Diversify pensions investments to secure future retirees — Axis CEO

A pensions expert, Afriyie Oware, is calling for a diversification of pension fund investments to ensure better returns and safeguard the future of pensioners in the country.

According to him, the over reliance on government securities was risky and unsustainable leaving pension funds vulnerable to sovereign debt fluctuations and inflationary pressures.

Consequently, he has proposed six critical areas that require immediate reforms to help diversify and build a more resilient pension system.

“To build a truly resilient pension investment framework, we must undertake deep structural reforms for successful implementation of the current investment guidelines,” he said.

Conference 

Mr Oware, who is the Chief Executive Officer (CEO) of Axis Pensions Trust, was speaking at the seventh Pension Strategy Conference, on the theme: “Rethinking Pension Investments: Policy, Innovation and Market Opportunities”, in Accra last Wednesday.

The conference, organised by Axis Pension Trust, brought together thought leaders, regulators, policymakers, trustees, fund managers and other key stakeholders to discuss pressing issues and reassess conventional investment approaches and policy frameworks within the pensions industry. 

Capital market 

First, he called for accelerated capital market development, emphasising that equity allocations currently stood at a “dismal” three per cent, reflecting limited investable stocks to absorb growing pension assets.

“Trustees, other capital market operators and the government must invest in listing stronger companies, improving governance practices of Ghanaian businesses, and deepening market liquidity. 

Without a vibrant stock exchange, long-term growth capital will remain elusive to the private sector,” he stated.

He said Ghana’s underdeveloped corporate bond market - accounting for just 1.5 per cent of total bond activity - signalled deep structural weaknesses in the private sector, compounded by a high non-performing loan ratio of over 24 per cent.

That, he said, reflected poor creditworthiness and weak debt culture, adding that “most Ghanaian businesses remain too small and fragmented to absorb significant capital, limiting their access to financial markets. Also, the decline of once-prominent SOEs, like PBC, left a sour taste in the mouths of pension funds and other investors.”

To build investor confidence and fuel capital market growth, Mr Oware said Ghana must promote mergers and acquisitions of its businesses to build scale, strengthen corporate governance, and foster a culture of transparency through credible issuer and instrument ratings.

Additionally, he said money market modernisation was essential to formalise and increase transparency in short-term investments that had traditionally been confined to over-the-counter transactions.

He further said the local government finance required revitalisation, advocating political reforms to consolidate municipalities and enhance their financial autonomy to enable viable municipal bond issuance.

Real estate 

Again, real estate presents significant opportunities but remains constrained by chaotic land tenure system, poor urban planning, and fragmented land administration. 

Therefore, he said “the government should legislate for land use reform where the granting of land leases across the country vests in an agency of the state; empower structured real estate developments in our cities; and build modern cities, not just settlements. Such reforms are not merely about real estate, they are about national transformation”.

State capitalism 

The CEO urged a reimagining of state capitalism, suggesting that the government could use its borrowing power to initiate commercially viable projects in partnership with private sector operators, and pension funds as financiers.

He explained that pension funds had continued to place massive bets on a public sector that traditionally had underperformed. 

Meanwhile, he said the private sector had been struggling with limited access to credit, receiving only about 13 per cent of Gross Domestic Product (GDP), significantly below the Sub-Saharan African average of 20 per cent.

That, he said, was in stark contrast with public debt levels of over 75 per cent of GDP as the most favoured borrower, the government could use its borrowing power to initiate commercially viable projects, in partnership with private sector as operators and pension funds as financiers.

“Public-private partnerships, like the successful Twifo Oil Palm Plantation developed with the European Union, exemplify how collaborative efforts can drive economic development. We either build quality assets locally to absorb the massive inflows or brace ourselves to export our capital,” Mr Oware said.