US-Africa Pension Funds explore investment opportunities in Sub-Saharan Africa

Standard Bank and Bank of New York Mellon, in collaboration with the NASP-USAID Investment Partnership for Mobilizing Institutional Investors to Develop Africa’s Infrastructure (MiDA) recently hosted a series of US Africa Pension Fund roundtables in Johannesburg with representatives of major US, African and South African pension funds and asset management firms.

MiDA is a ground-breaking investment partnership established in 2016 between the U.S. National Association of Securities Professionals (“NASP”) and the United States Agency for International Development (“USAID”) to facilitate and expand opportunities for infrastructure, real estate/housing, and private equity investments in Sub-Saharan Africa for investors seeking higher returns and developmental impact. During a series of roundtables, the MiDA delegation to South Africa explored investment opportunities with African pension funds, asset managers, and financial institutions to build partnerships and develop relationships.

“At approximately USD 10 trillion, public pension funds account for the largest pool of investment capital in the United States,” said Donna SimsWilson, Chairperson of NASP. “It’s estimated that Africa needs, on average, USD 90 billion in infrastructure investment annually over the next decade to truly achieve its economic potential.”Despite Africa’s vast potential as an investment destination, perceptions of risk persist.  Consequently, less than 1% of the value of United States pensions funds are currently invested in Africa.

According to Ms SimsWilson, “The purpose of the NASP African Institutional Investor Advisory Council is to educate, expose and then inspire US institutional investors to invest in Africa by delineating the actual versus perceived risks.”

NASP entered into collaboration in 2016 with the SA Association of Black Securities and Investment Professionals (“ABSIP”), which promotes the participation of ABSIP member firms as part of the investment drive. ABSIP President, Sibongiseni Mbatha, commented that, “Our collaboration with NASP has grown from strength to strength since we signed an MoU three years ago. In terms of the MoU, ABSIP and NASP members must collaborate for mutual benefit. We are delighted at this opportunity provided by MiDA, to explore business opportunities that will advance Africa’s economies.”

Speaking to the attendees, Aymeric Saha, the Managing Director of MiDA said: “Addressing the 30% performance shortfall in public pension funds demands that they consider new regions and asset classes.” One of the key roles that MiDA performs for its members is to de-mystify African risk. “Our relationship with Standard Bank, established in 20 markets across the continent, equips us with research to advise our members on how to invest in Africa,” he added.

The latest figures released by the African Development Bank suggest the continent’s infrastructure needs amount to between $130–170 billion a year, with a current financing gap of $67–$107 billion per annum. Given this financing gap, Africa offers vast opportunity for the investor base.

“Africa’s growth story continues to be increasingly attractive to global capital,” said Charl Bruyns, Head: Investor Services for Standard Bank.  “While the flows of global capital to Africa remain a small percentage of global flows, the continent has a growing ability to deploy these flows and to offer attractive returns at acceptable levels of risk,” he added.

During this third gathering of what is becoming an annual event, the trustees of United States pension and insurance funds, benefit trusts and city treasuries, collectively representing approximately US$ 1.1 trillion under management, met with South African Pension fund counterparts and investment managers accounting for almost ZAR 5 trillion under management.

“As Africa’s most industrialized and diverse economy, and as a country committed to broad and deep structural reforms, South Africa presents a compelling investment proposition on it’s own,” said Sim Tshabalala, Chief Executive for Standard Bank Group. “More importantly, however, South Africa’s deep, sophisticated and rapidly innovating financial markets remain the primary gateway to and facilitator of broader investment into Africa.”

To this end, Standard Bank’s partnership with Bank of New York Mellon, NASP/MiDA, along with ABSIP, BATSETA and IRFA, in hosting platforms like the United States – Africa Pension Fund Trustees Roundtables remains central to the bank’s mandate of driving Africa’s growth.

The series of roundtables convene working sessions around investment best practices, co-investment opportunities, and to promote financial inclusion in the financial services industry.

“The United States’ and Africa’s institutional communities as well as their banks have an incredible opportunity to influence future infrastructure investment,” said  Bruyns. “Africa is much more investor-ready, capable and transparent than it has ever been in the past and the result is that large United States pension funds are beginning to consider the region. These funds, with long mandates and higher commitment levels, are ideal for Africa’s longer investment and return cycles,” he said.