The Role of Custody Services in Building Investor Confidence Across Africa

As Kenya regains macroeconomic stability amid easing inflation, the Nairobi Securities Exchange has seen a 12% surge in 2025 thanks to increased investor interest. South Africa has surged to 7^th position in Kearney’s 2025 emerging markets Foreign Direct Investment Confidence Index, with some analysts suggesting it is defying current economic trends as it attracts fresh capital interest. Meanwhile, experts across the global custody services sector believe that after years of defaults and exclusion, investor trust across the continent is growing, with many large-scale investors seeing strong bond returns amid structural reforms, triggering a growing interest in the intra-regional approach. It’s an exciting time to be in the sector that facilitates such complex, nation-building investments, but how can we continue to build on this momentum?

Economic development organisation, Mennonite Economic Development Associates, recently conducted a study across 14 African countries, with its findings suggesting the need for the domiciliation of investment vehicles in Africa. With 80% of African investment vehicles domiciled outside the continent, bringing these funds back, they argue, is essential to attracting more foreign direct investment (FDI) and domestic capital.

This increased international capital to the continent and catalysed local capital will naturally grow the investment ecosystem in Africa, especially among small and medium enterprises (SMEs) seeking to secure capital. This, the report says, will “promot(e) economic growth and transformation and bolster dignified work opportunities for young people who comprise 70% of the population in the continent”.

Therefore, the importance of increasing FDI across the continent cannot be overstated, as it will build economies, enable SMEs, and secure new opportunities for individual Africans.

While FDI research by the African Centre for Economic Transformation has shown a modest growth in inflows in recent years, much of this investment is in the extractive sector, and unevenly spread across the continent. The centre argues in its research for new sector-specific strategies to promote investment, prioritising investment policies to attract greenfield investments in sectors to promote job creation and economic diversification.

However, it also recommends the continued development of regional trade agreements to create larger, more attractive markets for foreign investors – both within and beyond Africa. Easing trade and investment facilitation across borders has been at the heart of the World Bank Group’s Africa Cross Border Initiative, and of course, the much anticipated African Continental Free Trade Agreement, because investors are clearly aiming to invest in multiple countries at a time, seeking easier access to intra-regional opportunities.

This is the point where the private sector becomes an essential component of attracting such investment, by enabling trade, payments, and access to new capital markets for investors across the globe.

To facilitate such trades across Africa’s borders, investors require custody services and internationally savvy custodians to ensure the safety of an investor’s portfolio and ensure all transactions are securely processed. These services are vital to developing capital markets, as more investors invest in stock markets and acquire assets across the continent but need custodians (such as banks) with international footprints, utilising their local branches equipped with unique service capabilities. Our role in the custodian sector has extended so far beyond merely safeguarding assets, especially in the space of a segregated portfolio, everything from trade settlement to asset safekeeping, regulatory compliance to corporate actions management.

But there’s a reason the role has evolved: these services are optimising investment administration, especially for those seeking cost efficiency as they invest in securities markets across Africa or require efficient tax reclaims.

This is the reason Absa has started its own pan-African Investor Services journey, moving the business beyond South Africa into Mauritius, most recently Kenya, and five other African markets in the coming year. Particularly in the space of segregated portfolio, our role extends beyond merely the safeguarding of assets. We can no longer identify exclusively as custody services, as we offer a holistic range of operational and administrative support solutions to institutional clients: asset managers, pension funds, stockbrokers, life insurers, government departments, global custodians, and broker dealers. It’s essential that we can provide a client the services needed from the mere consideration of an investment to executing a trade across a given market, to settling the cash in the securities, while ensuring all reporting requirements are met – regardless of the region.

What is key, however, is that our new offering is unencumbered by legacy platforms and systems, with new cloud-based technology making us agile enough for the speed of transactions and processing required by our clientele – and we are already able to trade in 88 markets globally.

Absa Investor Services’ most recent launch in Kenya is aimed at attracting a highly diversified client base, including investment firms, pension funds, unit trust funds, insurance companies, SACCOs (Savings and Credit Cooperatives),  and other financial institutions seeking secure asset servicing solutions. The re-introduction of this custody business into the Kenyan market coincides with recent projections of a surge in the region’s pensions and capital markets (unit trust funds) sectors (key investment vehicles), with assets under management already reaching a substantial Ksh. 2,255.3 and 389 billion respectively as of 31 December 2024.

Meanwhile, we know that Kenya isn’t the only market requiring our skillsets, with the next expansion targeting East and West African countries over the next few months.

As investor confidence continues to return to African markets, it is clear the continent is entering a pivotal phase of transformation – one that demands strategic, well-structured, and collaborative approaches, from government, the private sector, and investors themselves.

Transformed custodian services are critical to building this renewed investor confidence in African markets by offering secure, transparent, and efficient investment infrastructure and advisory capabilities. Therefore, the role of custodians is no longer confined to safeguarding assets but has become foundational in enabling seamless, more efficient investment flows, fostering regional integration, and developing African capital markets.

At Absa, we recognise the immense responsibility and opportunity that comes with this shift. By expanding our Investor Services offering and investing in future-ready, agile infrastructure, we want to be an important part in attracting DFI and building local economies.