For years, African finance ministers have made the same case at investor conferences and multilateral summits: the continent is not short of bankable projects, it is short of affordable capital. This week, that case took a tangible step forward. Legal & General Asset Management, one of Britain’s largest institutional investors, launched the L&G LSF African Government Bond (USD) UCITS ETF — the first exchange-traded fund of its kind available to European investors — built on the iBoxx LSF USD African Sovereigns Index and developed in partnership with the Liquidity and Sustainability Facility (LSF).
It is a milestone worth pausing on. For the first time, a European investor can gain diversified exposure to African sovereign debt with the same ease, and through the same familiar mechanism, used to buy an S&P 500 fund or a German bund tracker. That simplicity is the point: it is precisely what has been missing from African capital markets, and precisely what has made a real difference in other regions that have walked this path before.
From a single transaction to durable market infrastructure
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The achievement did not happen overnight. In 2024, the LSF worked with S&P Dow Jones Indices to build the iBoxx LSF USD African Sovereigns Index, developing a proprietary methodology to curate a standardized, investable benchmark for African Eurobonds. That index has now matured into a retail-accessible fund — proof, as Dr. Vera Songwe, the LSF’s founder and chair and formerly the United Nations’ top economist for Africa, put it, of the growing appetite among private investors for African securities. Songwe singled out Afreximbank’s early support as instrumental in building the momentum behind the milestone. Prof. Benedict Okey Oramah, Afreximbank’s former president and board chairman, said the bank’s original ambition reached beyond a single instrument toward a lasting foundation for deeper, more resilient African capital markets — and called the ETF’s launch tangible evidence that African sovereign debt can now attract the same caliber of standardized, investable products found in the world’s mature markets.
That shift — from bespoke, one-off transactions to standardized, repeatable financial infrastructure — is what economists who study emerging markets consider the real prize. Indices and the funds built on them aggregate exposure to many issuers inside a single, tradable structure, opening the door to institutional investors who allocate capital through recognized benchmarks and would otherwise find it difficult to build African exposure bond by bond. As that investor base broadens, secondary-market trading tends to deepen, improving price discovery and gradually narrowing the liquidity premium that has long made African governments pay more to borrow than the underlying risk alone would justify.
The beginning of a market infrastructure, not just a fund
What distinguishes this launch from a one-off product announcement is the architecture behind it. Since its establishment, the LSF has worked with African and international partners on a structural problem, not a single transaction: the illiquid secondary markets that have long translated into higher borrowing costs for African sovereign issuers. The ETF is the visible, investable output of that longer effort — but the more consequential piece is what sits underneath it. An index, a curation methodology, and now a public-market vehicle built on top of both form the early layers of something African capital markets have never had: durable, replicable financial infrastructure, the kind that can support the next index, the next fund, and the next generation of instruments, rather than a single deal that expires once it settles. It is, in that sense, less a product launch than groundbreaking — the pouring of a foundation that future African bond funds, corporate debt indices and structured products can be built on for years to come.
A path other regions have proven works
Africa is following, and can now build on, a trail blazed elsewhere with striking results. After the 1997 Asian financial crisis exposed the dangers of financing long-term projects with short-term foreign-currency debt, ASEAN nations joined with China, Japan and South Korea in 2003 to launch the Asian Bond Markets Initiative, an effort to deepen local-currency bond markets as a durable alternative to bank borrowing. The results, over two decades, were transformative: by 2018, the region’s local-currency bond markets had grown to more than $12 trillion outstanding — approaching the scale of the entire euro-denominated bond market. A companion Asian Bond Fund initiative, run through regional central banks from 2005, is credited by the Bank for International Settlements with driving marked improvements in liquidity and far more reliable government yield curves across the region.
Latin America’s experience is, if anything, an even sharper illustration of what standardized, tradable instruments can unlock. The 1989 Brady Plan converted defaulted Latin American bank loans into tradable, dollar-denominated bonds, turning a small and illiquid market for developing-country debt into a thriving one within a few short years: sovereign bond issuance by developing countries rose from roughly $1.5 billion in 1985 to more than $200 billion by 1992, while bid-ask spreads — the standard measure of how efficiently a market prices risk — fell by more than half. Mexico, Brazil, the Philippines, Colombia and Venezuela all eventually retired their Brady bonds entirely, having graduated into full, normalized access to global capital markets. It is a case study in how a single well-designed financial innovation can rewrite a region’s relationship with global investors.
What it means for the factories, mills and industrial zones Africa is building now
For a continent working to move from exporting raw commodities to building the mills, ports and industrial zones that turn them into finished goods, the relevance of a more liquid sovereign bond market is direct and consequential. Every basis point shaved off a government’s borrowing cost is capital freed for the roads, power and industrial-zone infrastructure that projects like Benin’s Glo-Djigbé Industrial Zone or Senegal’s cotton-spinning mills depend on. Sovereign yields also set the floor beneath which corporate and infrastructure borrowers price their own debt, so a more liquid, better-priced sovereign curve tends to lower financing costs across an entire economy — for the private manufacturers and agro-processors driving Africa’s industrial ambitions, not just for finance ministries.
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It is a case Dr. Songwe has been making for years well before she built an institution around it: that mobilizing private and institutional capital, not waiting on aid flows that have plateaued, would ultimately decide whether African industrialization succeeds. The African Development Bank and Afreximbank have each echoed that argument in recent years. Measured against the goal Songwe helped put at the center of that conversation, this week’s launch is exactly the kind of instrument that, in Asia and Latin America, proved able to compound into something much larger than its starting size. If the ambition she has championed through the LSF holds — and the early signs, from a $12 trillion Asian bond market to Latin America’s full return to global capital markets, suggest it can — this ETF may be remembered in African finance as the moment the continent’s capital markets began to be priced like the mature markets they are increasingly built to resemble.
