Increased investment by local pension and
other types of funds is gaining momentum in sub-Saharan Africa,
backing domestic bond and equities issuance, according to
policy makers, bankers and experts gathered in Tokyo.
This can help the region to overcome its
huge energy and other infrastructure deficits and cope with
deleveraging by traditional commercial bank partners dealing
with the fallout from the eurozone debt crisis.
Kenyan and Nigerian infrastructure bonds,
and calls on diaspora cash to part-fund Ethiopias $4.8
billion Grand Millennium Dam, are examples where domestic
instruments are now being used to develop essential
East Africa is now issuing bonds for
infrastructure and other purposes, offering low interest rates
[to borrowers] but high returns [to investors], Kenya
Commercial Bank chief executive Martin Oduor-Otieno said.
This is encouraging, but we must ask why we are not
seeing more of it?
The emergence of SSA-based investors will
help. Botswana Public Officers Pension Fund chief executive
Ephraim Letebele said the fund should be an example of
investing in Africa. This will help build up SSA infrastructure
and also boost funds like Botswanas which can benefit
from rates of return that are high against global
levels, said Letebele.
His fund has an asset base of around $4
billion, and invested around 70% abroad. It is now committed to
placing the maximum possible into alternative
investments in Africa led by infrastructure and private
South Africa-based, infrastructure-focused
fund manager Harith is raising a second fund, which is expected
to close next March or April, and would welcome increased
African institutional interest. There is quite a lot of
appetite, but it is mostly from [development finance
institutions] DFIs and other traditional backers,
Hariths chief investment officer Alwyn Wessels said. He
was disappointed to have very little response to
the fund-raising in the US where Africa is not
recognised as an asset class.
Projects like Lom Pangar [a
hydropower dam in Cameroon] are transformational... [a reason
why] on becoming vice president for Africa one of my priorities
was to move aggressively on the energy front, said World
Bank VP Makhtar Diop. This has a crucial development outcome,
Diop argued: How can you develop a business when you
depend on a generator in the back yard?
He noted that even the current level
of savings is not fully used in Africa. More structures
and incentives are needed for institutional investors to
channel resources into productive investment. The next
phase [of building these asset classes] will be creating
instruments that give comfort to institutional investors and
channel domestic savings.
The IFC and Standard Chartered have
launched a Pan-African Medium-Term Note Programme to boost
local currency lending, with an initial focus on Botswana,
Ghana, Kenya, South Africa, Uganda and Zambia.