Pensioners wait to get their monthly state pension payout on the parking lot at the Jabulani shopping mall on May 30 2013, Soweto, South Africa. The mall is one of many new developments in the township helping the people to buy food and goods locally instead of traveling to Johannesburg. Soweto today is a mix of old housing and newly constructed townhouses. The population in Soweto is estimated to be around one million people.

African pension providers are for the first time unifying their efforts to create a domestic financing pool, aiming to mobilize their collective $700 billion in assets to establish a “Development Fund for Africa.”

The unprecedented move is driven by an imperative to fund the continent’s development needs locally and reduce reliance on traditional foreign funding, according to leaders in the industry. The African Development Bank estimates the continent needs more than $1.3 trillion annually to meet its development goals.

The plan will take center stage at the “700b in 1 Room” All Africa Pensions Summit, set to be held in Kampala, Uganda, from Nov. 5-7, where funds are expected to commit to the new structure.

“Pension funds across Africa hold about $700 billion in assets under management,” said Patrick Micheal Ayota, managing director of NSSF Uganda and chairman of the International Social Security Association’s East Africa Liaison Office. “This is a major opportunity for Africans to catalyze our own economies by providing funding that is not tied to unfavorable conditions from foreign funding agencies.”

Ayota noted that geopolitical shifts and declining aid flows mean that traditional foreign funding can no longer keep pace with the continent’s growing infrastructure needs.

The push for domestic resource mobilization was echoed by U.N. Resident Coordinator for Uganda Leonard Zulu, who called on Africa to look inward by mobilizing domestic savings and using blended financing models.

“The traditional models of development cooperation are being redefined, and official development assistance, though vital, is no longer sufficient,” Zulu said. He noted that 15 of the 20 traditional donor partners have reduced their funding, making it critical for the continent to rethink development financing and shift focus from aid to trade.

Meshach Bandawe, secretary general of the Africa Social Security Association (ASSA), which represents 51 funds, stressed that African infrastructure funding requirements must now be addressed by Africans.

“Pension funds are increasingly being recognized as critical levers for inclusive development and can be key players in unlocking long-term capital for infrastructure, stimulating agriculture, climate change financing and social impact,” Bandawe said.

Source: pmldaily