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MFW4A Hosts Roundtable on Local Investors and Long-term Finance in Africa

02.05.2017

MFW4A Secretariat and the Africa Pension Funds Network hosted a Roundtable on the theme “Local Investors and Long Term Finance in Africa: Developing the Buy Side”.

Pension funds and other institutional investors play a critical role in long-term finance and capital markets through the mobilization and allocation of long-term savings to support investment. With assets under management (AuM) by African pension funds expected to increase to $1,098 billion by 2020, up from $293 billion in 2008, there is increased interest in the role they can play in funding long-term investment on the continent. Despite this growth, and an improving regulatory environment, the majority of African pension assets remain invested in government securities and other short-term assets.

Some work has been done to understand the regulatory and capacity barriers that African institutional investors face. However, there is little understanding of the factors that drive their investment objectives, and there is often a mismatch between products offered to Africa's institutional investors and their investment needs. Significant untapped potential remains to further diversify portfolios and contribute to long-term finance in Africa.

It is in this context that the Making Finance Work for Africa (MFW4A) Secretariat and the Africa Pension Funds Network hosted a Roundtable on the theme "Local Investors and Long Term Finance in Africa: Developing the Buy Side", in Nairobi (Kenya) on 26-27April 2017. The event brought together over 40 representatives of African pension funds, Development Finance Institutions (DFIs), pensions regulators and long-term finance experts to:

  • Identify and discuss the key drivers behind investment decisions of African institutional investors, in terms of risk appetite, asset class and sector;
  • Explore how domestic institutional investors, DFIs and international investors can work together to design and structure solutions, and the support required from other stakeholders; and
  • Foster co-operation and exchange of best practices amongst African institutional investors and DFIs.

Experts at the gathering stressed the need to diversify investment portfolios, whilst minimizing risk to ensure that pension funds meet their obligations to their contributors. David Ashiagbor, MFW4A Partnership Coordinator called for greater understanding of the investment philosophies and needs of African pension funds in order to structure investment solutions adapted to their needs. Opuiyo Oforiokuma, CEO ARM-Harith Infrastructure Investment Ltd, added that Africa must develop the necessary structures to channel domestic capital to finance its infrastructure needs.

Delegates agreed that pension funds, regulators, policy makers and DFIs all needed to work together to support increased portfolio diversification and long-term investment by African pension funds. In addition to capacity building for pension funds, regulators and policy makers, participants called for increased dialogue between regulators and pension funds at the continental level to identify the risks and appropriate mitigation measures. They called on DFIs to share their expertise through co-investments and supporting the design of appropriate structures adapted to the needs of African pension funds and African markets.

For further information, please email: d.ashiagbor[a]afdb.org or visit the MFW4A website, mfw4a.org.