Southern Africa will need to significantly strengthen its ability to mobilise and deploy financial resources if it is to translate a gradual economic recovery into broader improvements in living standards, according to the African Development Bank’s 2026 Regional Economic Outlook for Southern Africa.
The report, titled “Mobilising Southern Africa’s Development Financing at Scale in a Fragmented World”, examines the region’s economic outlook, the constraints affecting investment flows and the reforms required to expand access to long term financing. It estimates that Southern Africa could face an annual development financing gap of approximately $55 billion by 2030, reflecting challenges in converting available capital into productive investment.
The report does not frame the challenge solely as a shortage of financial resources, but rather as a question of how capital is mobilised, intermediated and directed towards areas that support structural transformation. It identifies limited financial intermediation, inadequate project preparation capacity, insufficient long term funding mechanisms and gaps in domestic resource mobilisation as some of the factors affecting investment outcomes.
“African Development Bank” Director General for Southern Africa Kennedy Mbekeani said the region’s challenge was increasingly about improving the systems that allow existing resources to support development at scale.
Southern Africa’s economic growth is projected to improve from 2.1% in 2026 to 2.7% in 2027, supported by stronger household consumption and continued expansion in services. However, the report notes that uneven diversification, infrastructure constraints, agricultural productivity challenges and labour market pressures continue to limit the pace at which economic growth translates into improved livelihoods.
The report highlights that gross capital formation in the region declined to approximately 18.6% of GDP by 2025, below levels generally associated with sustained structural transformation in middle income economies. The decline comes amid tighter global financial conditions and reduced availability of concessional financing, increasing the importance of strengthening domestic and regional sources of capital.
Southern Africa’s development financing landscape remains diverse. Countries across the region have different levels of access to financial markets, institutional savings and external financing channels. The report identifies opportunities in areas including pension funds, insurance assets, diaspora remittances, sovereign investment vehicles and natural resource revenues.
Remittances remain particularly significant in countries such as Lesotho and Zimbabwe, while economies including Namibia and South Africa have deeper capital markets and sizeable institutional investment pools. The report suggests that improving mechanisms for channelling these resources towards productive sectors could expand financing capacity across the region.
The African Development Bank argues that Southern Africa will need to move beyond traditional bank dominated financing models and develop deeper capital markets capable of supporting infrastructure, industrial development, energy transition initiatives and private sector expansion.
It also points to the importance of stronger public financial management, improved investment frameworks, greater transparency in resource allocation and measures to address illicit financial flows. Digital technologies, the report notes, could play a role in expanding formal economic participation, strengthening tax systems and improving financial inclusion.
The outlook also highlights a changing global environment in which African economies are navigating shifting trade patterns, tighter financial conditions and increased uncertainty. Rather than relying primarily on external financing sources, the report emphasises the importance of strengthening Africa’s own financial architecture and increasing the ability of domestic institutions to support development priorities.
African Development Bank Chief Economist and Vice President for Economic Governance and Knowledge Management Kevin Urama called for accelerated implementation of the New African Financial Architecture for Development, an initiative aimed at strengthening continental financial institutions and improving Africa’s capacity to manage development financing needs.
The report presents the mobilisation of finance as part of a broader development challenge involving governance, industrial capacity, regional cooperation and economic transformation. Across Southern Africa, governments and private sector institutions have increasingly focused on building investment ecosystems that can support value addition, infrastructure development and greater participation in global markets.
South Africa remains a central component of the region’s financial landscape. The African Development Bank’s accompanying South Africa Country Focus Report 2026 notes that the country’s economy grew by 1.1% in 2025, compared with 0.5% in 2024, supported by stronger agricultural output and improved activity in sectors including finance, real estate and trade.
Growth in South Africa is projected at 1.2% in 2026 and 1.6% in 2027, supported by improvements in energy availability and reform initiatives including Operation Vulindlela. However, electricity and water constraints, logistics challenges affecting ports and freight networks, high unemployment and public debt pressures remain significant factors influencing the economic outlook.
The report notes that South Africa’s removal from the Financial Action Task Force grey list in 2025 following reforms to strengthen anti money laundering and counter terrorism financing systems contributed to improved investor confidence. The country’s capital markets, pension assets and financial institutions remain among the most developed on the continent, although the challenge remains ensuring that available capital supports broader economic participation.
South Africa’s National Treasury has argued that changing global conditions present both risks and opportunities, with countries that strengthen governance, institutional credibility and investment frameworks likely to be better positioned to attract and retain capital.
The African Development Bank’s assessment reflects a wider conversation across Southern Africa about how the region can better leverage its own financial resources while strengthening partnerships with international investors. As countries seek to accelerate industrialisation, expand infrastructure and respond to demographic pressures, the ability to mobilise capital effectively is likely to remain a defining factor in the region’s economic trajectory.
The discussion around development finance increasingly reflects a shift from viewing Africa primarily through the lens of financing needs towards recognising the continent’s significant pools of domestic capital, entrepreneurial capacity and investment opportunities. The challenge for Southern Africa will be building the institutions and mechanisms required to convert these resources into sustainable and inclusive growth.
