Africa urged to tap local funds to finance mega infrastructure

Two European development agencies have urged African governments to find ways to help pension schemes and local private equity firms to finance mega infrastructure.

European Investment Bank (EIB) and German Technical Assistance (GIZ) said African governments can promote use of locally available funds through Special Purpose Vehicles (SPV) at the bourse.

GIZ advisor Timo Bollerhey said this could be fast-tracked via formulation of a legal framework that promote alternative infrastructural investments by pension funds, away from the restrictive regime currently governing their operations.

“Global Development Finance Institutions (DFIs) must redefine their role and nurture Kenyan or Africa-based infrastructure fund that sponsor cross-border developments. We need to have development products floated at the bourse for pension funds to contribute a percentage of their deposits to such projects,” he said.

EIB deputy head of Financial Sector Division Nikolaos Milianitis said the government must be involved in formulating products that enable rich citizens, private equity funds and pension funds inject money in SPVs for specific projects.

This, he said, will reduce reliance on foreign institutions to fund development projects such as roads, energy, value addition ventures among others.

“Pension fund members will be proud to finance construction of a road whereby a toll station will be erected to recover the funds. This could see more pension funds offer to finance other projects that earn them higher returns than investments in government bills,” he said.

The two-day workshop that attracted pension administrators, asset managers, consultants DFIs and regulators from across Africa called for establishment of an Africa-wide forum to discuss possibility of creating an African Fund that will promote investments opportunities for local funds.

A facilitator, Make Finance Work for Africa coordinator, David Ashiagbor said Africa will never advance if it keeps sourcing for expensive foreign funds to execute local projects.

“Local investors understand local risks and are best placed to assess the risks involved. Think about M-Pesa and its huge social benefits. Can Kenyans think about life before a mobile phone and its value added services from internet penetration to money transfer services. Can citizens from developed countries understand its benefits to Kenyans?” he posed.

The forum, held in Nairobi was convened by the Association of Pension Administrators of Kenya (APAK).