Ghana has become the first African nation to require local pension funds to allocate at least 5% of their assets to domestic private equity and venture capital. The directive, could unlock as much as $337 million in funding for Ghanaian firms by 2026, tapping into the country’s $6.7 billion pension pool.
The move marks a shift in how African governments approach pension capital. While countries like Nigeria, Botswana and South Africa have long allowed pension funds to invest in alternatives, they have done so by imposing caps. Ghana’s model flips the script by introducing a floor. What was once optional is now mandatory.
This recalibration could have far-reaching implications not only for Ghana’s startup ecosystem, but for how long-term African capital is deployed across the continent. The directive aims to break a pattern where pension portfolios are dominated by low-yield, low-risk assets such as government bonds and bank deposits, strategies that prioritize liquidity over growth.
A Quiet Pool of Untapped Capital
Before the new rule, Ghana allowed up to 25% of pension assets to be invested in alternative funds. In practice, less than 1% was allocated. Ghana’s new directive forces institutional investors to rethink their risk appetite, and the role they play in building the local economy.
The rationale is clear: with the right structure, pension funds can drive innovation, deepen capital markets, and generate returns while staying aligned with long-term liabilities. If other African countries followed suit, the implications could be significant. A Bloomberg analysis suggests that if Africa’s ten largest pension funds mandated similar 5% allocations, over $13 billion could flow into the continent’s venture capital ecosystem within five years, triple Africa’s projected 2024 VC inflows.
A Proven Model in the Making
South Africa offers a case study. After raising its private equity cap from 10% to 15% and creating a dedicated 45% bucket for infrastructure investment, commitments to local private capital jumped from $216 million to $344 million in a single year. Most of that funding flowed into the country’s strained energy sector.
Evidence from global markets suggests similar policy shifts can yield long-term macroeconomic benefits. In the U.S., pension funds became a major force in venture capital following a 1979 regulatory clarification, ultimately backing some of Silicon Valley’s most iconic firms. Today, private equity supports over 26 million U.S. jobs and contributes around 5% of GDP, according to EY.
Emerging market data offers further support. A multi-country study found that every 10% increase in pension assets allocated to private capital correlated with a 0.5% increase in annual GDP, compounding over time into substantial economic gains.
Risks Remain, and Must Be Managed
Despite the upside, pension investment in private markets carries real risks. Liquidity remains the most pressing. African capital markets are still thin, and private equity funds typically lock capital for 7–10 years. That can be misaligned with short-term obligations to retirees if allocations aren’t carefully sized.
Valuation opacity is another concern. Unlike public equities, private assets are not marked to market daily. A CFA Institute analysis found that secondary stakes in private funds often trade at 10–15% discounts to stated net asset values, raising questions about how assets are priced and reported. Cyclical risks also loom: too much capital chasing too few deals can inflate valuations, while downturns can exacerbate illiquidity.
Then there’s political risk. To avoid capture or misuse, industry observers say the implementation should be protected by law, with independent oversight and strict transparency requirements. Annual reporting of fund commitments and performance could build public trust and keep institutions accountable.
A Signal to Global Capital
Perhaps one of the most consequential ripple effects of Ghana’s move will be its signaling power. Many African venture firms rely on capital from development finance institutions (DFIs), partly because local institutional backing is minimal. That dynamic shapes what kinds of businesses get funded, often favoring donor-aligned mandates over market-driven innovation.
Local pension investment could change that. It would give African fund managers a stronger position when raising capital abroad and shift incentives toward commercially viable, scalable ventures. For foreign investors, it would send a powerful message: Africa’s own institutions are backing its future.
Ghana’s directive is still new. Execution will matter. But if it succeeds, it could offer one of the continent’s most cost-effective economic catalysts, no new borrowing, no subsidies, just long-term capital deployed at home.
