The rise of Institutional Investments in Africa


The African continent is well recognized as a region of choice for investment opportunities. However, things are different when it comes to collecting funds from institutional investors – Collective Investment Schemes, Pension funds, Insurance companies. But for how much longer?

Demographic drivers of African Institutional Investment Management

Insurance companies, pension funds, retail investment funds… They all depend on people’s appetite for their products. A lot has already been said about the rapidly growing population in Africa (from 1.2 billion people in 2016, it is expected to double by 2050, according to the INED organization1). Instead, let’s look at some demographic trends:

  • Between 2000 and 2050, the population of Africans aged 20 to 64 years old will be the fastest growing, shifting from 46 to 54 % of the total population, according to the US Census Bureau2, thereby fueling Institutional premiums.

  • Urbanization is also key to boost institutional investment:

    • It enhances educational standards, favoring the interest and need for financial services;

    • It supports the manufacturing workforce in need of pension and insurance products;

    • It provides investment asset classes (listed equities and bonds, infrastructure, housing and real estate).

  • The African urban population is expected to register the fastest growth worldwide, reaching an impressive share of 60% of the total African population in 2050, according to the United Nations (Department of Economics and Social Affairs), up from 27% in 19503.

  • Middle classes traditionally feed most of the Institutional Investments and, in Africa, they should move up from 34% now, to 42% of the total population (ie some 1.1 billion people) in 2060, according to the African Development Bank4, following the trend of urbanization and economic diversification towards manufacturing and services sectors.

Current Institutional Investment growth in Africa

Unsurprisingly, these structural changes have already impacted Institutional Investments in Africa.

It is worth noting that total Assets Under Management (AUM) in the 12 major economic powers in Africa will increase from 634 bn USD in 2014 to an expected 1,100 bn USD in 2020, recording a healthy 9.6% average yearly rate over the period, according to figures from local authorities5, says Nathan Derhy, Head of International Coordination at SGSS.

African pension funds have proved to be very dynamic, reaching close to half a trillion USD of assets6, but it is only fair to state that situations vary significantly from one country to another. For example, in Ghana a proper pension framework has been created, where in other countries there is virtually no pension scheme at all today. Hence a huge potential for growth.

The premiums collected by insurers in Africa amount to 3.5% of the GDP according to Riscura7. The penetration rate has been growing regularly but, like for pension funds, we can expect a spectacular increase if we compare this to the penetration rate of the most advanced African economic power – South Africa - which registers an enviable 14%.

Anuj Awargal, Chief Financial Officer of Allianz Africa, Insurance company established in 13 African countries with 1500 employees, states that Nigeria and Ghana, for instance, present a promising potential for growth, given the insurance policies under penetration in the middle class8.

Do African asset pools match the African Institutional investors’ needs?

As we can see, the way is paved for a continued sustainable growth in African Institutional Investment.

However, institutional investors would welcome regional domestic investment pools if only to mitigate forex exposure entailed by non-African investment. But are these local pools sufficient today?

At the end of 2018, the African Investment Forum was calling for more regional investments from African Institutional investors, claiming they amounted to no more than 10% of the total portfolios, despite Africa’s huge funding requirements for infrastructures. This sounds like a good idea but are the African capital markets ready for it?

African capital markets are very diverse. Institutional investors, often favoring secured government bonds, may tap significant pools in more mature countries like Morocco or South Africa, but in some other locations this is unfortunately not possible yet. Corporate bonds, equities, notes and Asset Backed Securities are still annoyingly scarce.

Private equity, real estate and infrastructure are, on the other hand, growing asset classes in Africa, which might be an interesting alternative for regional institutional investors. However, between 2011 and 2017, African institutional investors accounted for less than 1% of private placement in infrastructure (PPI)9. These non-listed asset classes are reckoned to be inadequate by institutional investors who are rather looking for less risky, larger, and more liquid assets.

Other alternative asset classes are worth noticing though: Dr Jens Köke, Chief Investment Officer of Allianz Africa, interestingly states the plan to co-fund syndicated banking loans to corporates in Western Africa.


As we can see, listed capital markets still need to grow to provide the required local investment pools to African institutional investors. Also, improving liquidity, attracting corporates to issue listed bonds and equities, and enticing regional institutional investors will require regulatory changes which are in the process of being discussed in several countries such as Cameroon and Algeria to name just a few.

Jean-François Marchand SGSS International Country Supervision, Africa & India Societe Generale Securities Services