Since the financial crisis of 2008 loans from banks have become more difficult to obtain. African countries increasingly have explored alternatives to raise capital for their economic development projects. Experience in some African countries and other developing regions indicates that bonds present opportunities to raise funds to finance capital-intensive projects, particularly infrastructural schemes, that take place over long periods of time. There are various types of bonds African governments can issue. Capital markets in many African countries, however, remain largely underdeveloped and lack the necessary regulatory structures to bolster the confidence of investors to attract investment in local bond markets. These bond markets are characterised by the issuing of bonds mostly by national governments. State, local government and corporate bond issues are almost non-existent. The lack of market infrastructure fundamental for the development of secondary markets on which bonds can be traded presents critical impediments to bond market development in African countries. Although there is evidence that bond markets in Africa are opening up, if governments and firms in African countries are to access capital for development through issuing bonds, financial and regulatory reforms are needed to accelerate the development of debt capital markets which in turn would contribute to the growth of bond markets in Africa.

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Author: Chijioke Kennedy Oji, South African Institute of International Affairs