Survival of Africa's pension industry depends on allocation to domestic alternative assets
Ghana's robust pension industry stands on the cusp of a survival or extinction.
By Amma Gyampo, CEO, Ghana Venture Capital and Private Equity Association
Ghana's robust pension industry stands on the cusp of a survival or extinction. With a rapidly expanding youth demographic poised to enter the workforce, ensuring the long-term sustainability of the nation's pension system is a paramount economic imperative.
The lessons learned from the 2022 Domestic Debt Exchange Programme (DDEP), which impacted a significant GH¢31 billion (about $3 billion) of pension holdings, clearly underscored the vulnerabilities inherent in an over-concentrated investment portfolio. Diversifying these substantial assets is not merely a financial strategy; it is a vital step towards securing the economic future of Ghana's retirees and fostering opportunities for its burgeoning youth.
In this pivotal moment, the Ghana Venture Capital and Private Equity Association (GVCA), has emerged as a formidable force for positive change. The GVCA has been instrumental in shaping dialogue with government and regulatory bodies, advocating for policies that encourage institutional investors, including pension and insurance firms, to judiciously increase their allocation to alternative assets. This strategic focus is designed to yield both robust financial returns and substantial socio-economic benefits by nurturing new, job-creating industries and fostering market-creating innovations. The Association's landmark Pension and Insurance Industry VC/PE Compact in April 2025 served as a powerful catalyst, aiming to galvanise government and regulatory action and illuminate practical pathways for unlocking domestic private capital from institutional investors.
As the GVCA prepares to host its next crucial policy advocacy convening – a government and regulatory roundtable this month – it continues to serve as a strategic knowledge and implementation partner, offering insightful recommendations for the industry's evolution. For the pension industry to reinforce its own long-term viability and effectively fulfill its mandate to secure the future of its contributors, it is suggested that it embraces innovation, diversifies its investment strategies, enhances its internal capabilities, and cultivates deeper alliances with the domestic private sector development finance ecosystem. This proactive transformation is recognised as essential, extending beyond mere financial performance to the creation of the dignified, sustainable employment opportunities vital for both the pension system's enduring strength and the broader economic prosperity of Ghana.
Our pension capital is the seed money for Ghana's next generation of decent, salaried workers and jobs – the lifeblood of our economy and the pension industry itself. By aligning pension capital with our most promising innovations and industries, we build a future where everyone thrives. The pension industry's own survival depends on getting this right.
This guiding principle underpins the GVCA's approach, offering pathways for the pension industry to secure its future by investing in the nation's productive capacity.
Expanding Regulatory Horizons for Domestic Alternatives
While the National Pensions Regulatory Authority's (NPRA) 2023 revision, which increased the ceiling for alternative asset allocations to 25% of Assets Under Management (AUM), conceptually could free up an estimated GH¢25 billion by the end of 2025, the practical uptake has indicated a need for further enabling frameworks. Ghana might consider proactively broadening the permissible investment universe:
Encouraging Substantive Alternative Allocations: Beyond setting a ceiling, a helpful recommendation could involve exploring mechanisms to encourage a minimum allocation for pension funds into domestic private equity, venture capital, infrastructure funds, and Small and Medium-sized Enterprise (SME) ventures. This aligns seamlessly with existing government directives for allocation to VC/PE by 2026.
Facilitating Private Debt and Real Estate Investment Trusts (REITs): The finalisation of pending REIT/Mortgage-Backed Securities (MBS) regulations is certainly a crucial step. Explicitly permitting investments in corporate and infrastructure bonds, including "green" and "social" bonds, could significantly aid diversification. Furthermore, the establishment of a robust, functional REIT market on the Ghana Stock Exchange would be instrumental in enabling pension funds to effectively participate in real estate assets.
Guiding Patient Capital to Local Industries beyond SMEs Creating pension-compliant investment vehicles, targeting strategic sectors such as health, creative or agriculture, or providing clear guidelines for small allocations to licensed local funds could effectively channel capital to high-growth or create innovative new markets. The adoption of co-investment vehicles with the best characteristics of both credit and equity, with a focus on revenue-based models, could also facilitate more efficient capital deployment and confidence from institutional asset owners.
Building Market Expertise and Infrastructure
Addressing the prevailing capacity deficit within private markets is a significant priority for successful alternative investments.
Fostering Professional Development: The NPRA could consider mandating and facilitating continuous professional development programs for trustees and fund managers, with a specific focus on alternative investment strategies, due diligence processes, and robust risk monitoring. Collaborative efforts with industry groups, drawing upon the GVCA's expertise, would be highly beneficial in developing best-practice toolkits and model investment policies.
Strengthening Governance and Transparency: Implementing rigorous valuation and reporting standards for private assets is paramount. This would include encouraging independent valuation of unlisted holdings and regular impact reporting. Leveraging the emerging Pensions Digital Ecosystem (PDE) could also significantly enhance the oversight and transparency of these allocations.
Working with catalytic funders to build local pipeline and skills required to build the ecosystem including new venture building studios and emerging funds dedicated to market-creating innovations that tackle mass market pain points at scale.
