According to the 2023 outlook survey by Axis Pension Trust, pension funds have set their sights on investing in the real sector, amidst the prevalent economic crisis in Ghana, which is pushing investors to seek diversification away from government securities.
The Axis Pension Trust survey reports that investors are currently in search for alternative assets to diversify their portfolios, which will set the stage for pension funds to finally invest in the real sector of the economy. This is seen as a positive step towards addressing the structural weaknesses in the Ghanaian economy.
Market analysts are of the view that, amidst the limited investment alternative, investors could consider real estate investments and exposure to agriculture and energy-focused private equity (PE) funds as alternative investments, as well as commodities such as gold and other precious metals, infrastructure and cryptocurrencies.
Speaking with the media, the Chief Executive Officer of Axis Pension Trust, Afriyie Oware noted that:
“It is crucial to note that developed countries allocate a significant percentage of pension fund assets to the private sector to drive economic growth. Government expenditure should also be directed towards capital expenditure, generating investments that can drive growth.
“It is necessary to redefine the direction of the country for the next economic cycle by efficiently allocating resources to the private sector and implementing proper investment guidelines. This will attract private sector investments, drive economic growth, and avoid excessive investing in government debt.”
Afriyie Oware
However, amendments to the existing investment guidelines from the Securities and Exchange Commission (SEC) and the National Pensions Regulation Authority is crucial for effectively harnessing these opportunities. These amendments to the existing investment guidelines will be to increase the investment ceilings on other asset classes as the current ceiling assigns heavyweights to the sovereign debt.
Meanwhile, the survey further established that the Domestic Debt Exchange Programme (DDEP) could be detrimental to both the financial and real sectors in the years unfolding. Also, the growth outlook and its consequential impact on asset prices, the survey shows, are highly negative, with the central bank losing credibility in its ability to control inflation and liquidity being drained out of the system.
Ghana expected to grow at a slower pace in 2023
Portfolio managers who were surveyed say they expect the country to have a challenging 2023, growing under trend pace of between 2-3 percent. This is attributed to the soaring inflation and elevated interest rates, slowdown in government capital expenditure and a devastated consumer population suffering from the ail outcomes of government’s DDEP.
“With the central bank losing credibility in its ability to control inflation and with liquidity being drained out of the system, the growth outlook and its consequential impact on asset prices is highly negative.”
Axis Pension Trust Report
In the meantime, the central government has predicted a growth rate of 2.8 percent in 2023. A downward revision of this projection may however be required due to the heightened uncertainty surrounding the debt exchange programme and its consequential impact on local currency and inflation.
“Beyond the Domestic Debt Exchange Programme, the government will have to think of bolder and more transformative policies to build fiscal buffers towards a path of sustainability. This includes addressing weaknesses in enforcing compliance and improving tax administration to mobilize domestic resources to support economic recovery.”
Axis Pension Trust Report
Axis Pension moreover indicated that improving the efficiency of revenue collection through institutional reforms such as improved governance and adopting digitization and e-governance will improve transparency and reduce illicit financial flows.
