The Power of I

Investment (“I”) is one of the components of the GDP calculation. GDP is consumption plus investment, plus government spending, plus net exports minus imports. For GDP to grow, these four components have to be growing — and as they grow exponentially, the GDP of a country grows exponentially.

I recently spoke with Amandine, COO of Paystack, and she reminded me of this formula as we talked about Borderless.

I'm no economist, and I won't pretend to be one, but I wanted to paint a picture of what progress looks like at a macro level. Africa's GDP still sits below $4 trillion, lagging behind other regions. Its economic growth has stagnated for several reasons, including insufficient investment. The African Development Bank estimates that the continent must bridge a yearly financing gap of $402.2 billion—approximately 13.7% of its forecasted GDP—which will require deliberate action.

The diaspora has long been the continent's biggest funder, but it currently funds consumption. Remittances topped $100 billion in 2024, with the World Bank putting the total above $104 billion. That remains the biggest single source of external funding for the continent. That can keep growing but won't move the scale; we need to funnel more capital into investment. I did some research to support my hypothesis.

As part of my research, I looked at economies like China, Singapore, South Korea, and Poland to see which component of the GDP formula grew consistently and significantly enough to drive each country's growth. Every single time, the answer was the same: when investment grows, that country’s GDP grows.

South Korea. Capital investment stood at 10.52% of GDP in 1960 — the lowest level in the country's recorded history. It peaked at 41.23% in 1991. Over that same window, per capita GDP went from $87 in 1962 to $10,543 by 1996, with real GDP expanding by an average of more than 8% a year — from $2.3 billion in 1962 to $204 billion in 1989. A fourfold increase in the investment share of the economy, and a hundredfold increase in income per person.

Singapore. Almost the identical shape. Investment was 11.33% of GDP in 1960 and hit 46.93% in 1984. Between 1965 and 1995, growth averaged around 6% a year, transforming living standards within a single generation.

China. Since 1978, China's investment ratio has sat between 30% and 45%, averaging 37.3%, and it still runs at 40.6% of GDP as of 2024. The result: normalising GDP to 100 in 1978, the index reached 781.2 by 2001 — roughly 9% growth per year for over two decades.

Poland. The most recent case, and the one closest to home for a diaspora argument. Since joining the EU in 2004, Poland has attracted $279 billion in foreign direct investment, and its stock of FDI rose from 27% of GDP in 2003 to 52% in 2022. What that investment bought: cumulative GDP growth of almost 130% between 2003 and 2025, the highest in the EU, against an EU-27 average of 34.5%. GDP per capita went from €5,400 in 2004 to €19,920 in 2023, exports rose almost sixfold from €60 billion to €350 billion, and unemployment fell from 19% to 3%.

Now contrast that with where we are. South Africa, the continent's most developed capital market, recorded gross capital formation of just 14.1% of GDP in 2024, ranking 161st out of 176 countries. Across Southern Africa as a whole, gross capital formation has fallen to around 18.6% of GDP, below the threshold needed for middle-income economies to achieve structural transformation. China is investing 40% of its economy back into itself. We are investing 14 to 18.

There are bright spots worth flagging. Senegal's gross capital formation reached 37.5% of GDP in 2024, up from 20.1% in 2010, and Tanzania now sits at 40.7% — fifth in the world. These are not accidents, and they are worth watching over the next decade. I’m extremely bullish on Tanzania as a newly adopted Mtanzania.

As African governments gather in New York for the 81st UNGA, they need to highlight Africa's potential for global investment. Although this has been discussed for a long time, little has changed. Many African countries seek investment but focus on diaspora remittances for consumption rather than investment. Investment is less emotional and expects results, unlike consumption.

For African governments to encourage the diaspora to move their hard-earned savings into African investments, three things have to happen.

First, address the high cost of moving capital. In early 2025, sending $200 to sub-Saharan Africa cost nearly 9%, triple the global target of 3%. For family remittances, small fees are absorbed out of necessity. However, for income-generating investments, a 9% fee on larger amounts erodes returns before investments can grow.

Second, offer a competitive rate. African governments have to figure out how to offer the diaspora higher returns than they would earn in their host country. The good news is that a lot of returns in Africa are already higher at a so-called risk-free level, precisely because the risk perception of these economies is higher — so average or even the lowest interest rates tend to already be in the double digits. The raw material for the offer already exists. We need to let the world know about it.

Third, guarantee the exit. Once a diaspora investor has made money, they need a very clear path to get that money back in their host-country currency. No amount of yield compensates for capital you cannot repatriate. This is the step most governments skip or ignore, leaving the well dry as quickly as the water starts coming out.

There are many ways to do this. But if a single African government makes these three steps extremely easy, they will pull a lot of capital from their own diaspora, then from the wider African diaspora. The rest of the world will invest in that country when it has consistent data showing how it can generate above S&P500 returns.

Investment is the lever I care most about, but there's a fourth term in that formula I opened with, and right now it's working against us: net exports.

Africa–China trade hit a record $348 billion in 2025. Chinese exports to African nations climbed 25.8% to $225 billion, while African exports to China rose just 5.4% to $123 billion. That leaves the continent with a $102 billion trade deficit — up 64.5% year on year. Every dollar of that gap is a direct subtraction from African GDP. In accounting terms, we are exporting our own growth.

Double-click on the Africa-China export numbers, and you will learn that 89% of African exports to China between 2000 and 2022 came from extractive industries — oil, copper, iron ore — while manufactured products accounted for the vast majority of what we import back. In the year to June 2025, Africa imported 15,032 megawatts of Chinese solar panels, up 60% on the previous twelve months, and four of Africa's top five smartphone brands are now Chinese.

While China offers zero-tariff treatment to all African nations connected to Beijing, that trade model works against us. Free market access doesn't help if Africa mainly exports raw materials and imports finished products, which widens the trade deficit.

There is some connection here. Africa can industrialise and export finished goods but this industrialisation requires investment. You cannot become productive without first becoming capitalised. African domestic credit to the private sector averaged just 23.7% of GDP between 2020 and 2024 — less than half the 51.9% recorded in Latin America and the Caribbean.

The encouraging part is that the money exists. The AfDB estimates Africa could unlock as much as $1.43 trillion annually through stronger tax collection, improved public investment efficiency, reduced illicit flows (read: corruption), deeper capital markets, diaspora financing and expanded public-private partnerships. This is not a resource problem. It is a plumbing problem.

Address the plumbing issue—covering the costs, the returns, and the exit strategy—and the diaspora ceases to be the continent's primary source of consumption and begins to be its leading source of investment.