Domiciliation is key to mobilising capital flows in Africa – Study

 

CAPE TOWN, South Africa – A new study calls for domiciling investment vehicles in Africa. It argues that mobilizing the flow of investment capital to African-based investment vehicles (IVs) will contribute to economic growth, job creation and inclusive business opportunities for young people on the continent.

“It is time to build Africa’s competitiveness through strategic investment vehicle domiciliation,” says Dr. Dorothy Nyambi, President and CEO of Mennonite Economic Development Associates (MEDA), a partner in the study. “Transforming Africa’s investment landscape one jurisdiction at a time is building one of the most sustainable systems for capital flows into the continent, a major catalyst for entrepreneurship and decent work creation for our youth.”

According to data from Oryx Impact (Top Domiciles for Africa Focused Fund, 2023), approximately sixty percent of African-focused IVs are domiciled outside the continent. Systemic investment change is vital to improving Africa’s competitiveness and ensuring inclusive growth, especially support for micro, small, and medium enterprises (MSMEs).

The new report entitled Study on Africa as a Jurisdiction for Domiciliation of Investment Vehicles will provide a detailed analysis of factors and opportunities across 13 jurisdictions in Africa. It asks why and how investors choose IV domiciliation jurisdictions and examines what Africa needs to do to become a preferred IV destination. Countries studied, including Cabo Verde, Côte d’Ivoire, Ethiopia, Ghana, Kenya, Mauritius, Morocco, Nigeria, Rwanda, Senegal, South Africa, Togo and Uganda, have been profiled as case studies, though similar opportunities for domiciliation could be explored by other countries across Africa.

The study engaged over 170 stakeholders, including fund managers, investors, regulators, ecosystem enablers, and investment professionals from African and global fund domiciliation centres. It highlights emerging trends and key growth drivers while mapping a path to mobilize international and domestic capital through specific, actionable recommendations.

“Africa’s youth face significant barriers to decent work,” says Maame Tutua Dadson, Lead Counsel, Stafford Law, and a contributor to the study. “MSMEs are effective at producing inclusive jobs but have limited access to affordable finance. That is hindering African entrepreneurs from starting, growing and scaling high-potential enterprises.”

Amongst other factors that hinder access to finance for MSMEs, the size and scale of such businesses remain a key barrier since they require more innovative and diverse capital providers and IVs to support their establishment and growth. MSMEs are often too large to access microfinancing and too small to access traditional bank services, Private Equity (PE) or Venture Capital (VC) funding.

The study was commissioned by the Mastercard Foundation and conducted by a team of experts from across the globe, including Momentus Global, Samawati Capital Partners, and Stafford Law with support from MEDA. It aligns with the Mastercard Foundation’s Young Africa Works strategy to address a critical gap in access to finance for MSMEs, which are key for job creation and economic growth. It also adds to a growing body of research seeking to diversify capital flows to the continent.

“We recognize the transformative potential of strengthening Africa’s investment ecosystem by domiciling investment vehicles on the continent to catalyze economic growth and create dignified work opportunities for young people. Domiciling investment vehicles aligns funding mechanisms with the specific needs of African MSMEs, enabling tailored financial solutions, reducing administrative barriers, and fostering deeper engagement with entrepreneurs to drive sustainable growth,” said Daniel Hailu, Executive Director of Pan-African Programs at the Mastercard Foundation.

Unlocking pension fund investments into IVs requires establishing clear and supportive frameworks that facilitate seamless domiciliation while ensuring regulatory clarity, investor confidence, and alignment with global best practices.

“Leading global international financial centres create niches that address the needs of distinct investors and IV managers. Such specialization would be strategic for the African jurisdictions looking to become preferred fund domiciles,” said Diana Smallridge, CEO of Momentus Global and a contributor to the study.

The release of the Executive Summary represents a pivotal first step in developing a practical framework to inform and shape country-specific and pan-African dialogues throughout 2025. The Executive Summary is accessible here, with the full report, offering detailed insights and country-level analyses, scheduled to be released in January 2025.