Acting Retirement Benefits Authority (RBA) chief executive Nzomo Mutuku recently said that infrastructure funding will help the funds to earn higher returns while contributing to national good, as a diversification from their old-style portfolio of the stock market and government securities.
“The laws have been amended and we are waiting for formulation of legal structures that will enable development finance institutions to partner with local pension schemes in executing projects locally,” Mr Mutuku said during the Africa Pension Funds Network in Nairobi last month.
The State is planning a series of events to encourage more pension funds to invest in infrastructure projects.
By amending the law to allow investment in public infrastructure under Public Private Partnerships (PPPs), the State expects to lower its reliance on borrowing to fund its project and the pension schemes that are struggling in a low-yield environment will benefit.
Gerald Gondo, a development executive with UK-based investment advisory firm, RisCura, told the forum that he supports the involvement of pension schemes in partnering with the government on mega projects.
He said the partnership will give them the first opportunity to acquire higher stakes in profitable ventures when the government opts to reduce ownership.
Jacqueline Irving, one of the panellists, said State projects were the safest bet for pension schemes, which often retain large amounts within their host countries.
Over half of local pension schemes have shown interest in committing their billions in public projects, with two thirds favouring investments in equity.
According to European Investment Bank’s deputy head of Financial Sector Division Nokolas Milianitis, the government must be involved in formulating investment products in order to expedite faster adoption.
Local pension funds currently hold 28 per cent of all government securities worth nearly Sh542 billion, which is equivalent to more than half of their total assets. The balance is held in real estate, fixed deposits, bonds, private equity and high yielding offshore investments.
Involving pension funds to finance infrastructure is not new in East Africa. Already, neighbouring Tanzania’s National Social Security Fund (NSSF) has invested 60 per cent in the modern Kigamboni Bridge, Dar es Salaam, using a similar special purpose vehicle (SPV) and has lined up other mega infrastructure projects.