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    Opinion: Pension funds are underused in financing Africa’s infrastructure

    Here’s how substantial domestic resources can be unlocked to finance sorely needed infrastructure projects on the African continent.

    By Rachel Moré-Oshodi // 13 May 2025
    Pension funds, with their long-term goals and vast pools of domestic savings, present a strategic, yet underused resource for investment in Africa’s infrastructure. The continent is at a critical juncture in addressing its substantial infrastructure financing gap. With annual investment needs estimated at approximately $170 billion by the African Development Bank, significant shortfalls persist despite international and governmental support. Recent global shocks — including rising tariffs and tighter capital markets — are compounding the challenge. African import-export faces new trade barriers. Borrowing costs are rising. And key development finance partners, such as the U.S. Agency for International Development, are retreating. These shifts make infrastructure more expensive to finance — at a time when the need has never been clearer. To close this gap, Africa must revolutionize its approach by harnessing the substantial domestic resources already available. By overcoming regulatory constraints, leveraging specialized financial instruments, and enhancing local market capacity, African nations can effectively deploy pension fund assets to drive infrastructure development, stimulate economic growth, and strengthen financial resilience. Pension funds are inherently aligned with long-term infrastructure investment Local pension funds are ideal investors for infrastructure because both share a common characteristic: a long-term investment horizon. Infrastructure assets — such as roads, power generation, transmission networks, and water systems — can provide stable, inflation-adjusted returns over decades, matching long-term oriented mandates of pension funds. Across African markets, however, this natural alignment remains underused. African pension funds managed $500 billion in assets in 2020 — a figure projected to grow to $7.3 trillion by 2050. Yet less than 2.7% is allocated to infrastructure. Much of this capital is invested in low-risk government bonds or foreign markets — despite the persistent local infrastructure gap. Examples from South Africa and Kenya show what’s possible. South Africa’s Government Employees Pension Fund has backed renewable and social infrastructure projects through its Public Investment Corporation. Kenya’s Retirement Benefits Authority has authorized investments in alternatives up to 10% of portfolio allocations, enabling select pension schemes to invest in roads and power. These models offer a framework for broader replication across the continent. If even a modest reallocation — say 5% of total pension assets under management — were redirected into infrastructure, it could unlock $100 billion for long-term development. Regulatory and institutional constraints are the most immediate barriers to unlocking this capital Despite the alignment between infrastructure and pensions, restrictive regulatory environments often prevent African funds from participating. Many countries impose strict limits on “alternative” investments — typically capped at 5% of total assets — and maximum thresholds on investment in a single fund. These constraints reflect a traditional focus on liquidity, meaning having cash-producing assets to support paying out to a fund’s obligations, and risk avoidance, prioritizing stable investments such as bonds rather than “alternative” investments like infrastructure. But in doing so, they exclude the very kind of strategic capital needed to finance infrastructure. Institutional capacity remains another bottleneck. Many pension fund managers lack experience in evaluating infrastructure risk or structuring deals. As a result, even where regulations allow infrastructure exposure, risk aversion persists. Addressing this gap requires dedicated capacity-building initiatives — training programs, public-private dialogue, and shared risk analysis tools. Industry leaders can help by providing educational workshops and structuring co-investment platforms that demystify infrastructure as an asset class. Specialized financial instruments and capital market reforms are key to de-risking investment and enabling scale Even with regulation and capacity in place, pension funds still need tailored financial tools to make infrastructure truly investable. Without mechanisms such as credit guarantees to reduce default risk, liquidity windows that allow for early or partial exit, or pooled investment vehicles that diversify exposure across multiple projects, most infrastructure deals remain too complex or risky for institutional investors. A growing number of instruments can close this gap. Blended finance structures, where concessional funding absorbs first losses, can make early-stage projects viable. In this model, a public or philanthropic investor agrees to take on the initial losses if a project underperforms, effectively acting as a cushion that protects other investors and makes the deal less risky for commercial capital. Infrastructure bonds, credit enhancement tools, and risk-sharing facilities have already enabled institutional participation in other markets. “With the right reforms and structures, Africa can build a new financing model — one where local capital leads, and global capital follows.” --— There is ample debt funding available for projects that are already developed and bankable, but the real gap lies in the early-stage capital needed to get projects to that point. Few investors are willing to take on the higher risks associated with early development, yet without this capital, projects cannot mature into the bankable opportunities that the debt side is eager to finance. With the right vehicles in place, such as blended finance structures, institutional capital can be channeled into early-stage investments that eventually mature into viable, bankable opportunities for debt investors. Local currency guarantees are also critical. Currency mismatch remains one of the biggest risks for domestic investors. Facilities that allow investment in local currency while protecting against depreciation by not being susceptible to exchange rates can unlock new sources of participation. Beyond instruments, Africa must deepen its capital markets. Regular issuance of government bonds helps set clear benchmarks for pricing other long-term investments, including infrastructure. Regulatory frameworks can incentivize portfolio diversification. Fund-of-fund structures — investment vehicles that pool capital from multiple investors and then allocate it across a portfolio of infrastructure funds — and co-investment platforms can provide scale and reduce entry costs for smaller pension schemes. All of this adds up to a stronger, more investable ecosystem for infrastructure. Mobilizing pension capital is not just about filling a gap — it’s about building a sustainable investment ecosystem. Redirecting even a fraction of African institutional capital into infrastructure would be transformative. But it would also have a knock-on effect: enabling local institutions to participate actively in national development. Moreover, when local investors participate early, they reduce political risk and build confidence for foreign capital. Africa needs long-duration financial mechanisms, early-stage capital, and policy support to realize this vision. Facilities must be structured to hold assets long-term. Project pipelines must be carefully selected and structured so that they are financially viable, technically sound, and investment-ready. And concessional capital — sourced not just internationally, but domestically as well — must play a greater role in project preparation. The narrative of a resource-poor Africa is outdated. The continent has the capital. What it lacks are the tools, rules, and coordination to deploy that wealth into long-term development. With the right reforms and structures, Africa can build a new financing model — one where local capital leads, and global capital follows.

    Pension funds, with their long-term goals and vast pools of domestic savings, present a strategic, yet underused resource for investment in Africa’s infrastructure.

    The continent is at a critical juncture in addressing its substantial infrastructure financing gap. With annual investment needs estimated at approximately $170 billion by the African Development Bank, significant shortfalls persist despite international and governmental support.

    Recent global shocks — including rising tariffs and tighter capital markets — are compounding the challenge. African import-export faces new trade barriers. Borrowing costs are rising. And key development finance partners, such as the U.S. Agency for International Development, are retreating. These shifts make infrastructure more expensive to finance — at a time when the need has never been clearer.

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    The views in this opinion piece do not necessarily reflect Devex's editorial views.

    About the author

    • Rachel Moré-Oshodi

      Rachel Moré-Oshodi

      Rachel Moré-Oshodi is a seasoned leader in project finance and global strategy, with over two decades shaping infrastructure across energy and ICT. She has led over $7 billion in projects promoting sustainable access in emerging markets. Her career spans AES Corporation, the Inter-American Development Bank, IFC, Rand Merchant Bank, and TotalEnergies.

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