The World Bank reported in 2017 that closing sub-Saharan Africa’s infrastructure deficit could quicken the GDP growth rate by an estimated 2% per year.
Further analysis from the report revealed, however, that public spending in countries is significantly less than the funds allocated for infrastructure development. This situation thus affects governments’ annual execution plans and reduces their projected budgets for infrastructure development.
In other words, the levels of public capital spending across sub-Saharan Africa are too low to address its infrastructure demands.
A new report from the Africa-Europe Foundation (2025) says that the continent requires $130 to $170 billion annually to close its infrastructure gap.
The current yearly estimate of governments’ contributions is $80 billion, yet the status quo persists. This figure, which encompasses transportation, energy, digital networks, etc., also includes sports facilities, an area that continues to face underinvestment.
For closer context, Kenya’s sports ministry was allocated KSh 16.69 billion ($128 million), 0.4% of the national 2025 budget. Nigeria’s Federal Government earmarked ₦78 billion ($50.8 million), 0.14% of the country’s ₦54.99 trillion budget, for sports.
With a special focus on the Formula 1 revival in South Africa, R6.3 billion (0.8% of the total government budget) was allocated to the nation’s sporting industry.
As countries across the continent grapple with this sports funding gap, as highlighted from the above three examples, certain methods of financing have been explored by governments/ministries over the years, one of which is the municipal sports bond.
This bond generally serves as a debt security, where corporations or governments raise capital to fund specific projects and are required to repay the principal, along with accumulated interest, over a specified period.
Within the sports infrastructure domain, these bonds have helped to finance stadiums and related facilities over the years. However, the key question, given recent developments across the continent, is whether this relatively proven financing model can be effectively and comprehensively adapted in the best interest of sports infrastructure advancement and broader economic growth.
The global context
The US presents arguably the most comprehensive example of sports bond financing. We find here that state and local government funding of major league venues between 1970 and 2020 totalled $33 billion.
Furthermore, in the past two decades, about four in ten stadiums built for the four largest American sports leagues were financed in part by municipal bonds exempt from federal taxes. These records illustrate that bonds for the construction of sporting facilities have been a common practice amongst governmental bodies in the US and beyond.
The way bonds are set up has evolved significantly. Today, bonds issued in connection with stadiums are usually secured by reliable tax revenue streams, rather than the money generated from the facility alone. Since the money is almost guaranteed, investors feel safer lending, and bonds receive better credit ratings.
The federal treatment of sports bonds has created significant implicit subsidies. According to a journal published by the University of Chicago Press (PDF), the US federal government lost an estimated $4.3 billion in tax revenue by allowing municipal sports bonds to be tax-exempt. Issuers (bondholders) were not required to pay taxes on the interest received on money they lent to the government.
This tax break, while rewarding for issuers, also provided a $3.6 billion subsidy to professional sports teams and their owners, having used public funds to fund private stadiums. As such, some people criticise these bonds, arguing that taxpayers are essentially footing the bill for private constructions.
Public funding or subsidies for stadiums come in various forms, including tax-free bonds, cash, long-term tax exemptions, and funds for roads (spent on infrastructure improvements) or operations (covering the ongoing costs of the stadium). Although governments use these frameworks to facilitate the building of sports venues, economists question the benefits of these investments for the wider community.
Infrastructure financing in Africa
Since Nedbank, a financial services group in South Africa, issued the continent’s first green bond in 2012, 20 of these bonds, worth $2.78 billion, have been issued across Africa. This is a sign of growing awareness in the bond market and increased investment appetite in infrastructure-related securities.
Several African countries have successfully used infrastructure bonds to finance public projects. As defined earlier, these bonds are loans that the government takes to finance facilities in the healthcare industry, transportation, education, etc.
In South Africa, government institutions issued bonds on the JSE Debt Board, established in 1994, to raise money for the execution of large capital projects such as roads, power plants, schools, and hospitals.
Kenya, Ghana, and Senegal have also successfully issued infrastructure bonds to finance transportation and energy projects.
Across the continent, this method of financing is becoming a popular way for countries to fill the gaps in their infrastructure funding. The most common structure is general government bonds, typically repaid using tax revenue rather than income from the projects themselves.
Talanta Sports City (Kenya)
From the recent examples of stadium financing on the continent, the Talanta Sports City in Kenya is cited as a significant leap in mobilising private capital for public projects.
The bond, worth Ksh 44.7 billion, listed by Linzi 003 Infrastructure Asset-Backed Security for the 60,000-capacity arena, illustrates a major framework for reducing pressure on the government’s budget. It also highlights several notable aspects of how sports bonds can function on the continent.
The Talanta Sports City bond differs from traditional government bonds, as it utilises asset-backed securities. This system reduces the government’s direct financial risks, affording investors a closer connection to the project’s performance.
