Africa's largest economies are leading the way, investing in equity market and pension funds but more countries need to follow suit to attract much needed foreign institutional investment into the continent.
These conclusions came out of session on 'Institutional Investors Dialogue' at the Africa Investment Forum in Johannesburg, South Africa.
"We sit on the management of about US$120 billion, which is invested in the South African equity market, pension funds, and other portfolio invested in other parts of Africa," Linda Mateza, Head of Investments at South Africa's Government Employees Pension Fund, speaking during the session.
Pensions funds are also active in Nigeria.
"So far, we have invested US$25 billion in infrastructure private equity, housing, and pension funds", noted Dave Uduanu, Chair of the Africa Pension Fund Network, Nigeria. "In terms of infrastructure financing, it is about the depth of bankable projects. The predictability of cash flows are significant to crowding in private capital like pension and equity funds."
Africa sits on a vast amount of pension funds, insurance funds, and sovereign wealth funds collectively worth more than US$1 trillion. But the continent is struggling to convince these funds to invest money that is desperately needed to close its infrastructure financing gap of between US$68 and US$108 billion.
"Why aren't we seeing more domestic pension funds investing in Africa," asked Ritesh Anand, Executive Vice-President of Crown Agents Investment Management Ltd. On average pension funds in Africa have less than 10% invested. One percent of international pension funds and 10% of pension funds in Africa will make a difference on the continent."
Sub-Saharan Africa has the highest number of regulation reforms (107) in the world across all areas. One-third of all business regulatory reforms recorded by the World Bank's Doing Business 2019 were in the economies of Sub-Saharan Africa.
Africa is ready to do business, but there remain major stumbling blocks. "Perceptions of risks and returns on equity and pension funds pose a challenge to institutional investing in Africa", said Lerry Knox, Chief Executive Officer at Sovereign Infrastructure Group.
The Africa Investment Forum is seeking to help de-risk transaction, reduce intermediation costs, improve the quality of project information and documentation, and increase active and productive engagements between African governments and the private sector.
A total of 61 deals, estimated at more than US$40 billion, will feature in 'Boardroom Sessions,' while another US$28 billion will be showcased to investors at a marketplace Gallery Walk. The forum will curate from a total pipeline of 230 projects worth over US$208 billion, across various sectors, such as energy, infrastructure, transport and utilities, industry, agriculture, ICT and Telecoms, water and sanitation, funds and financial services, health, education, hospitality and tourism, housing, and aviation.