Africa's Capital Markets Missing Key Exit Infrastructure

The article argues that while mobilizing local capital in Africa is important, it's only half the solution to building functional capital markets. The author, Abraham Augustine of Aperçu Holdings and Norrsken House Kigali, warns that focusing solely on convincing pension funds and family offices to invest in venture capital and SMEs is dangerous because it ignores the critical issue of exit infrastructure.

Historically, societies have dealt with liquidity challenges through toleration (accepting illiquidity), debt instruments (bills of exchange), and communal pooling (tontines, stokvels). The real breakthrough came with the Dutch East India Company's 1602 innovations: capital lock-in, fractional transferable shares, and a centralized exchange.

The equation is simple: Total System Liquidity = Capital Inflow × Velocity of Exits. Africa has successfully increased capital inflow (2021-2022 venture influx), but with near-zero velocity of exits, the result is zero liquidity. The current "pedestal" approach—building platforms without addressing the "monkey" (legal transferability, regulatory frameworks, market-making functions) creates an illusion of progress.

The solution requires working on both sides simultaneously: building proper exit infrastructure while mobilizing capital. A practical model might involve local capital de-risking companies early, followed by foreign capital entering later at scale to provide exit through buyouts.

SOURCE: https://techcabal.com/2026/05/25/the-next-wave-escaping-the-bog/