- AFC and CPF Financial Services will collaborate in identifying, developing, and co-financing infrastructure projects aligned with Kenya’s growth plan.
- Globally, infrastructure development is recognized as a critical pathway to any country’s economic take-off.
- Kenya boasts one of the best infrastructure networks in the South of Sahara.
Kenya’s infrastructure is set for a huge boost following a partnership between the Africa Finance Corporation and CPF Financial Services. The agreement signed during the opening of the ongoing Africa Climate Summit is aimed at increasing infrastructure investments in the East African nation.
Under the new partnership AFC and CPF Financial Services will collaborate in identifying, developing, and co-financing priority infrastructure projects that are aligned with Kenya’s development roadmap. The two organisations will leverage their combined technical expertise and access to domestic and global capital.
“African institutional investors are one of the single largest sources of investable capital and will play a catalytic role in bridging Africa’s infrastructure gap,” said Samaila Zubairu, President & CEO of AFC.
“It is with this immense potential in mind that we are partnering with CPF Financial Services. Our combined expertise and access to capital will accelerate progress towards achieving economic prosperity and job creation for Kenya and, ultimately, the African continent.”
Tapping into retirement funds for development
CPF Financial Services is a Group of companies operating within Kenya and South Sudan offering a dynamic pool of services in Retirement Benefits, Financial, Training and Consultancy, Property Management and ICT.
Under Kenya’s 2023/24 budget, the government announced plans to mobilize over Sh100 billion in private sector capital through priority projects that deliver nationally significant infrastructure, drive growth and have the highest benefit to Kenyans.
This is in line with Kenyan pension schemes that are in search of profitable, secure, and impactful investments for better returns for their members.
Over the past few decades, infrastructure and alternative assets have offered an attractive but untapped new asset class for pension schemes as they offer attractive returns and much-needed portfolio diversification benefits, delivering better overall investment performance.
According to Kenya’s Retirement Benefits Authority (RBA), the pension industry assets under management stand at approximately Sh1.5 trillion.
Pension funds are allowed to put up 10 per cent of their assets into infrastructure as per the RBA investment guidelines passed in 2020.
Traditionally, pension funds have invested in government securities, listed equities, and direct property investments but infrastructure investments remain hugely untapped yet profitable and sustainable in the long term.
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Kenya’s infrastructure development
Globally, infrastructure development is recognised as a critical pathway to any country’s economic take-off.
This is because it promotes intra-country linkages and strengthens regional or international production and distribution networks.
Kenya boasts one of the best infrastructure networks in the South of Sahara. Since 2017, the Kenyan government has been increasing the allocation of funds to the development of transport infrastructures during annual budgeting.
This has enabled the development of more roads, railway lines, sea transport; upgrades by the building of new ports and berths, and upgrading of airports in the country.
According to data by the Kenya National Bureau of Statistics (KNBS), road infrastructure spending grew to Sh200 billion in 2021 from Sh10 billion in 2003.
This rise in spending correlates positively with an increase in the classified road network to more than 160,000 kilometres today from less than 60,000 kilometres a decade ago.
The ripple effects of the massive infrastructure development can be seen in the job opportunities that have been created over the past few years, opening up satellite centres for economic growth and improving traffic flow.
The trickle-down effects of infrastructure growth are also expected to strengthen Kenya’s economic position in the Eastern Africa region.
It will help cement Kenya’s position as the service and commercial hub in the region through the provision of efficient port services to neighbouring landlocked countries.
AFC’s role as an institutional investor
The new partnership aligns AFC, with a track record of generating competitive returns on over $12.7 billion of investments in transformational infrastructure projects across 36 African countries, with CPF, one of Kenya’s leading institutional investors with more than $1 billion in assets under management.
African institutional investors, including pension funds, insurance companies and asset managers, hold nearly $1trillion dollars of assets under management, equivalent to a third of the continent’s combined GDP and more than 5 times the annual infrastructure and climate financing needs of the continent.
AFC is a major development partner in Kenya—a sovereign member since 2017—with cumulative investments of approximately $400 million in the country to date and a robust in-country pipeline of infrastructure, industrial and trade finance projects valued at over $750 million.
“We are excited to collaborate with AFC, a recognized leader in the infrastructure sector. This alliance aligns perfectly with our goals of creating value-driven solutions and supporting Kenya’s infrastructure agenda. By working together, we aim to unlock new opportunities and facilitate sustainable economic growth,” Hosea Kili Group Managing Director and CEO of CPF Financial Services said during the announcement.
