Key Takeaways
- • African pension funds, which hold roughly $600 billion in assets under management, have only about 10% allocated to infrastructure, housing, private credit or SME investments, according to a report by FSD Africa and others.
- • Kenya's Banki Kuu Pension Scheme (Central Bank of Kenya Pension Fund) has invested in nearly a dozen private funds, mostly repeat commitments to AfricInvest, and says it recycled proceeds from its first fund into a second with returns meeting expectations.
- • NSSF Uganda, managing 32.8 trillion Ugandan shillings ($8.4 billion), committed $8 million to a $40 million agriculture fund and is developing a $100 million fund-of-funds to invest in local Ugandan funds.
- • South Africa's legislation revised in 2023 permits pensions to allocate up to 45% to infrastructure and 15% to private equity; Ghana and Nigeria have recently passed enabling legislation.
- • Pension trustees and industry backers are pushing local capital into SME and growth financing, with President Yoweri Museveni publicly pressing NSSF Uganda to direct investments toward job creation.
Summary
Africa's pension schemes, which safeguard workers' retirement savings, have historically avoided private equity and private debt. That posture is shifting as trustees look to finance the small and growing businesses that create jobs and drive economic growth in their home markets, according to ImpactAlpha.
Jane Nzau, chairperson of Kenya's Association of Retirement Benefit Schemes and administrator of the Banki Kuu Pension Scheme, described a cautious, incremental approach. "Start small. Dip your fingers a bit," she said in a video interview. The scheme has invested in nearly a dozen private funds, most through repeat commitments to the pan-African private equity firm AfricInvest, including the second close of its FIVE (Financial Inclusion Vehicle) evergreen fund backing financial institutions, and its series of funds supporting SMEs in francophone Africa. Nzau said the pension recovered its capital from its first fund investment and recycled it into the second, adding that "our return expectations have been met." The scheme is also part of a consortium that invested over $85 million in Development Partners International's third fund in 2021, and is in talks to support Kenya's $200 million Green Investment Fund, which launched late last year to back low-carbon and resource-efficiency businesses.
The push was discussed at the Capital in Common gathering at Lake Naivasha, hosted by Front End Ventures to connect pension trustees with private equity investors. Argidius Foundation, which supported the event, said pension capital is "more patient and is locally rooted," and that local investment strengthens alignment between growth, retirement savings and national development priorities. African fund managers report growing interest from local pensions and high-net-worth investors, who can also invest in local currencies.
Uganda's NSSF is among the more active pension backers. It has committed $8 million to a $40 million agriculture fund aimed at market linkages for farmers, is the first pension backer of Pearl Capital Partners' Yield Uganda Investment Fund (a €20 million vehicle for local agribusinesses), and is developing a $100 million fund-of-funds to invest in Ugandan funds supporting small businesses. President Museveni, speaking at an event in Kampala, criticized the fund for investing in areas that do not address jobs or GDP, asking how many workers were added by buying Kenyan government bonds.
The broader constraint is allocation. According to FSD Africa and others, African pensions hold around $600 billion but only about 10% goes to infrastructure, housing, private credit or SMEs. In Kenya, roughly 1.1% of the $21 billion in pension assets is in alternatives. South Africa, with the continent's largest pension pool at $390 billion, has legislation allowing up to 45% in infrastructure and 15% in private equity. Government Employees Pension Fund of South Africa's Sifiso Sibuya argued that diversification is necessary and that alternatives may deliver equal or better returns.
Support infrastructure is also developing. Argidius and Small Foundation have backed Ghana's Ci-Gaba fund-of-funds, which reached a $30 million first close with two-thirds from local pensions and targets $75 million, 70% from local institutions. Zambia's Small and Growing Business Initiative has $260 million in first-loss debt financing from the Bank of Zambia. Peris Wanjala of JKUAT's Staff Retirement Benefits Scheme said declining government note returns make it necessary for schemes to look elsewhere.
Jane Nzau, chairperson of Kenya's Association of Retirement Benefit Schemes and administrator of the Banki Kuu Pension Scheme, described a cautious, incremental approach. "Start small. Dip your fingers a bit," she said in a video interview. The scheme has invested in nearly a dozen private funds, most through repeat commitments to the pan-African private equity firm AfricInvest, including the second close of its FIVE (Financial Inclusion Vehicle) evergreen fund backing financial institutions, and its series of funds supporting SMEs in francophone Africa. Nzau said the pension recovered its capital from its first fund investment and recycled it into the second, adding that "our return expectations have been met." The scheme is also part of a consortium that invested over $85 million in Development Partners International's third fund in 2021, and is in talks to support Kenya's $200 million Green Investment Fund, which launched late last year to back low-carbon and resource-efficiency businesses.
The push was discussed at the Capital in Common gathering at Lake Naivasha, hosted by Front End Ventures to connect pension trustees with private equity investors. Argidius Foundation, which supported the event, said pension capital is "more patient and is locally rooted," and that local investment strengthens alignment between growth, retirement savings and national development priorities. African fund managers report growing interest from local pensions and high-net-worth investors, who can also invest in local currencies.
Uganda's NSSF is among the more active pension backers. It has committed $8 million to a $40 million agriculture fund aimed at market linkages for farmers, is the first pension backer of Pearl Capital Partners' Yield Uganda Investment Fund (a €20 million vehicle for local agribusinesses), and is developing a $100 million fund-of-funds to invest in Ugandan funds supporting small businesses. President Museveni, speaking at an event in Kampala, criticized the fund for investing in areas that do not address jobs or GDP, asking how many workers were added by buying Kenyan government bonds.
The broader constraint is allocation. According to FSD Africa and others, African pensions hold around $600 billion but only about 10% goes to infrastructure, housing, private credit or SMEs. In Kenya, roughly 1.1% of the $21 billion in pension assets is in alternatives. South Africa, with the continent's largest pension pool at $390 billion, has legislation allowing up to 45% in infrastructure and 15% in private equity. Government Employees Pension Fund of South Africa's Sifiso Sibuya argued that diversification is necessary and that alternatives may deliver equal or better returns.
Support infrastructure is also developing. Argidius and Small Foundation have backed Ghana's Ci-Gaba fund-of-funds, which reached a $30 million first close with two-thirds from local pensions and targets $75 million, 70% from local institutions. Zambia's Small and Growing Business Initiative has $260 million in first-loss debt financing from the Bank of Zambia. Peris Wanjala of JKUAT's Staff Retirement Benefits Scheme said declining government note returns make it necessary for schemes to look elsewhere.
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