Push is on to unlock billions from African pension funds

London — The Africa Finance Corporation said it was accelerating efforts to mobilise the continent’s money for investments and tapping investors in the Middle East and Asia, as developing nations grapple with seismic shifts in geopolitics and funding flows.

Samaila Zubairu, CEO of the AFC — a development finance institution owned by Nigeria’s central bank and other African financial institutions — said in an interview the lender was ready to weather a world in which the US and Europe cut financial aid and turn increasingly inward.

“The only thing we want... to change, is to get domestic capital more available for investment within the continent,” Zubairu said.

“We would accelerate our initiatives to mobilise domestic capital from African pension funds, African institutional investors, to invest domestically,” he said, adding that in the long term, some $15 to $20-billion could come from domestic pension funds.

US President Donald Trump’s America First agenda and cuts in US aid money could drain billions from projects in Africa. European countries are also slashing aid funding, with Britain redirecting much of it to boost defence spending.

Africa’s low savings rates and shallow markets have stymied efforts to mobilise local pools of cash.

Zubairu said the AFC, which deploys $2.5-$3bn each year, would scale up fund allocation “prudently” by choosing projects other backers could pile into.

It launched the pilot project InfraCredit to support pension fund investments in much-needed infrastructure projects, with oil-rich Nigeria’s sovereign wealth fund providing guarantees on local currency debt.

The project has mobilised about 230-billion naira ($152-million), including investments from 21 pension funds, which previously invested almost exclusively in government debt.

Zubairu said he expected to launch similar programmes as early as this year in Botswana, Angola and Kenya.

“This is the kind of programme that we think needs to be replicated at scale,” he said. “If we do programmes like this, then you see a lot more billions available for investment.”

Pension funds had also placed money in the Infrastructure Climate Resilience Fund, boosting a $52m commitment from the European Investment Bank, he said.

Investors from the Gulf and Europe are also looking to place money in other AFC projects, such as ARISE Integrated Industrial Platforms which designs and finances industrial projects.

Trump has yet to publicly signal his plans for US investment in the Lobito Corridor, a railway project linking resource-rich Democratic Republic of Congo with Zambia and Angola’s Atlantic port of Lobito.

Former US President Joe Biden visited the site in December, during his only trip to Africa.

Zubairu said he was confident Trump would see the value in backing the corridor, though it was a strong, bankable framework that would move forward regardless.

Longer term, African countries should rethink how they view reserves, focusing less on how many months of import cover they provide and more on how they can leverage them for investment and growth in a capital stock.

“How are we using our savings? How are we ensuring that our savings work for our economies?” he said, adding governments needed to be “very intentional” about capitalising financial institutions.

The AFC is also eyeing bond more sales in the Middle East — after their first sukuk issue last month — and in China, after securing AAA credit ratings from S&P Global (China) Ratings and China Chengxin International Credit Rating Co.

“We’re expanding the frontiers of financing sources available for Africa,” he said.

Reuters