NAIROBI, Kenya, Sept 2 – East African pension funds are emerging as a largely untapped source of long-term capital for businesses, with investment in private equity remaining well below regulatory limits despite growing demand for alternative financing.
The East Africa Private Equity and Venture Capital Association (EAVCA) says pension funds currently have about 0.7 percent of their investments in private equity, against an allowable allocation of up to 10 percent.
The gap is putting the spotlight on the region’s ability to channel domestic savings into businesses, infrastructure and other productive investments as companies face limited access to growth capital.
EAVCA CEO Christine Maina said increasing pension fund participation would require greater investor education, stronger evidence of returns and a more predictable policy environment.
“At the moment, investments into private equity are at 0.7 percent. And yet, I think what’s allowable is about 10 percent.”
“We’re working a lot on education and awareness and also really bringing forward real case studies of investments that have had returns to be able to attract more local capital.”
The association estimates that private capital investments across 30 funds and 14 fund managers between 2022 and 2025 reached $7 billion (Sh 906 billion), contributing to more than 100,000 jobs.
EAVCA Chairman David Owino said increasing domestic participation would allow East Africa to retain a larger share of the returns generated from investments in its own economies.
“We want to see more local capital participating in investing in local entities rather than waiting for someone from out there to come and invest.”
“Local capital should take the lead and we’ve seen that there’s actually a lot of money locally.”
NCBA Investment Bank Managing Director Muathi Kilonzo, however, said the challenge is not simply a shortage of capital but also a shortage of investors willing to take early-stage risks.
“There are opportunities out there that definitely are bankable and are interesting.”
“Unfortunately, in Africa, you don’t have these sorts of angel investors or the people who basically come in early and take that early risk on an idea and help it scale.”
The industry is also calling for greater certainty in taxation and investment regulations, warning that frequent policy changes can affect investment decisions that typically run for several years.
According to the industry leaders, predictable policies would give institutional investors greater confidence to commit more capital to private markets, potentially increasing the pool of funding available to East African businesses.
