State-run schemes from Uganda, Kenya and Tanzania plan to pump millions
of dollars into real estate or infrastructure projects in coming months.
Photo/File
By A JOINT REPORT The EastAfrican
The volatility of the stock and money markets is
shepherding public pension managers into real estate where they hope to
get better and more stable returns for their shareholders.
But the question most managers face is how to exit the equity market and government securities without booking huge losses.
Data contained in their latest financial filings
show the state-run schemes from Uganda, Kenya and Tanzania plan to pump
millions of dollars into real estate or infrastructure projects in
coming months.
Uganda’s National Social Security Fund, said
besides real estate it plans to shift some of its investments from
stocks to government securities. But analysts said there are no takers
to buy off its huge share holding of equities.
Kenya’s NSSF reported last week it holds quoted
securities worth Ksh39 billion ($469 million) or 35 per cent of its
entire Ksh111 billion ($1.33 billion) assets. The pension scheme holds
36 per cent of its assets in real estate, and plans to increase this,
with the rest held in government securities.
Tanzania’s NSSF is betting on increased investment in infrastructure projects especially in the roads and energy sectors.
Uganda’s NSSF is seeking to go big on real estate
too, while also increasing lending to the government through the money
market, as it seeks to move away from the equity market, where it holds
80 per cent of all floated shares at the Ugandan Securities Exchange.
“Our portfolio at the USE has matured and we
believe investing more money is not the solution to increasing our
market returns. But we are willing to exit some market positions and
enter new ones in case there are good takers for our stock,” says
Richard Byarugaba, NSSF’s managing director.
Last year, the Kenyan and Ugandan securities
exchanges market lost an average of 25 per cent of their value. But
since January this year, the two bourses have rebounded, posting about a
20 per cent return, pushing them to the top 10 best performing bourses
in the world. Last year, the two were among the worst performing
globally.
In the money market, a sudden surge in interest
rates across the region saw financial institutions book huge losses in
their available for sale and available for trading bond holding.
This is because interest rates and bond prices
have an inverse relationship, meaning an increase in interest rates
leads to a fall in bond prices.
With the Ugandan scheme currently having an
investment mix of 75 per cent fixed income assets, 15 per cent real
estate and 10 per cent equity, a volatile movement in either the bond or
equity has a huge effect on the fund.
NSSF Tanzania, whose investment portfolio stood at
$627 million in 2011, is targeting to invest $130 million in the
construction of the Kigamboni commercial Bridge. The bridge will link
Dar es Salaam to Kigamboni Island situated to the east of the city.
The 520,000 member pension scheme also plans to
pump cash into the construction of a 300MW, gas powered power plant in
Mkuranga, 21 miles to the south of Dar es Salaam
In Uganda, NSSF says it will kick-start the second
phase of its Pension Towers, an Ush260 billion ($105 million)
commercial complex that will also serve as its headquarters. It will
also pump money into low cost housing projects in Temangalo and Lubowa,
central Uganda.
The Fund is also eager to lend roughly Ush1
trillion ($403.9 million) to government to enable it finance large
energy and roads projects.
In Kenya, the NSSF is looking at increasing its
real estate holding through the development of its land holding which
will enable it unlock value in the parcels it holds.
By Bernard Busuulwa, Adam Ihucha, Emmanuel Were and Peterson Thiong’o
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