ZUKO HEWANA | How Tier 2 corporate lending will finance Africa’s industrial decade – Business Day

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Africa’s share of global trade has remained stagnant for two decades, hovering stubbornly at about 2.5% of worldwide exports despite the continent holding about 30% of the world’s mineral reserves.
The businesses that will transform Africa’s export profile are likely not the ones already sitting at the table; rather, they are the ones that have never been given a seat.
The continent’s mid-corporate manufacturers and processors — the critical links required to convert raw output into high-value exports — consistently struggle to access the structured, patient capital they need to scale.
To bridge this gap we need to be deliberate in redirecting capital toward mid-market African businesses that are poised to unlock the continent’s true productive potential.
At the heart of our updated strategy should be an intentional expansion into Tier 2 corporate lending.
These mid-market businesses operate in sectors with immense value-adding potential such as agroprocessing, light manufacturing, logistics, energy transition infrastructure and fintech, but they lack the size, track record or collateral profiles that traditionally attract institutional debt capital. They are not small; they are simply underserved.
While this segment accounts for a significant share of private-sector employment across the continent, it receives a disproportionately small share of institutional credit. This creates a persistent structural brake on economic diversification: businesses with genuine potential to create jobs and generate export revenue are starved of liquidity.
Four distinct pillars can address the challenges of navigating this market, and they form the basis of our credit philosophy:
Industrial growth with human outcomes
Deploying capital into businesses that sit one or two steps downstream from raw commodity production helps catalyse tertiary value-adding industries.
This means funding food processing facilities that retain profit margins locally rather than exporting raw agricultural goods, supporting manufacturing operations that substitute expensive imports, and scaling logistics networks that reduce the cost of moving goods across African borders.
The socioeconomic implications of this shift are profound, creating sustainable long-term value for companies and society. Unlike capital-intensive extractive industries or huge infrastructure projects, mid-market industrial businesses generate dense, skilled and semi-skilled employment in communities where formal wage income is scarce.
The knock-on effects on household spending, school enrolment and healthcare outcomes are well-documented. Financing a mid-market manufacturer not only funds a balance sheet, it funds the wage packet of a first-generation formal-sector worker, the education their income secures, and the local economy their spending stimulates.
A continent-wide opportunity, a deliberate strategy
Historically, institutional lending in Africa has heavily favoured large, well-capitalised corporations and sovereigns. Our lending activity outside South Africa largely mirrored this trend, anchored in transactions with large-cap entities boasting established credit profiles and ready access to international markets.
But while these relationships remain vital, they no longer represent the full scope of what capital can and should achieve. Africa’s demographic trajectory, with a projected working-age population of over 1-billion by 2040, makes building productive industrial capacity an urgent imperative.
Without it, this demographic dividend risks becoming a socioeconomic burden. With it, the continent can realistically move beyond mere participation in global trade to competing on its own terms.
The opportunity is well understood across the industry, but execution remains differentiated. Experience structuring complex, multi-jurisdictional transactions alongside banks, development finance institutions and supranational lenders can be especially valuable in emerging markets, where mid-market borrowers rarely fit neatly into standard risk frameworks.
This evolution in lending strategy is not a departure from commercial discipline. Rather, it is an expansion of where that discipline is applied, driven by the conviction that the most consequential transactions of the next decade will not be the ones that were easiest to finance.
• Hewana is principal, Pan Africa, at Sanlam Alternative Investments.
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