Key Takeaways
- • Ghana became the first African country to mandate that local pension funds invest at least 5% of their assets in domestic private equity and venture capital firms, according to TechCabal's Next Wave newsletter.
- • The directive, on over $6.7 billion in pension deposits, could unlock a $337 million funding pool for Ghanaian firms by the end of 2026.
- • Ghana's earlier permissive regime allowed up to 25% of pension assets in alternative funds, yet only 0.58% was allocated before the mandate, illustrating why caps alone failed to drive investment.
- • South Africa's 2023 increase of its private equity cap from 10% to 15%, plus a separate 45% infrastructure bucket, lifted local pension and endowment commitments to private capital from $216 million to $344 million within a year.
- • Critics flag liquidity risk, valuation opacity and cyclical overallocation as material risks, with the author recommending transparency, skilled oversight and slow pacing.
Summary
Towards the end of April 2025, Ghana became the first African country to require local pension funds to invest at least 5% of their assets in domestic private equity and venture capital firms, according to TechCabal reporter Muktar Oladunmade. With more than $6.7 billion in pension deposits, the directive could unlock a $337 million funding pool for Ghanaian companies by the end of 2026.
The article notes that Nigeria, Botswana and South Africa also link pension funds to private capital, but their caps have largely failed to drive allocations. Many African pension portfolios remain concentrated in government bonds and bank deposits, prioritising capital preservation and liquidity. Ghana had permitted up to 25% of pension assets to go into alternative funds, yet only 0.58% was allocated before the directive. Converting a permissible allocation into a mandatory floor is presented as the key change.
The author cites South Africa's 2023 decision to raise the private equity cap from 10% to 15% of a retirement fund's portfolio and to create a separate 45% infrastructure bucket. Within a year, local pension and endowment commitments to local private capital rose from $216 million to $344 million, with a resulting increase in investment in the country's energy sector. The article argues that if Africa's ten largest pension funds adopted similar floors, more than $13 billion could flow into the continent's venture capital industry within five years, roughly tripling the 2024 VC total.
The piece also cites broader evidence on pension-backed capital, including an EY finding that U.S. private equity supports more than 26 million jobs, and a multi-country study linking a 10% increase in pension-funded assets to a 0.5% annual rise in GDP. It adds that the U.S. 1979 clarification of the prudent man rule preceded a rise in pension funds' share of U.S. venture funding from about 15% to over 50% within eight years.
The risks highlighted include limited exit activity, fund lock-ups of 7 to 10 years, and private valuations that are not marked to market. The article cites a CFA Institute analysis finding that secondary prices for some private fund stakes sat well below stated NAVs, implying possible overvaluation of 10 to 15%. It also warns that synchronised allocations could inflate bubbles and later trap capital. The author recommends legislated minimum floors rather than caps, mandates for businesses earning primarily in local currency to reduce FX mismatch, and full disclosure of fund commitments.
The article notes that Nigeria, Botswana and South Africa also link pension funds to private capital, but their caps have largely failed to drive allocations. Many African pension portfolios remain concentrated in government bonds and bank deposits, prioritising capital preservation and liquidity. Ghana had permitted up to 25% of pension assets to go into alternative funds, yet only 0.58% was allocated before the directive. Converting a permissible allocation into a mandatory floor is presented as the key change.
The author cites South Africa's 2023 decision to raise the private equity cap from 10% to 15% of a retirement fund's portfolio and to create a separate 45% infrastructure bucket. Within a year, local pension and endowment commitments to local private capital rose from $216 million to $344 million, with a resulting increase in investment in the country's energy sector. The article argues that if Africa's ten largest pension funds adopted similar floors, more than $13 billion could flow into the continent's venture capital industry within five years, roughly tripling the 2024 VC total.
The piece also cites broader evidence on pension-backed capital, including an EY finding that U.S. private equity supports more than 26 million jobs, and a multi-country study linking a 10% increase in pension-funded assets to a 0.5% annual rise in GDP. It adds that the U.S. 1979 clarification of the prudent man rule preceded a rise in pension funds' share of U.S. venture funding from about 15% to over 50% within eight years.
The risks highlighted include limited exit activity, fund lock-ups of 7 to 10 years, and private valuations that are not marked to market. The article cites a CFA Institute analysis finding that secondary prices for some private fund stakes sat well below stated NAVs, implying possible overvaluation of 10 to 15%. It also warns that synchronised allocations could inflate bubbles and later trap capital. The author recommends legislated minimum floors rather than caps, mandates for businesses earning primarily in local currency to reduce FX mismatch, and full disclosure of fund commitments.
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