NEMA RAMKHELAWAN-BHANA | Rising geopolitical stress triggers flight to credibility

With the global geopolitical risk index (GRI) consistently tracking at twice its 20-year average, the old globalisation playbook has been shredded.

Markets are grappling with multipolarity without multilateralism, in which trade routes are weaponised and national security often trumps economic efficiency.

In this climate of heightened instability a critical question arises for the global investment community and the broader continent: does Africa now present a compelling option for capital diversification? The answer is more nuanced than the Africa Rising narratives.

We are not witnessing a broad, indiscriminate flight to risk. Instead, investor behaviour has undergone a fundamental shift. Capital is now more selective, instrument-driven and, above all, insistent on policy credibility. These dynamics pose constraints and opportunities for Africa’s frontier markets, demanding a repositioning of how we present our capabilities to the world.

Reranking of opportunities

Historically, periods of global uncertainty drove capital to exit developing markets, seeking the perceived safety of the dollar or gold. African frontier markets, characterised by smaller scale and lower liquidity, typically suffered most during these risk-off cycles. Data frequently showed widening sovereign spreads and sharp currency depreciations as portfolio flows turned volatile.

However, 2026 is revealing a different trend: selective re-engagement. Investors are no longer painting the continent with a single brush. We are seeing capital return to specific jurisdictions where risks are transparently priced, macroeconomic adjustments have been made and reforms are institutionalised.

For instance, Zambia and Ghana saw market repricing only after the painful process of addressing debt overhangs. Kenya maintained its market access through proactive fiscal discipline. Egypt’s earlier foreign exchange liberalisation acted as a reset for investor perceptions.

The lesson for the continent is clear: in this new era adjustment comes first, credibility follows and capital arrives last. Frontier Africa is benefiting from an internal reranking within emerging market portfolios, not from a general increase in risk appetite.

The changing form of capital

Contrary to the exit narrative, capital has not disappeared from Africa; it has changed form. Long-dated, local-currency sovereign debt remains under pressure as investors favour shorter durations and hard-currency exposure. Consequently, domestic debt now dominates new financing, though this brings its own set of rollover risks.

This evolution has elevated the role of domestic financial institutions. Investors increasingly prioritise access to the hedging and structured risk management solutions that transform local volatility into investable, risk-controlled exposure. The era of outright directional positions — simply betting on a currency to go up — is giving way to a more sophisticated, corridor-based approach.

Strategically, foreign direct investment (FDI) has shown remarkable resilience, but it is becoming more fragmented. Capital is flowing toward critical intersections: energy transition, logistics and digital infrastructure.

This is driven by long-term global needs rather than short-term yield. The challenge for African governments is no longer just attracting capital but attracting the right kind — capital that is structured to suit the continent’s changing industrial needs.

Higher bar for governments

For African governments the bar for entry has been raised. Geopolitical risk does not preclude portfolio flows, but it demands higher quality and stability. Credibility is now the primary currency. Investors explicitly price in policy risk; reforming countries typically trade at tighter spreads (often 300-600 basis points lower, according to IMF data) and regain market access years sooner than their peers.

Furthermore, in a fragmented world geopolitical neutrality has become a tangible asset. Alignment risk is increasingly being priced into country risk. We see this in the sustained exclusion of sanctioned states and the persistent risk premiums applied to markets entangled in great-power competition.

Africa’s ability to remain a nonaligned hub for trade and minerals is perhaps its greatest strategic capability.

Role of domestic institutions

This environment elevates the role of domestic financial institutions from simple lenders to market intermediaries. As global investors seek African exposure without assuming the full weight of operational or liquidity risk, they look to institutions that combine deep local knowledge with global execution standards.

While challenging, volatility creates an opportunity for those equipped to manage it. There is a surging demand for platforms that can provide two-way pricing in periods of stress, ensuring that capital isn’t trapped in country silos but can flow efficiently across intra-African and global corridors.

The winners in this regime will be those who invest in technical capability and risk transformation rather than just balance-sheet size.

Strategic trifecta

The markets now attracting the most interest — such as Kenya and Nigeria — share a common thread: an alignment between the following key actors:

• Governments providing credible policy frameworks;
• Domestic financial institutions offering sophisticated risk transformation; and
• Global investors supplying price-sensitive, selective capital.

The central question for 2026 is not whether investors are moving to Africa, but which countries on the continent are adapting most effectively to the new rules of capital allocation.

In a world defined by the permanence of risk, those who deliver consistent reform and credible returns will not just survive volatility, they will lead the next era of African growth.

• Ramkhelawan-Bhana is senior client executive for global markets international at RMB.