The Chief Executive Officer of the Private Sector Federation, Nana Osei Bonsu, has called for a significant policy redirection in how Ghana’s pension funds are managed.
He argued that instead of being heavily tied to government securities, pension contributions should be channelled into Ghanaian businesses to foster long-term private sector development.
Speaking on the critical financing challenges confronting local enterprises, Mr. Bonsu highlighted that access to affordable and long-term capital remains a major hurdle for Ghanaian businesses. “The cost of credit is high, and access to adequate capital formation is very low. Capital formation is difficult in our environment,” he stressed.
He noted that despite macroeconomic gains, including declining inflation and a relatively stable exchange rate, businesses continue to face tight financial conditions due to limited access to long-term credit. For him, the root of the problem lies in the country’s pension investment strategy.
Pensions as a Tool for Economic Transformation
Mr. Bonsu believes the country’s pension architecture — particularly the three-tier scheme — has the potential to unlock the needed capital for business expansion and job creation.
“Our pension schemes provide long-term capital for everybody, but we have enough, and that’s one of the areas that we propose our meeting with the management team of the government to talk about — how do we increase capital formation?”
Nana Osei Bonsu
He explained that the Private Sector Federation was part of the consortium that designed the three-tier pension system, particularly to encourage private sector participation and allow for diversified investment strategies. Yet, the impact of this policy innovation has been limited.
“We now have a three-tier pension scheme, but we’re not accumulating enough capital. Private sector, actually the Federation, was part of the consortium that developed and sought the three-tier pension scheme.”
Nana Osei Bonsu
Misalignment of Fund Investments
Currently, only about 35% to 36% of pensions are held by the private sector, but that is not yielding adequate investments in productive sectors. Mr. Bonsu criticised the prevailing practice where fund managers prefer investing pension monies in government instruments such as treasury bills and bonds.
“Most of them are investing in treasury bills and treasury bonds. That is not the private sector. That’s not the reason why the third tier was advocated for.”
Nana Osei Bonsu
According to him, such investments, although secure, do little to catalyze economic growth or support struggling small and medium enterprises (SMEs) — the real engine of job creation and innovation.
Mr. Bonsu advocates for a policy environment that compels pension fund managers to diversify their portfolios to include investments in local businesses, infrastructure, and other real-sector ventures. “If the volume of capital available to the private sector is such that you’ll be begging for investment opportunities, it definitely will make the rate go down,” he argued.
He maintains that a more robust inflow of pension funds into business financing will ease liquidity constraints, reduce interest rates, and stimulate broader economic growth.
“We want full participation, additional people participating, to increase the quantum of resources that go into that,” he said, referring to the need for greater contributions and investment from private and institutional actors into the third-tier scheme.
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