As G20 leaders convened in Johannesburg at the weekend, expectations were high that SA, hosting the summit for the first time on African soil, would (and did) push for progress on one of the most urgent financial challenges facing developing economies: the crippling cost of capital.
Yet even as Pretoria used its chairmanship to advocate such changes to the global financial system, it remains unclear whether world leaders are ready to deliver the breakthrough emerging markets urgently need.
The G20 declaration adopted at the weekend is not legally binding but carries political weight.
SA has placed the reduction of borrowing costs and debt sustainability at the forefront of the G20 agenda, something the UK government has promised to support as the US takes over the presidency of the body in 2026.
While the leaders’ summit at the weekend focused on inclusive economic growth, debt reforms and mobilising finance for sustainable development, with a special emphasis on the Global South’s development challenges, it is unclear when real reforms will materialise.
Africa alone carries a debt stock estimated at $1.8-trillion, with annual debt servicing reaching $90bn — resources that could otherwise fund essential infrastructure, health, education and energy.
The cost of debt in Africa is estimated to be 20 times higher than in a Western European country and that cost is passed on to citizens.
— Wamkele Mene, secretary-general of the African Continental Free Trade Area
Voices from across the continent, and financial experts, highlight the scale of the challenge. Wamkele Mene, secretary-general of the African Continental Free Trade Area (AfCFTA) secretariat, speaking at the Bloomberg Business Summit held in Johannesburg last week, criticised inflated risk premiums.
“The cost of debt in Africa is estimated to be 20 times higher than in a Western European country and that cost is passed on to citizens. In my view, the risk perception is not based on reality. It is unfounded, which drives up the cost of debt: the risk premium,” Mene said.
He highlighted Africa’s untapped financial potential and stressed the importance of domestic capital mobilisation as an own solution.
“The solution lies in mobilising our own domestic capital to invest in Africa — about $4-trillion — whether in infrastructure or small and medium enterprises as an asset class. By ‘domestic’ I mean institutions with the balance sheet to manage risk, such as the African Development Bank or Africa50. Blended finance tools, I believe, should be used more intensively,” Mene said.
Africa50 is a pan-African infrastructure investment platform, established by the African Development Bank (AfDB) and African governments, that develops and invests in bankable projects across the continent.
By “mobilise” Mane means putting this money to work — using domestic savings and financial resources to fund businesses, infrastructure, energy and other critical sectors that can drive growth.
Speaking on the same panel as Mene, Jeremy Awori, CEO of Ecobank, highlighted the continent’s financing gaps.
“Africa faces major shortfalls in funding. Infrastructure projects are underfunded by $50bn–$100bn, while lending to SMEs falls short by about $300bn. The financial sector must work together to close these gaps, and if we do, real progress is possible,” he said.
Awori added that boosting domestic savings and strengthening banks’ capital was critical.
“We need to mobilise sovereign funds and pension funds, build up the core capital of banks across Africa, and then channel that money into the real economy — supporting businesses, SMEs and individuals over timem,” he said.
SA’s own reforms offer some momentum. James Turp, head of fixed income investment strategy at Sanlam, said structural improvements were under way, but cautioned that much work remained.
“There’s been progress on logistics, ports and transport networks, and power supply is improving. Visas have been simplified and there’s some support for small businesses and labour market reforms.
“These steps are positive, but reforms that encourage fixed investment are what we really need. Bond market performance alone doesn’t create jobs or open businesses. The goal is to build an investor-friendly environment, but it takes time,” he said.
Turp pointed to the potential effect of the G20 summit on SA’s economy: “Many corporates are holding large cash balances because of economic uncertainty. With low inflation as the policy focus of the Reserve Bank and National Treasury, that cash may now be deployed into growth-oriented initiatives. Will the G20 trigger that? I’m not sure. But any positive outcomes would be welcome.
“With the spotlight on the country, it’s a chance to build on the positive momentum from fundamental improvements. It’s also an opportunity for the president to act decisively and demonstrate commitment to growth and investment.”
While they reached consensus on the need to reform global financial institutions, a lot still needs to be done on the ground.
And until this happens emerging economies may turn more towards Brics+ and regional coalitions to pursue alternative approaches, including strengthening regional financial systems including those in Southern Africa, expanding development financing and exploring mechanisms to make capital more accessible and affordable.
Read all the latest G20 news, plus expert views on what South Africa’s leadership of this critical forum means when it comes to shaping global policies and advocating for Africa’s interests on the international stage, on our G20 page.
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