Unlocking Pension Funds for Infrastructure in Ghana: A Path to Economic Transformation

Discover proven strategies for redirecting Ghana’s pension assets into critical infrastructure projects like roads, power grids, and water systems to close the financing gap and fuel sustainable development.

Introduction

Ghana’s economy has shown resilience, achieving average annual growth exceeding 5% in recent years, driven by agriculture, services, and mining sectors. However, this progress is severely limited by a chronic infrastructure deficit in Ghana, which hampers productivity, job creation, and equality. Potholed roads delay goods transport, unreliable power disrupts manufacturing, and inadequate water systems pose health risks to millions.

The African Development Bank (AfDB) estimates Ghana needs at least $37 billion annually for the next three decades to bridge gaps in transport, energy, and urban utilities. Traditional funding sources—government budgets, foreign aid, and loans—are insufficient amid fiscal pressures, including public debt peaking at 85.7% of GDP in 2022 and stabilizing around 44.5% by October 2025. Gross fixed capital formation stands at just 10% of GDP as of April 2025, down from 27.7% in December 2015, placing Ghana above only Eritrea and Comoros in Sub-Saharan Africa.

This creates a financing shortfall equivalent to 2.8% of GDP, higher than the regional average of 1.7%. Unlocking pension funds for infrastructure in Ghana offers a viable solution. With pension assets surpassing GHS 86.4 billion ($8.23 billion)—including GHS 57 billion ($5.43 billion) in private pensions—strategic reallocation could provide long-term capital for transformative projects, benefiting retirees and the economy alike.

Analysis

Ghana’s Infrastructure Challenges

Quality infrastructure supports 92% of the 169 United Nations Sustainable Development Goals (SDGs), impacting economic inclusion, education, health, and empowerment. In Ghana, poor roads restrict market access for smallholder farmers, who produce 80% of the nation’s food; only 25% of rural residents have road access, compared to 34% continent-wide. Road transport handles 80-90% of freight and passengers.

Social infrastructure lags too: 34% of the population accesses improved sanitation, 65% has clean water, and just 5% of arable land is irrigated. This leads to 30% post-harvest losses, despite Ghana’s agricultural potential, forcing $2 billion in annual food imports—including $600 million for rice and $400 million for poultry. Power outages cost industries up to 10% of sales, even with 85-90% access rates. Urban water access is 80%, leaving rural areas vulnerable.

Addressing these could boost GDP by 1-2% yearly, create 1.5 million jobs (targeting youth and women), and reduce poverty, where over 39.5% of rural dwellers live below $1.90 daily. Youth unemployment was 13.6% in 2024 (down from 14.6% in 2023), with 80% of the workforce in informal sectors contributing only 27% to GDP.

Current State of Pension Funds in Ghana

Ghana’s three-tier pension system includes Tier 1 (mandatory public via SSNIT), Tier 2 (mandatory occupational), and Tier 3 (voluntary). Total assets reached GHS 86.4 billion by recent reports, but over 80% are in short-term treasury bills and government bonds under three years maturity. Alternative investments like infrastructure use only 4.4% of the 25% cap, trailing Nigeria (34% of 5% cap) and South Africa (8% of 15% cap). Globally, Europe allocates 18%, and the US 24%.

This conservatism arises from regulatory limits, risk aversion post-debt restructuring like the 2023 Domestic Debt Exchange Programme (DDEP), and falling treasury yields (from 26% early 2025 to 10.2-13.8% by August). African pension assets grew from $500 billion in 2020 to $1.1 trillion, projected to $7.3 trillion by 2050, yet infrastructure allocation is under 2.7% despite a $181-221 billion annual need and $108 billion gap.

Summary

In summary, pension financing for Ghana infrastructure proposes redirecting 5-10% of pension assets—unlocking GHS 8-10 billion ($1 billion) yearly—into de-risked projects via infrastructure bonds and public-private partnerships (PPPs). This mirrors successful models, reduces sovereign risk exposure, and aligns long-term savings with national development needs, potentially adding 1-2% to GDP growth while creating jobs.

Key Points

Practical Advice

Regulatory Reforms

To enable Ghana pension funds infrastructure investment, raise alternative investment caps to 20%, with a phased 5-10% mandate over five years. Introduce liquidity facilities for 3-5% annual payouts during project gestation periods.

Implementation Mechanisms

Leverage the Public Private Partnership Act of 2020 (Act 1039) for PPPs. Establish a Project Development Facility for feasibility studies and equity stakes. Shorten procurement timelines and empower metropolitan assemblies (e.g., Accra, Kumasi) to issue revenue-backed municipal bonds. Partner with AfDB, FSD Africa, and British International Investment for guarantees covering 75% of FX risks, using local currency to mitigate cedi depreciation (30% in 2021, 27.8% in 2022, 19.2% in 2024).

Capacity Building

Create a Pan-African Pension Academy to train 500 managers annually on infrastructure risk assessment. Offer tax exemptions on bond income and local content incentives.

Example projects: Oti River Bridge for rural connectivity, dualizing Accra-Cape Coast-Takoradi Road (25-30% cost savings), or northern solar farms adding 500 MW.

Points of Caution

While promising, redirecting pension funds requires safeguards. High sovereign exposure, as seen in DDEP losses, demands diversification to avoid correlated risks. Regulatory limits protect against volatility, so phased mandates prevent overexposure. Politicization risks necessitate National Development Planning Commission (NDPC) oversight. Macro stability—controlling inflation and cedi volatility—is essential. Pension trustees must prioritize fiduciary duties, ensuring inflation-hedged returns above 8-12% from viable projects.

Comparison

African Peers

South Africa’s Government Employees Pension Fund ($119 billion assets) invested in a 100MW solar plant and hospitals, yielding 8-12% returns and jobs. Nigeria’s ARM-Harith Fund mobilized $41 million from pensions for energy and digital infrastructure, targeting 3,000 green jobs; InfraCredit guarantees bonds. Kenya raised $500 million for roads via consortiums.

Global Benchmarks

Canada’s Pension Plan Investment Board owns toll roads and utilities with 8-12% long-term returns. Australia’s superannuation funds support urban transport and energy grids. In Europe (18% allocation) and the US (24%), pensions drive infrastructure without compromising security.

Legal Implications

Ghana’s National Pensions Act, 2008 (Act 766), governs the three-tier system and sets a 25% cap on alternative investments, including infrastructure. The Public Private Partnership Act, 2020 (Act 1039), provides a framework for PPPs but requires streamlined implementation to avoid delays. Reforms must comply with fiduciary standards under the National Pensions Regulatory Authority (NPRA) and Securities and Exchange Commission (SEC). Bond issuances by assemblies tie to local revenues, ensuring legal enforceability. FX hedges and guarantees need alignment with Bank of Ghana policies to mitigate currency risks legally.

Conclusion

Unlocking pension funds for Ghana’s infrastructure is key to sovereignty, turning a $37 billion gap into growth dividends. With GHS 86.4 billion in assets, a modest 5-10% shift could fund 320-475 km of roads, 250-450 MW solar, and broadband networks yearly, creating 1.5 million jobs (60% youth, 40% women) and enrolling 20 million informal workers by 2030. Policymakers should prioritize cap increases, PPP acceleration, and NPRA-SEC collaborations. This approach fosters inclusive growth, reduces import reliance, and builds climate resilience, securing Ghana’s prosperous future.

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