The Organisation for Economic Co-operation and Development (OECD) believes that, "Domestic financing, such as gross private savings and taxes, is the most important source of development finance in Africa," and could be an important source of funding for businesses. However, this source has become less and less available, with private savings decreasing by 17% between 2010 and 2018. At the same time, foreign investment has also declined.

In addition, the recently announced changes to Regulation 28 of the Pensions Fund Act in South Africa would potentially allow for up to R800 billion to leave the country to be invested offshore. "While the move is important for corporate investors, such as pension funds, providing access to far more options that could allow for a return on the funds invested,  the loss of these funds would severely impact the moneys available to grow the economy in South Africa," comments Bryan Turner, Partner at Spear Capital, a private equity firm that invests growth capital into businesses in Sub-Saharan Africa.

A positive, though, is that in South Africa the Public Investment Corporation (PIC) and the  Government Employees Pension Fund (GEPF) have recently increased their allocation for investment into unlisted assets, which will certainly boost the capital allocation locally.

Contrast this with the fact that $1,5 trillion is available internationally in the private equity space - basically looking for suitable investee companies to be allocated to. "It's unfortunate that so many global private equity funds do not look at the opportunities available in Africa," Turner explains. "Now, more than ever, emerging markets should be looking attractive to foreign investors. With the current sell-off in investments in the developed markets, emerging markets offer a greater attractiveness in terms of diversification. And, if selected properly, the returns can be appealing, too.

"Over the years, Spear Capital has identified many quality businesses for our Nordic and European clients to invest in - often they are in countries that may not be well run but this does not mean that the business itself cannot deliver. With strong management teams, a skilled workforce, and a thorough understanding of the market, these businesses can deliver good returns and grow substantially in size and reach. We have also identified some that have been extremely successful in providing services to international corporates operating outside of the continent, which reflects that African-domiciled companies can certainly hold their own in the international arena."

Investment into businesses in Africa provides the opportunity not only to deliver sound returns to investors, but also to impact the people and the environment in positive ways. This is what drives Norsad Capital, a provider of private credit to growth-stage businesses in a number of African countries. The firm applies the funds of investors from the Scandinavian regions to carefully selected businesses that are ripe for growth.

"Our purpose as an organisation is to build a better Africa by providing financing to mid-market growth companies that contribute towards the continent's economic growth and improvement," says Norsad Capital CEO, Kenny Nwosu.

"We're particularly focused on financial institutions, the food value chain, soft and social infrastructure, and industrials and manufacturing," says Nwosu. "Many of these industries also happen to be large-scale creators of employment and are critical to lifting people out of poverty and reducing inequality."

Both Spear Capital and Norsad Capital encourage investors from Europe to allocate funds for investment and lending in Africa. However, it is also crucial that economies provide more funds for investment within their own countries - which is why the potential loss of so much domestic money owing to offshore investment among South African pension funds is a concern.