The World Bank has urged local pension schemes to invest in Public-Private Partnership projects as the government moves to open infrastructure as a new asset class for them to invest in.
World Bank’s Senior Financial Sector Specialist Caroline Cerruti says infrastructure needs in Kenya are vast with need for about Ksh 400 million ($4 billion) per year, creating an opportunity for long term institutional investors particularly pension schemes.
According to Retirement Benefits Authority, the pensions sector had assets worth over Ksh 1.02 trillion as at the end of 2017 and schemes are under pressure to maximise value for their members through diversifying their investment.
The World Bank representative was addressing trustees of different pension schemes across the country during the annual Trustees Forum organised by Enwealth Financial Services at a Mombasa hotel.
“Bank lending as a source of long-term financing is diminishing. Given constraints of commercial banks to lend long-term to PPP projects, it makes sense for the government to search for long-term local currency financing for various infrastructure projects, this is an opportunity for pension schemes,” said Cerruti.
In the upcoming budget, the Treasury is expected to table a proposal to revise the asset classes that pension schemes are allowed to invest.
“In Kenya, the regulator has been supportive of opening up of more investment channels. This will be presented in the upcoming budget proposal to open infrastructure investment as anew asset class for pension schemes,” she said.
She said there are about 67 projects in pipeline which pension schemes can take part in, with the first 5 mover PPP road projects coming to market in need of about $3-4 billion. Among them is the 175 km road Nairobi-Nakuru Toll Road whose final bids were submitted in March and the Second Nyali Bridge construction in Mombasa which is in the pre-qualification stage.
The Bank advised pension schemes to join in PPP projects through Infrastructure Debt Fund as senior debt providers not equity partners to ensure they have the highest priority in terms of payments.
Enwealth Financial Services CEO Simon Wafubwa added: “Diversification benefits are obvious for alternative investment , but returns from infrastructure assets show a strong case”.
“The reason international pension schemes are coming here is because there are under pressure from their members and this is where they see they can maximise in the benefits for their members, why not us,” said Wafubwa.
The theme of this year’s Trustees forum is ‘Retirement Benefit Scheme Governance in a dynamic environment’.