Nine Kenyan pension plans have formed a consortium to invest in local infrastructure, private equity and real estate in deals structured to also potentially include direct investment by international asset owners and managers. According to Pensions and Investments Research, the consortium is ready to make a move on infrastructural projects.
The World Bank has been calling on pension funds in Africa to take advantage of infrastructure opportunities especially by use of Public Private Partnerships. According to the World Bank, infrastructure needs in Kenya amount to about $4 billion (Sh. 400 billion) per year, creating an opportunity for long-term institutional investors, particularly pension schemes
The consortium is considering its first project first project, a $2 billion toll road in Kenya- the Nairobi-Nakuru-Mau Summit Highway- supported by guarantees from the World Bank. Once the contract is awarded, the consortium could invest a combined equivalent of $70 million in local currency into the project once.
The project will be under the supervision of Kenya National Highways Authority’s which has shortlisted three groups to undertake the project; an expansion of a 180-kilometer road into a four-lane highway. The authority could make a selection any time now, according to people close to the process.
Sundeep Raichura, Nairobi-based group CEO of pension plan administrator Zamara Actuaries, Administrators & Consultants Ltd., who has helped to create the consortium acknowledged that the consortium would make a relatively small investment in local currency since it is the first.
The nine pension plans have entered into an agreement to work together, but Mr. Raichura added other local pension plans are interested. The group could expand to 15 members with combined total assets of $2 billion, he said.
“Investing in infrastructure is new for most pension plans in Kenya,” said Constantine Kandie, Narobi-based director on the board of the Moi Teaching and Referral Hospital, which oversees its 3 billion Kenyan shilling ($30 million) pension scheme.
“In Kenya, most pension plans are relatively small; the pension world is fragmented,” she said. “However, together Kenyan pension plans have a combined 1 trillion shillings in assets,” she added.
In 2015, the Kenyan government changed regulations to allow pension plans to invest up to 10% of their assets in private equity and venture capital.
Infrastructure however, has not yet been designated as a specific asset class for local pension fund investment, Ms. Kandie explained. She said that although currently pension funds can only allocate 5% to infrastructure, they expect the government will revise the regulations allowing up to 10% in infrastructure.