It’s a project that, regarding capacity and funding requirements, also suggests that under favourable circumstances and well-structured conditions, African governments, like those from more developed countries, can be willing to commit substantial resources to sports infrastructure.
The Asset-Backed Security funding the enterprise is from the Linzi FinCo 003 Trust — a special-purpose vehicle that issued medium-term notes, secured and highly rated, to investors.
The notes, and by extension, the whole bond, offer an annual return of 15.04% and will be repaid in 2040. The bond sale, which closed on June 30th, 2025, saw several subscriptions that shot the rate to Ksh44.875 billion, exceeding the initial target of Ksh44.791 billion. This bidding ratio indicates strong investor confidence in the project’s viability and the government’s ability to repay the 15-year loan using the funds generated.
All successful bids were reportedly accepted on a fair, proportional basis. So, bond sales will facilitate the construction of the Talanta Sports City, including a new stadium for the 2027 African Cup of Nations (AFCON) hosted by Kenya alongside Uganda and Tanzania.
The overall emphasis of this project on reducing budget pressure indicates a recognition of the importance of balancing public investment with financial sustainability.
Financial structure and risk assessment
Funding stadium construction in Africa can be quite challenging because the project’s outcome relies on several unique risk factors. In contrast, building a sports arena in the US, for example, might cost $2.1 billion, with a large chunk of that emanating from two kinds of government loans: $500 million in bonds generated by the state with its complete tax power, and $760 million in bonds raised from specific stadium revenues like ticket fees.
The money used to repay sports bonds is sourced from various sources, including government taxes, ticket sales, user fees, and even payments from companies for naming rights. Some of these sources, however, are often described as unstable revenue streams.
The unpredictability of these revenues, alongside socioeconomic instability, could often shape investor perception. Research shows that despite having lower default rates on infrastructure debt than some developed countries, Africa faces a risk perception and reality gap, resulting in higher borrowing costs.
Investors often demand much higher returns on African projects because they are generally regarded as risky, even when data indicates that a project is not.
Mitigating financial risks is, therefore, crucial in Africa, where volatile currencies, amongst other factors, can disrupt how a bond performs. Structures must be put in place to account for these issues through currency hedging arrangements or insurance mechanisms.
Economic development potential
Studies confirm that sports facilities can serve as anchors for broader urban development.
For example, a 2024 report by consulting firm Oliver Wyman revealed that big tournaments like South Africa’s FIFA World Cup in 2010 facilitated employment opportunities through infrastructure revamps and also improved tourism. R38 billion (approximately $5.12 billion at the time) was also added to the country’s economy, enhancing growth by 0.4%.
The fact that world-class facilities can attract international tournaments and opportunities for tourism is a clear justification for the investment. Cape Town’s E-prix race event, generating over R1 billion in economic activity, lends further credence to this fact.
Regulatory requirements
For sports bonds to succeed on the continent, they must be grounded in robust rules and management frameworks.
The Cape Town green bond of 2017 is a fine illustration. As reported, it was the first in South Africa to get accredited by the Climate Bonds Initiative.
Evidently, therefore, African administrators can raise money internationally if they adhere strictly to global standards.
The lack of investor confidence that many have in Africa — a major barrier to local bond markets on the continent — can be addressed by establishing clear and transparent regulatory schemes for bond issuance and reporting.
Also, credit ratings must be convincing to increase the odds of securing funding from a major global institution.
Alternative financing methods
Money for the construction of a sports stadium can be sourced in various ways, each having its own pros and cons. A sports bond is just one of a pool of other viable options listed as follows:
- Government funding: The government undertakes the entire project independently, placing immediate pressure on the budget and avoiding loans.
- Public-private partnerships: The government forms an alliance with a private firm, which can be more effective but may lead to expensive, long-term contracts.
- Development loans: In this case, they tap into the resources of large institutions like the World Bank or the IMF, which often present attractive offers but come with strict rules.
- Private investment: A private company, provided it will generate substantial returns, will fund the project.
Regional variations and opportunities
West Africa, increasingly identified as a credible destination for investors across all economic sectors (PDF), with a population of over 300 million, probably possesses the most differential capacity to support significant sports infrastructure investments.
Nations to the East have benefited from their developed financial markets, particularly Kenya, which has been rated as one of the fastest-growing bond markets in sub-Saharan Africa.
The financial markets in Southern Africa, especially South Africa (the most advanced in the region), with the continent’s largest stock exchange (the JSE), serve as a strong centre for bond nurturing.
The proximity of Northern countries to Europe and their experiences with international markets are some of the compelling factors that endear the region as a whole to investors.
For smaller countries on the continent, forging cross-border sports engagement could create opportunities for joint financing arrangements that spread costs and risks across multiple administrations.
The most recent example of this is the forthcoming 2027 AFCON, co-hosted by Kenya, Tanzania, and Uganda. This joint bid takes coordinated effort to renovate and build stadiums, alongside associated facilities.
