Pension funds in Africa

Africa’s pension fund assets

The continent’s pension fund assets are relatively small in global terms and has a large country bias, with a disparate asset allocation that is largely influenced by regulation.

Assets under management

The Organisation for Economic Co-operation and Development (OECD) records pension assets amounting to USD 38tn in 2016 in OECD countries. The US continues to be the largest market at USD 25tn (66%) of OECD countries with the Canada and the UK at USD 2.4tn and USD 2.3tn respectively; these three countries account for more than 78% of total pension assets in the OECD.

Pension fund assets globally are on the increase as countries move from unfunded to funded (or partially funded) status, and as many outsource pension fund management to private firms and move from defined benefit to defined contribution schemes.

A common measure used to equate the significance of pension assets to a country’s economy is the pension assets-to-GDP (Gross Domestic Product) measure. In OECD countries, on average, these assets-to-GDP measures increased from 37% in 2006 to 50% in 2016. In the non-OECD jurisdictions, these measures also recorded an improvement, from 12% to 20%.

Similar to the global picture, there is a large country bias present in Africa, with 90% of the assets concentrated in Nigeria, South Africa and Namibia, Within these countries a few large funds also tend to dominate.

In global terms, the proportion of Africa’s pension assets remains relatively small. Promisingly for Africa’s unfolding economic development, African pension systems are in reform. While the assets in African pension funds are still relatively small, the pace and direction of regulatory reform now taking place in Africa speaks to a common purpose, and pension systems therefore cannot fail in contributing to two equally important goals, funding retirement and contribution towards the development of the continent’s economy and capital markets.

A sub-set of African countries is depicted below where the measure of asset-to-GDP ratio depicts the variation in the development of pension systems and economic development across the continent.

Region Country Year Currency / Code AUM (LCL) [Million] AUM (USD) [Million] GDP (IMF 2016) [Billion] GDP (IMF 2016) [Million] AUM as % GDP

East Africa

Kenya Flag

Kenya

2016

Kenyan Shilling
[KES]

1 080 000

$10 701,0

USD 68,92

USD 68 919

16,0%

Rwanda Flag

Rwanda

2015

Rwandan Franc
[RWF]

633 791

$735

USD 8,41

USD 406

9,0%

Tanzania Flag

Tanzania
[including Zanzibar]

2015

Tanzanian Shilling
[TZS]

11 208 861

$4 927

USD 47,18

USD 184

10,0%

Uganda Flag

Uganda

2016

Ugandan Shilling
[UGX]

6 531 508

$1 713

USD 26,20

USD 195

7,0%

Egypt

Egypt Flag

Egypt

2016

Egyptian Pound
[EGP]

48 300

$2 705

USD 332,35

USD 332 349

1,0%

Nigeria

Nigeria

Nigeria

2016

Nigerian Naira
[NGN]

6 078 000

$16 837

USD 405,95

USD 405 952

4,0%

Other East
Africa

Seychelles

Seychelles

2016

Seychellois Rupe
[SCR]

2 637

$189

USD 1,41

USD 1 405

13,0%

Other West
Africa

Ghana

Ghana

2015

Ghanaian Cedi
[GHS]

12 628

$2 870

USD 43,26

USD 43 264

6,6%

South Africa

South africa

South Africa

2016

South African Rand
[ZAR]

4 035 825

$306 653

USD 294,13

USD 294 132

104,0%

Swaziland

Swaziland

2015

Swazi Lilangeni
[SZL]

22 842

$1 721

USD 3,77

USD 3 770

45,7%

Southern Africa [excl. SA]

Botswana

Botswana

2016

Botswana Pula
[BWP]

72 847

$7 191

USD 15,02

USD 15 018

48,2%

Mauritius

Mauritius

2015

Mauritian Rupee
[MUR]

154 300

$4 604

USD 11,95

USD 11 950

38,5%

Namibia

Namibia

2016

Namibian Dollar
[NAD]

137 462

$10 497

USD 10,65

USD 10 646

99,0%

Zambia

Zambia

2016

Zambia Kwacha
[ZMW]

5 798

$567

USD 21,31

USD 21 310

3,4%

Total

371 911

1 290 500

29,0%

RisCura estimates pension fund assets in Africa to be USD 372bn, representing only 29% of the above-mentioned countries’ GDP. Similar to the global picture, there is a large country bias present in Africa, with 90% of the assets concentrated in Nigeria, South Africa and Namibia, Within these countries a few large funds also tend to dominate. Examples include Government Employees Pension Fund (GEPF) in South Africa, Government Institutions Pension Fund (GIPF) in Namibia, Botswana Public Officers Pension Fund (BPOPF) in Botswana and a few larger vehicles in Nigeria.

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