Businesses in Africa pay a median real borrowing cost of 1.8 percentage points more than their counterparts in high-income economies. That is the headline finding from an International Finance Corporation study built on more than 330,000 corporate bonds issued by over 50,000 firms across 30 years. The numbers were presented by Césaire A. Meh, Manager of Private Markets at the IFC, at the Africa Financial Industry Summit in Luanda, Angola.
The gap becomes even clearer when you look at the decade between 2015 and 2024. African firms faced a median real yield of 2.8% on corporate bonds during that period. Companies in high-income countries paid just 1%. That 180-basis-point difference represents real money leaving African businesses before a single product is made or a single employee is paid.
The IFC research is careful to point out that the cost of capital is only part of the story. Domestic fiscal conditions, exposure to global financial shocks, the depth of local investor markets, regulatory frameworks, and individual company characteristics all shape what a business ultimately pays to raise debt. In other words, the premium is structural, not inevitable.
The picture also varies considerably across the continent. The IFC compared selected economies including Nigeria, Morocco, South Africa, and Egypt, and found meaningful differences in real corporate bond yields between them. Africa is not one market, and the borrowing conditions a Lagos manufacturer faces are not the same as those confronting a Casablanca retailer.
The research does offer a pathway forward. Pension reforms, capital market liberalisation, and stronger corporate governance are identified as levers that could bring African borrowing costs closer in line with the rest of the world. The question is which governments and institutions will move first.
Originally published by TechCabal.