Pen­sion schemes form pool to win big projects

The 10 funds com­mand an as­set base of over $1.5 bil­lion. Ten oth­ers have ex­pressed an in­ter­est in join­ing

The East African - - BUSI­NESS - By NJIRAINI MUCHIRA

Ten large Kenyan pen­sion funds have formed a con­sor­tium de­signed to pool funds and in­vest in cap­i­tal-in­ten­sive in­fra­struc­ture projects.

In or­der to di­ver­sify their in­vest­ments, the funds have es­tab­lished the Kenya Pen­sion Fund In­vest­ment Con­sor­tium at a time when the gov­ern­ment is re­vis­ing the as­set classes that pen­sion schemes are al­lowed to in­vest in to in­clude pub­lic-pri­vate part­ner­ships, which will en­able them to di­rect their vast re­sources into in­fra­struc­ture projects.

“We have made a proposal to the Na­tional Trea­sury to al­low for a PPP as­set class in which schemes can in­vest,” Nzomo Mu­tuku, Re­tire­ment Ben­e­fits Au­thor­ity chief ex­ec­u­tive, told

“This will en­able them di­ver­sify their in­vest­ment op­tions.”

Mr Mu­tuku said that RBA sup­ports the for­ma­tion of the con­sor­tium, which will en­able schemes to play an ac­tive role in help­ing the gov­ern­ment re­alise the Big Four agenda, par­tic­u­larly af­ford­able hous­ing.

While pre­sent­ing the 2018/2019 bud­get in June, Na­tional Trea­sury Cab­i­net Sec­re­tary Henry Rotich called on pen­sion funds and other in­sti­tu­tional in­vestors to con­sider PPPS as a dis­tinct as­set class and to part­ner with the gov­ern­ment in en­hanc­ing the coun­try’s ca­pac­ity for de­vel­op­men­tal in­vest­ments.

“These funds have the po­ten­tial to play a crit­i­cal role in pro­vid­ing lo­cal cur­rency fi­ap­petite nanc­ing for PPP projects thereby sig­nif­i­cantly de-risk­ing projects from for­eign-cur­rency fund­ing ex­po­sure,” he said.

Sundeep Raichura, Za­mara Group chief ex­ec­u­tive, said that investing to­gether can help to achieve economies of scale, lower costs, lower ex­po­sure and risks and con­fer in­creased bar­gain­ing power.

He said the 10 funds com­mand an as­set base of over $1.5 bil­lion, adding that 10 oth­ers have ex­pressed an in­ter­est in join­ing the con­sor­tium.

“We have also en­gaged with var­i­ous stake­hold­ers, in­clud­ing global pen­sion funds who are keen to in­vest to­gether with lo­cal pen­sion funds in Kenya and across East Africa,” he said.

There are more than 1,300 pen­sion schemes in Kenya, with a mem­ber­ship of over three mil­lion.

Al­though pen­sion schemes in Kenya con­trol as­sets worth $10 bil­lion, 80 per cent is in­vested in tra­di­tional as­set classes, partly due to low-risk and partly to the rigid­ity of reg­u­la­tors, who dis­cour­age investing in high-risk, high-re­turn in­stru­ments.

Kenyan pen­sion schemes mainly in­vest in gov­ern­ment bonds, equities, off­shore, prop­erty and only re­cently have started mov­ing to as­set classes like pri­vate eq­uity.

Cur­rently, the fixed-in­come class ac­counts for about 70 per cent of as­set al­lo­ca­tion, fol­lowed by equities at 24 per cent, prop­erty at four per cent and off­shore one per cent.

In East Africa, where pen­sion schemes boast of as­sets un­der man­age­ment of $18 bil­lion, only Tan­za­nia has ex­per­i­mented with schemes investing in in­fra­struc­ture projects. Tan­za­nia’s Na­tional So­cial Se­cu­rity Fund has in­vested $135 mil­lion in the con­struc­tion of the 680-me­tre Ny­erere Bridge in Dar es Salaam.

The World Bank has been prod­ding schemes to take an in­teres in PPP projects. The bank con­tends that in­fra­struc­ture needs in Kenya are vast, re­quir­ing about $4 bil­lion an­nu­ally, cre­at­ing an op­por­tu­nity for long-term in­sti­tu­tional in­vestors like pen­sion schemes.

Pic­ture: File

Pedestrians min­gle with mo­torists along the Nyali bridge, Mom­basa, caus­ing de­lays un­til it be­came im­per­a­tive to widen the bridge.

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