When public markets thin and real needs surge, capital has to look elsewhere. Across the world the public equity universe is getting smaller while Africa’s real economy expands and intensifies. On the Johannesburg Stock Exchange, the number of listed companies has roughly halved over two decades even as total market capitalisation rose. Fewer counters mean more concentration and less breadth for active managers and asset allocators who still need diversification.

This shrinkage is a risk in itself. Capital crowds into a handful of heavyweights, correlations rise and genuine stock picking room narrows. Risk is shrinking into fewer names at the very time savings pools need wider sources of return.

The pattern is global, not just South African. Over the past 20 years more companies have left US exchanges than have gone public. Germany has far fewer listings than it did in 2000 and the UK has also shrunk. At the same time companies are staying private for longer. In the US the median age at IPO rose to around 14 years in 2024 versus 6 years in 2000.

The result is simple. By the time many companies list, the steepest part of the value curve has already been captured off-exchange. Scale, network effects and margin expansion accrue to private holders. When the public finally gets access the growth runway is shorter and the opportunity may have been harvested, especially before it ever enters an index.

The growth of large private companies reinforces the point.

As of mid-2025 more than 1 200 private companies globally have a combined valuation above US$4 trillion.

These are significant slices of the modern economy across energy, healthcare, technology and financial services, yet they sit outside broad public indices and the products that track them.

This matters because most domestic unit trusts, indices and ETFs are not as diversified as they appear. Different products often hold the same set of large South African counters. Balanced funds tilt to the same local benchmarks. Global products pile into the same mega caps.  Portfolios are often marketed as varied but, beneath the surface, the same heavyweights dominate. When those names move, most portfolios move together. True diversification comes from owning cash flows driven by different engines altogether, typically not available in listed markets. User tariffs on wind and solar. Long leases in a data centre etc. These drivers do not closely track a narrow basket of listed shares.

Set that supply-side squeeze against Africa’s demand curve.

The continent has passed 1.5 billion people and is on track for roughly 2.5 billion by 2050, lifting Africa’s share of the world’s population towards 26%.

That is a persistent engine for urbanisation, consumption, logistics and digital connectivity. Energy is the stress point that becomes an investment point. About 600 million people in Africa still lack electricity access. Achieving universal access by 2030 requires connecting roughly 90 million people a year and more than US$60 billion of investment annually. The financing gap for broader infrastructure sits at US$68-108 billion per year. These are not abstractions, they are investable backlogs with real users.

Digital infrastructure follows the same logic.

Africa has less than 1% of global data centre capacity yet data use is growing at about 40% a year, roughly double the global average.

Installed capacity is a little over 400 MW with about 1.3 GW in the pipeline. Demand is visible and creditworthy.

Local policy already enables capital to meet this need. Amendments to Regulation 28 explicitly define alternative asset classes such as infrastructure and allow retirement funds up to 45% exposure, with private equity limits lifted to 15% from 10%. That gives South African savers a policy-enabled route into energy, digital infrastructure and social assets while staying within fiduciary guardrails.

The implication for allocators is direct. The listed universe is no longer a sufficient proxy for the real economy. If the mandate is growth, income and diversification, alternatives are not optional. They are how you rebuild breadth, resilience and net-of-inflation returns when public markets are thin. Operating assets can pay steady income that funds distributions during the life of a fund. Development assets convert to operating or are sold on planned timelines. Liquidity in alternatives is planned, not accidental.

The aim is not daily dealing, it is steady cash flows and periodic exits that match pension liabilities.

Common questions deserve clear answers. “Does the de-listing cycle signal risk?” In most cases de-listings reflect mergers, buyouts or moves to deeper pools of capital. In South Africa a smaller public universe often shows corporates seeking control of their destiny off-exchange. The lesson is not avoid equities, it is also own the economy through private channels.

If a portfolio still rests on the traditional 60/40 split it is increasingly buying an index of incumbents and ex-growth names. The next decade’s value creation in energy, digital and essential services will be built and owned in private markets, then possibly listed later. The evidence is clear. Fewer listings on local exchanges. Older IPOs when they arrive. Thousands of sizeable private companies absorbing capital off-exchange. Demographics that ensure lasting demand for alternatives.

For South African retirement funds the combination of regulatory support, policy reform and visible demand shifts the question from should we allocate, to where and how much should we allocate?  Energy where embedded generation and storage are investable today. Digital infrastructure where capacity is scarce and tenants are creditworthy. Social infrastructure where outcomes matter and cash flows can be index-linked. In a world of fewer listings and higher concentration this is how to rebuild breadth, resilience and net-of-inflation returns for members.

The public markets will remain vital, but the real economy of Africa is being financed and built in alternatives. It is time to own that reality and turn concentration risk into diversified, cash-generating assets that serve members, communities and the continent.