How AfCFTA could help build Africa’s venture capital infrastructure

The African Continental Free Trade Area (AfCFTA), the world’s largest free trade area by population, is taking shape, bringing together a unified market of 1.4 billion people with a combined GDP exceeding $3.4 trillion. As AfCFTA lays the foundations for overcoming Africa’s long-standing market fragmentation, it has the potential to do more than integrate trade. It can serve as the bedrock for building the capital pipelines needed to fund homegrown venture ecosystems.

AfCFTA is laying the regulatory architecture for the seamless movement of goods and services across its 54 signatory states, and is widely projected to be the pathway to a $7 trillion continental economy by 2035. The opportunity now is to extend this ambition beyond trade. Imagine Pan African pipelines not only for maize, cocoa, and cars but also for venture capital. A common marketplace where entrepreneurs raise regional rounds with the same ease that goods cross borders.

The timing could not be more critical. Equity and debt financing for startups in Africa contracted sharply in 2022 and 2023. Partech Africa’s Tech VC Report confirms that total financing declined from $6.5 billion in 2022 to just $3.2 billion in 2024. However, data from 2025 points to a cautious rebound, with African startups raising approximately $4.1 billion by year-end. The rebound presents an opportunity to strengthen the foundation of Africa’s venture ecosystem and ensure that future growth is underpinned by domestic capital and integrated markets.

Regardless, IFC research shows that roughly 80% of VC financing on the continent still originates from foreign investors. This dependence leaves African innovation exposed to global cycles beyond its control. A continent whose public pension funds, central banks and sovereign wealth funds collectively hold nearly $1 trillion in assets should not rely on foreign venture funds for 80% of its innovation financing.

AfCFTA’s ambition echoes what others have learned from integration. In the United States, a single capital market and pooling of state and corporate pensions underpin Silicon Valley’s boom. Diverse American public pension plans (CalPERS, TIAA, etc.) and endowments collectively commit billions to venture funds. Singapore and other Southeast Asian economies took this further: under ASEAN integration, mutual recognition of funds and cross-border investment agreements have encouraged domestic institutional investors to back regional startups. The result in these markets is deeper domestic capital pools and a larger, integrated investor base.

Africa can draw directly from these examples. Mobilizing institutional savings is critical. In 2025, Ghana took a bold step by mandating a 5% allocation of pension assets to private equity and venture capital. This policy signals how domestic capital can be deliberately channelled towards innovation. If replicated across the continent, even modest pension allocations could unlock a meaningful share of Africa’s $1 trillion in pension assets for venture financing.

Beyond pooling resources, AfCFTA institutions and national policy-makers could accelerate integration by introducing a common fund passport for venture capital and private equity vehicles, similar to Europe’s Alternative Investment Fund Managers Directive or ASEAN’s mutual recognition frameworks. Under such a system, a fund licensed in one country could raise capital and invest across multiple African markets. This would allow pension capital from countries such as Zambia to flow seamlessly through funds managed in Nigeria or Kenya without repeated regulatory approvals, reducing friction and expanding access to capital across the continent.

The AfCFTA vision also encompasses financial infrastructure and mobility. A key milestone is the Pan African Payment and Settlement System (PAPSS), a cross-border payment platform that enables instant settlement in local currencies. Africa currently operates with approximately 42 currencies, and the cost of currency convertibility is estimated at nearly $5 billion annually. This burden is largely driven by the continent’s heavy reliance on third currencies to conduct intra-African trade.

Reducing this friction is essential for building efficient capital markets. For pan African innovators, this means easier access to working capital, smoother revenue collection and faster capital deployment across multiple markets. As payment frictions fall, financing innovation across the continent becomes not only feasible but scalable.

For innovators, AfCFTA’s protocol on intellectual property is critical. It aims to establish continent-wide legal protections that give founders confidence that their ideas, brands and technologies can scale across borders without being misappropriated. Research consistently shows that strong intellectual property protections, including patents and trademarks, are positively associated with venture capital investment.

Because venture capitalists face information asymmetries when evaluating startups, enforceable intellectual property rights serve as an important signal of firm quality, competitiveness and growth potential. A harmonized intellectual property framework under AfCFTA would therefore strengthen investor confidence by lowering legal uncertainty and enforcement risk across jurisdictions.

Africa’s venture capital exit challenge is partly driven by fragmented markets and limited liquidity rather than a lack of innovation. Industry evidence shows that exits in African tech take significantly longer than in mature ecosystems, with most occurring through trade sales or secondary transactions rather than public listings. AfCFTA has the potential to change these fundamentals by expanding startups from small national markets into a single continental market of 1.4 billion people. Recent local listings, Vicenne and Cash Plus on the Casablanca Stock Exchange, and Dot Com Zambia on the Lusaka Securities Exchange, point to early progress in building domestic exit pathways. By harmonizing investment rules, reducing cross-border frictions, and enabling regional mergers and listings, AfCFTA can make exits more predictable and strengthen the long-term sustainability of venture capital across Africa.

With access to multiple countries under more uniform rules, firms can grow into regional players rather than saturating limited home markets. This added scale increases strategic relevance, boosts valuations and makes startups more attractive acquisition targets. The impact is already visible in rising intra-African consolidation, such as the acquisition of Egypt’s Fatura by MaxAB-Wasoko in the e-commerce sector. If infrastructure and regulation align, intra-African consolidation could evolve from an emerging trend into a dominant force for scale and liquidity.

AfCFTA represents more than a trade agreement. It is an opportunity to reshape Africa’s economic architecture by connecting markets, capital and innovation at a continental scale. By mobilizing domestic institutional capital, reducing financial frictions, strengthening intellectual property protection and enabling regional exit pathways, AfCFTA can address the structural constraints that have long limited the growth of Africa’s venture capital ecosystem.