New York
A US initiative aimed at spurring infrastructure investments by Kenyan pension funds could pump several billion dollars into energy and transportation projects, Donald Trump administration officials said on Thursday.
The Kenya Pension Fund Investment Consortium (Kepfic) involves the World Bank, US government agencies and a US-based advisory firm, as well as private US pension funds and some of Kenya's largest retirement benefit schemes.
“Individual pension funds in Kenya frequently lack the capacity to venture into big-ticket infrastructure projects alone,” the US embassy in Nairobi said in an announcing the initiative last week.
“Kepfic offers a solution to this challenge by pooling resources from individual funds,” the embassy added.
Victoria Whitney, chief operating officer for the Trump administration's Prosper Africa programme, noted during a press briefing on Thursday that Kepfic “is also going to provide an opportunity for greater collaboration between Kenyan and American pension funds as well as other institutional investors.”
Private US pension funds are in need of higher-yielding investments, said David Cohen, a US Agency for International Development official who also spoke at the briefing.
Traditional investment instruments are currently offering very low interest rates, Mr Cohen said. At the same time, retired workers drawing from the pension funds now outnumber active workers who are paying into the accounts, he said.
Pension funds in search of higher returns “can find those in Africa,” Mr Cohen suggested.
If US pension funds invested only one percent of their assets in Africa, that would amount to more than $120 billion, Ms Whitney added.
Kepfic will start small, Mr Cohen said, with infrastructure investments in Kenya in the $15 million range.
“But the idea is that it will eventually scale up and start looking at much larger-scale investments beyond $100 million, even up to several billion dollars.”
Kepfic will strive to “get Kenyan pensions comfortable with these types of investments and then scale from there,” Mr Cohen added.
Recent changes to the Retirement Benefits Authority guidelines allow Kenyan pension funds to invest up to 10 percent of their assets in infrastructure projects. That could potentially unlock over Sh100 billion ($917 million), US Ambassador Kyle McCarter said last week.
Kenya's annual infrastructure funding gap — the difference between actual investments and the amounts needed for vital projects — stands at more than Sh200 billion ($1.8 billion), according to the US embassy.
“Launching Kepfic is a huge milestone, not just for pension schemes, but also for the country,” said Sundeep Raichura, Kepfic's board chairperson. “With national and county governments facing a growing budget deficit and competing needs, pension funds through Kepfic will be well positioned to help bridge the infrastructure funding gap.”
The consortium's membership includes the Kenya Revenue Authority Staff Pension Scheme, Safaricom Staff Pension Scheme, KenGen Staff Retirement Benefits Scheme, and Kenya Pipeline Company Retirement Benefits Scheme.
