Kenny Fihla, Group Chief Executive Officer of Absa Group, has called for a strategic shift in how pension funds are invested across Africa, warning that current models are constraining the continent’s growth potential.

He said the prevailing approach is narrowing the pool of capital available for productive sectors of African economies.

While acknowledging the need to preserve capital and meet long-term pension obligations, Fihla stressed that the existing model is failing to optimise returns.

“Some of the pension fund investment policies actually mitigate against the capital being deployed in the right sectors. Many of these policies restrict where the money can be deployed and secondly make a requirement for a significant portion of these savings to be deployed in investments that are outside of African continent,” he said in an interview with Bernard Avle on a special edition of The Point of View on Channel One TV on Wednesday.

To reverse the trend, he outlined five priority areas pension funds should prioritise to drive Africa’s long-term prosperity.

1. Infrastructure Development: “I think we should be looking at what we can do to unlock productive infrastructure development. That is, not just delivering the infrastructure project but unlocking the economic potential that can be supported by that infrastructure project.“
2. Logistics: “Think about logistics. If they are efficient, reliable and if the logistics are connected [supply chains] will work exceptionally well.” 
3. Mining: “Think about the mining sector and the processing that is required to supply critical minerals.“
4. Port operations: “Our own ports should be benefiting from the crisis that is happening in the Middle East.“
5. High Tech Industries: “As everyone is talking about AI, data and so on, we need to support infrastructure that helps us to unlock these opportunities and I think pension fund should make sure that their own policies make it possible for these funds to be deployed to these areas.“