Archive for the 'Research' Category

How big are African pension funds?

Here are selected findings from a recent hunt through the Internet:

According to a recent report by PricewaterhouseCoopers, “Africa Asset Management 2020” (get your copy here) total assets under management in 12 selected Africa countries were $293 billion in 2008, more than doubling to $634bn by 2014. They are forecast at $1.1 trillion in 2020. (The 12 countries are: South Africa, Morocco, Mauritius, Namibia; Egypt, Kenya, Botswana, Ghana, Nigeria; Angola, Algeria, Tunisia).

Pensions are increasingly important as many countries set up and grow pension schemes. Mauritius and Ghana are examples of countries with 3-pillar pension systems and some countries are starting to revise their regulations to allow pension funds to invest more widely than just into domestic bonds, money market and equities

How big are the funds and are do they invest in infrastructure?

The giant African pension fund is South Africa’s Government Employees Pension Fund (GEPF), which had an investment portfolio of ZAR1.67trn ($124bn) at 31 March 2017 while accumulated funds and reserves grew at 10.2% a year for the last decade, according to the latest annual report.

The fund has 14 direct investments in 904MW of renewable energy including Bokpoort (50MW concentrating solar power CSP), wind and the 175MW photovoltaic (PV) Solar Capital Plant. GEPF has also backed 646 housing projects and unlisted investments include ZAR3.9bn ($290m) into the Pan African Infrastructure Development Fund run by Harith General Partners, ZAR2.4bn into South Africa’s airports and ZAR996m in telco MTN Nigeria, with a total of 1.2% of assets in infrastructure including roads and power in South Africa and across Africa.

Next-door Namibia has 2.5m people and David Nuyoma, CEO of the Government Institutions Pension Fund (GIPF) told a workshop in October 2017 its total assets were N$105bn ($7.9bn), 64% of the nation’s gross domestic product. Its unlisted portfolio includes residential, tourism and commercial developments, solar power and an infrastructure fund run by Old Mutual.

Botswana Public Officers Pension Fund has assets under management of BWP54.6bn ($2.6bn), including BWP11m invested with Harith.

Other markets are growing fast. In September 2017, Nigeria’s Pencom put pension fund assets at NGN7.16trn (down to $20.1bn after currency falls) of which NGN5.2bn was in infrastructure funds and NGN221.5bn in real estate including real-estate investment trusts (REITS). Earlier the industry had been growing by 30% a year from 2008-2015. There are 2015 regulations governing investment into infrastructure, and fund managers Asset and Resource Management Company and Harith General Partners, based in South Africa, have teamed up to create a $250m infrastructure fund for West Africa that meets the requirements.

 

Source: PricewaterhouseCoopers

In December 2016, Kenya’s Retirement Benefits Authority then CEO Edward Odundo said the industry would be KES1trn ($9.8bn) by the end of that month. The regulator is investigating structures for pensions and other funds to invest in road Government-led infrastructure such as Nairobi-Nakuru-Mau Summit superhighway (report in Nation newspaper)

Investments of social security schemes in Tanzania were TZS7.8trn ($3.6bn) in June 2015 and had grown 17% in the year, according to the Social Security Regulatory Authority (SSRA). The National Social Security Fund invested for 60% of the $140m Kigamboni toll bridge (Government has 40%).

Social Security and National Investment Trust (SSNIT) in Ghana, has assets GHS8.8bn ($2.0bn) and is invested in power projects, housing, health and other infrastructure in support of Government initiatives.

 

(Figures from author’s Internet research of annual reports of regulators and funds or recent news updates)

African pensions and infrastructure investment – recent research

Learning from Latin America
The challenge to create structures so that pension funds can invest in local infrastructure projects and help develop the capital markets has led to some innovative ideas across Latin America. There are lessons for African regulators of pensions and social security as well as for those promoting public-private partnerships for a full range of African infrastructure, including roads, bridges, telecoms, hospitals and house. Here are a couple of examples (from a 2017 World Bank paper by Fiona Stewart, Romain Despalins and Inna Remizova).

Mexico’s CKDs (Certificados de Capital de Desarrollo) securities are traded on the Mexican Stock Exchange (Mexican Bolsa/BMV) and were created in July 2009 with the mandatory pension funds (Siefores) as their key source of capital. CKDs are designed to boost infrastructure projects from ports to electricity and water, and real estate amounted to 30% of the total since 2009. Regulator CONSAR has deregulated investment restrictions for Siefores in stages to allow them to invest into private equity, real estate and infrastructure projects through CKDs.

Peruvian funds have created trust structures to allow pension funds to invest in infrastructure projects. The World Bank has helped Columbia develop infrastructure debt funds which pension funds can invest into.

 

Excellent recent research

Several excellent papers have been published this year. Here are some of them, with links to their sources.

  • Maurer, Klaus (April 2017). “Mobilization of of Long-term Savings for Infrastructure Financing in Africa”. Study prepared for Germany’s Study prepared for Federal Ministry for Economic Cooperation and Development (BMZ). Bonn. Deutsche Gesellschaft fur Internationale Zusammenarbeit (GIZ) GmbH, available here. Sources include 2 articles on this blog in Feb 2017 and in Mar 2015!
  • PricewaterhouseCoopers (2017). “Africa Asset Management 2020”. PwC. Download here.
  • RisCura (current). Bright Africa. Cape Town. RisCura. The report was published in 2015 but the website is interactive and updated, check out the excellent information and stats here.
  • Stewart, Fiona, Romain Despalins and Inna Remizova (July 2017). “Pension Funds, Capital Markets, and the Power of Diversification”. Policy Research Working Paper. Washington, DC. World Bank Group. Download via here.
  • Sy Amadou (Mar 2017). “Leveraging African Pension Funds for Financing Infrastructure Development”. Washington, DC. African Growth Initiative of The Brookings Institution with NEPAD and the United Nations Office of the Special Advisor on Africa (OSAA). Available from Brookings.

Another good resource is African Development Bank’s Making Finance Work For Africa (MFW4A).

Tanzania’s Kigamboni Bridge, an investment by NSSF (Credit Nairobi Wire)