Most African countries have undeveloped statutory pension systems, according to the Absa Africa Financial Markets Index 2024.
The report also mentions that domestic pension funds may drive capital market development by diversifying across asset classes and investing over long periods.
A substantial pension fund serves as an important pillar in a country’s financial structure.
Pension funds, by collecting resources from workers throughout their active years, may make a considerable contribution to capital markets, particularly in developing economies, many of which can be found in Africa.
Pension funds are long-term investors that often invest in infrastructure projects, government bonds, and private-sector activities to boost economic activity.
These investments have the potential to stimulate economic growth by creating jobs, expanding businesses, and developing infrastructure.
Additionally, a well-developed pension system contributes to a more secure and less volatile financial climate, encouraging both domestic and foreign investment.
The Absa report mentioned earlier ranks the accessibility, transparency, and openness of financial markets across 29 African countries, and for this, it considers 6 primary pillars, one of which is pension fund development.
This pillar assesses the potential for institutional investors to promote capital market expansion by analyzing the size of pension fund markets, both per capita and in comparison to locally listed securities.
The pillar score is based on two components that reflect pension fund development: pension fund assets per capita to assess their size, and pension fund assets relative to domestically listed securities, weighted by liquidity, to assess their contribution to the development and activity of local capital markets.
Top 10 African countries with the best pension situation
Rank
Country
Pension fund development score
Pension fund size
Pension fund assets to domestically listed assets
1.
Namibia
100
100
100
2.
South Africa
66
75
57
3.
Mauritius
64
100
27
4.
Seychelles
60
100
20
5.
Botswana
58
100
16
6.
Eswatini
57
74
41
7.
Morocco
32
35
30
8.
Lesotho
31
22
40
9.
Nigeria
28
13
44
10.
Ghana
24
14
35