Pension fund investment in Africa

Pension funds play a vital role in shaping the investment landscape in Africa, particularly when it comes to alternative assets such as private equity. The continent holds immense potential for private equity investments, with opportunities waiting to be tapped into. Seth Pillai, partner at the App Garage Group, sheds light on the current state of private equity in Africa and the challenges and solutions for pension funds looking to invest in infrastructure projects. One of the key issues hindering the deployment of private equity capital in African markets is the inadequate infrastructure. Pillai emphasizes the importance of infrastructure investing by pension funds, noting that it aligns with their long-term growth objectives and the need for stable assets to match their liabilities. Despite the willingness of governments to address infrastructure gaps, bottlenecks still exist in critical sectors like energy transmission and distribution. Investing in greenfield projects is essential for developing quality assets and defining risk and return profiles. Pillai suggests that pension funds should engage in project development to manage risks effectively. While conservative investors may favor brownfield assets, the high costs and limited availability make greenfield projects a more viable option. Pillai remains optimistic about attracting pension funds to critical infrastructure projects in Nigeria, citing ongoing initiatives in the gas sector as potential success stories. He highlights the use of grant money and guarantees as risk management tools for pension funds looking to invest in development projects. As the sector gains traction and showcases successful investment cases, Pillai anticipates a shift towards greater pension fund participation in African private equity.