Leveraging Pooled Syndication and Funds-of-Funds for De-risking and Diversification
To confidently navigate alternative investments, a strategic emphasis on pooled syndication and funds-of-funds is indeed a valuable approach. These mechanisms offer crucial de-risking and diversification benefits for institutional investors, particularly pension funds, enabling them to participate in high-growth private markets without necessarily undertaking excessive direct investment risk.
Enhanced Access and Diversification: Pooled vehicles, such as funds-of-funds, provide pension funds with the opportunity to gain diversified exposure to multiple underlying private equity, venture capital, or private debt funds. This effectively spreads risk across a broader portfolio of companies and sectors, helping to mitigate the impact of any single investment's underperformance.
Access to Professional Management: Recognising that many pension schemes, especially smaller ones, may not possess the extensive internal expertise and resources required for direct private market investing, funds-of-funds, managed by experienced professionals, offer a cost-effective pathway to access specialised deal sourcing, thorough due diligence, and expert portfolio management capabilities.
Catalytic Blended Investment Solutions: Regulators might consider adopting a generational strategic approach, enabling the domiciliation of innovative investment vehicles that go beyond traditional VC or PE structures. This could include catalytic blended finance models and revenue-based financing solutions that ingeniously combine the beneficial characteristics of private debt with the patient capital required for long-term growth. Such vehicles could encourage pension funds and institutional investors to engage with increased confidence in investment opportunities that foster new markets through innovation, offering structures that align with the long-term, stable returns sought by pension schemes while also providing the flexible capital necessary for building nascent private capital infrastructure and dynamic private sector growth economies.
Promoting Local Success Stories and Facilitating Mandates: Examples like Ghana's Impact Investing Ghana and Savannah Impact Advisory's Ci-Gaba Fund of Funds compellingly demonstrate the potential for local pooled vehicles to unlock domestic pension capital for growing businesses. Similarly, in Egypt, regulatory mandates encouraging retail banks to invest in funds-of-funds have successfully channeled pooled institutional capital into job-creating private equity and venture capital funds, effectively de-risking investments and fostering domestic development finance solutions.
Aligning Investments with National Development Imperatives
Pension capital is strategically positioned to serve as a pivotal catalyst for Ghana's broader socio-economic development objectives.
Embedding ESG and Impact Criteria: Formalising Environmental, Social, and Governance (ESG) policies and specific "impact objectives" within pension investment statements could be highly beneficial. The NPRA could consider issuing clear principles for impact investing, encouraging allocations to sectors such as renewable energy, affordable housing, or SMEs that demonstrably improve livelihoods, consistent with the South African model.
Developing Targeted Impact Vehicles: Creating or approving pension-friendly funds dedicated to specific social outcomes (e.g., low-income housing, healthcare expansion, climate resilience) could potentially be seeded by modest pension allocations and perhaps supplemented by public funds.
Fostering Ecosystem Collaboration: The NPRA could consider working in closer coordination with the Ministry of Finance, the Bank of Ghana, and key capital market stakeholders to integrate pension investments more seamlessly into broader national development plans. Exploring avenues such as tax incentives or guarantees and convening regular forums could help ensure policy alignment and foster a cohesive ecosystem for shared risk and information.
Cultivating Strategic Partnerships with Domestic Private Capital Expertise
To effectively navigate and mitigate the challenges ahead and secure its future, the NPRA might find immense value in forging proactive, strategic partnerships with the enablers of domestic private sector development finance. This encompasses Ghana's own venture capital, private equity, private debt, blended finance, fund of funds, market-creating innovation, private capital investment, and portfolio company operator experts. These specialised entities offer invaluable deep market knowledge, robust deal origination capabilities, and the operational expertise necessary to identify, structure, and manage high-quality, impactful investments. Such investments are crucial for generating both compelling financial returns and the decent, dignified, and scalable job creation that the pension industry is well-positioned to catalyse.
The era of relying predominantly on foreign investments is evolving. It is through the strategic deployment of our own capital within our own markets that African economies can truly attract cautious global investors. Local capital for local businesses and economies generates intrinsic value on the continent, ensuring that profits are circulated within the economy, ultimately benefiting pension schemes – and in turn, teachers, police officers, nurses, and their families, who may well be the employees of these very private sector, venture-backed industries. This fosters a virtuous, self-sustaining cycle of socio-economic growth across Africa. With over $300 billion in pension assets under management continent-wide, even a modest 5% allocation – an additional $15 billion – could catalyse unprecedented job creation, market development, and innovation. Regulators and governments hold a decisive key to unlocking this transformative opportunity.
The deeper the NPRA's collaboration with this domestic expertise ecosystem, leveraging their insights into private capital deployment and innovative investment vehicles, the healthier the industry, its returns, and its assets under management stand to become. This strategic partnership represents a profound win for all stakeholders: enhancing pension industry diversification and returns; providing pensioners with more secure and productive savings; and, most crucially, ensuring that the next generation workforce benefits from sustainable employment opportunities, thereby safeguarding the long-term viability and prosperity of Ghana's pension system.