What strategies should be adopted to relaunch the economies?
COVID-19 has exposed the fault lines in government spending on critical infrastructure that matters to citizens, especially in African governments need new models for funding and investing in infrastructure projects. It is imperative that these models be appropriate for specific project applications and the African governments’ prevailing and long-term developmental objectives. Essentially, African governments need to relax regulatory requirements to enable pension funds to invest in African infrastructure projects. Pooling of resources among national and continental pension funds should be encouraged and this is where the DFIs can be looked upon to de-risk and standardize infrastructure projects to allow some form of securitization of infrastructure assets that can easily be purchased by the pension funds for their portfolio diversification.
How can investors best gain access to infrastructure investment?
In the developed countries, there are established investment vehicles that allow investors to invest in infrastructure development projects, so I think Africa should be able to replicate such vehicles. Africa should be able to develop a continent-wide municipal securities market like the US municipal securities market that allows private investors and pension funds to invest in securities that create portfolio diversification and liquidity.
What are the main points that you would like to highlight from this session, in terms of existing challenges, solutions and opportunities?
Main Points: Need for Diversification, robust understanding of Liquidity, and capacity building among Pension Funds to allow greater evaluation, risk analysis, assessment of investment policy and strategy fit, and the ability to identify investment opportunities that meet their risk/reward criteria. Pension funds should be able to balance Risk/Return profile in their portfolio creation. Liquidity is key to allocation in the asset/liability matrix. DFIs are open to work with Pension Funds to develop and fund Infrastructure Investments by de-risking projects. Role of DFIs is not to crowd-out but crowd-in private investors by de-risking infrastructure projects so private investors and Pension Funds can come in after projects are de-risked. AfCFTA would be key in promoting cross-border Pension Fund investments. Capacity building for evaluating infrastructure projects will be necessary for most African Pension Funds. ESG will be key in investment selection.
Challenges: Funding Gap – Significant Infrastructure funding needs across the continent and limited available capital to fund projects. Limited capacity of Pension Funds to evaluate Infrastructure Investments.
Solution: Develop well-prepared, well-structured projects with adequate risk allocation procured through competitive processes. DFI de-risked and standardized Infrastructure Project.
Opportunities: Develop municipal securities and deep secondary capital markets to fit Pension Fund investment mandates. Collaboration between African and International Pension Funds, African DFIs, and International DFIs.
How does PIAfrica contribute to the leverage of Pension Funds and Alternative Investments in Africa? What could be improved?
PIAfrica should continue the advocacy role with regulators and legislators in addition to developing robust education and relevant training programs to enable Pension Funds and investors to invest in Alternative Assets in Africa, including Infrastructure Project Vehicles and Private Equity Funds.