At Indaba’s African Capital Markets Investor Conference in London last week, which convened investors, African stock exchanges and regulators, the same question was repeatedly asked: if the opportunity in Africa is so compelling, what is still holding back capital?
There is no single answer. Currency risk, liquidity and political uncertainty all play a role. However, there is a more practical question sitting underneath them. What would give investors enough confidence to act?
In many cases, the answer is surprisingly straightforward. Investors need to understand risk — clearly, consistently and reliably. That is where reporting comes in.
Global investors are increasingly required not just to assess risk, but to demonstrate what that assessment is based on, particularly in relation to environmental and social factors. If that information is not available or not presented in a way that can be used, capital is harder to deploy. Not because the opportunity is not there, but because associated risks cannot be fully identified, interrogated and, therefore, managed.
This is where the new range of reporting requirements – such as ISSB S1 and S2 – can help. Many of these new frameworks require a double materiality assessment, which looks at ESG risks and opportunities through two lenses: how the operating environment may impact the financial performance of the company; and how the company may impact the environment and society as a whole.
Many companies initially see these new detailed and demanding reporting frameworks as a burden. However, for African companies they actually present a real opportunity as many of the risks these frameworks are trying to capture are already part of everyday business reality for African corporates.
Ensuring infrastructure can withstand extreme weather is not a future scenario; it is an operational necessity. Securing infrastructure against hurricanes and floods, managing access to water, navigating land ownership and maintaining stable relationships with communities are not abstract considerations. They are central to how many African businesses operate effectively, identifying and managing the very risks investors are most concerned about.
What has often been missing is a structured way of showing that. The current reporting frameworks, for all their complexity, are essentially asking companies to do something quite simple: set out what the key risks are, how they affect the business, and what is being done about them.
For companies operating in African markets, that is not a new discipline. It is an opportunity to make visible what is already understood internally.
And that visibility matters. When a company can demonstrate that it has identified its key exposures to climate, resources or social factors, and can show how those risks are governed and managed over time, it changes the nature of the conversation with investors.
It signals preparedness and discipline, demonstrating that the business is being run on a long-term sustainable basis. That builds confidence in the underlying quality of management and governance, as well as the data being presented.
In some cases, it may also reveal an advantage. Companies that have been operating in more complex environments for longer are often further ahead in thinking about resilience and adaptation than peers in more stable markets. And when that is clearly articulated, it can be a point of differentiation.
This is where better reporting begins to chip away at the so-called ‘African discount’. Not by removing risk, but by making risk easier to understand and therefore easier to price.
There is also broader alignment at play. The issues these frameworks focus on, such as resilience, resource security, social stability, are the same issues that sit at the centre of long-term economic development across the continent. Demonstrating how they are being managed is not only relevant to investors, but to the sustainability of continental economic growth itself.
Many companies across the world see reporting as a compliance exercise — something to satisfy a requirement rather than to communicate how the business actually works. But I believe reporting to these new standards is actually an opportunity.
Used properly, reporting becomes a way for companies to demonstrate future readiness: that they understand the risks inherent in their operating environment, that they have structures in place to manage them, and that they are building businesses designed to endure. For African companies, much of that work is already being done.
Reporting helps make that visible. And that matters because, ultimately, capital does not move on potential alone. It moves on confidence. And confidence is built on what investors can see.
