The Chairman of Groupe Nduom, Dr Papa Kwesi Nduom, has encouraged stakeholders in the pensions industry to consider investing a portion of the country’s private pension funds in local banks to help them meet the new capital requirement of GH¢400 million.
He believes the country’s private pension funds could be invested in some of the local banks and, therefore, urged the National Pensions Regulatory Authority (NPRA), fund managers, and fund trustees to consider it.
He said that should, however, not be done indiscriminately.
“The pension fund managers must do evaluation of these banks and look at the ones with good governance practices, serious investments programmes and good business models and support them,” he stated.
Dr Nduom said this in an interview with the GRAPHIC BUSINESS on the sidelines of a colloquium on the insurance and pensions industries at the University of Ghana Business School.
He said the pension funds had more money than what some local banks needed to recapitalise and if special dispensation was given, the pension money could be used to fund these banks.
“Banking pays and an investment in it will be fruitful. These local banks too will in turn support the development of the country,” he noted.
Growth of private pension funds
Private pension funds have maintained their strong growth over the years, reaching a record high of GH¢9.7 billion in 2017, from the previous year’s GH¢6.8 billion.
Data from the NPRA shows that GH¢9.2 billion of the GH¢9.7 billion was accrued from Assets Under Management (AUM) managed by licensed trustees, while some GH¢0.5 billion came from the Temporary Pension Fund Account (TPFA).
Supporting local companies
Aside from the local banks, Dr Nduom also urged the fund managers to support local businesses who were doing well with a portion of the private pensions fund.
He said that would enable them to expand and create more job opportunities for the teeming youth of the country.
“It is more risky to invest in treasury bills because by that we are killing our local companies. The government gets revenue from local enterprises so if we are going to use our pension funds to buy government treasury bills instead of investing them in local companies, then how will they grow and contribute more to the government,” he explained.
“A lot of local companies are doing well. I belong to Groupe Nduom and you will find out that the Ghana Revenue Authority and the Electricity Company of Ghana (ECG) have been issuing certificates to our companies and this is because we are paying our taxes and bills, which means that the companies are doing well. It is such companies that we need to invest our pension funds into,” he added.
Funding foreign companies with pension funds
Dr Nduom also accused pension fund managers in the country of using the country’s private pension funds to rather fund foreign banks and companies.
He said he had evidence of people who had taken the country’s pension money from local investment houses and local banks and given them to foreign-owned organisations, banks and investment companies.
He said such a conduct was a huge disincentive to local companies, especially at a time when local banks were struggling to raise additional capital.