Why Africa is Emerging as a Strategic Global Connector

With more than R3 trillion in assets under management, the GEPF is not only Africa's largest pension fund but one of the continent's most significant pools of long-term capital. The mandate itself is noteworthy for its scale, but perhaps more interesting is what it says about the direction of travel for pension funds and custody services across Africa.

Pension funds on the continent, and similarly around the world, were historically largely domestic in character, both in terms of where savings originated and where those savings were ultimately invested, which meant the relationship between those funds and their custodians was built on a relatively clear set of expectations. Assets needed to be safeguarded, transactions settled, records maintained, and income collected, and that arrangement worked because it reflected the realities of the pension industry at that particular stage of its development.

Over time, however, these funds have grown into some of the largest institutional investors in their respective economies, overseeing pools of capital that would have been difficult to imagine a generation ago. According to the OECD, pension assets in Namibia exceeded the size of the country's economy, while Botswana, Namibia and South Africa all recorded pension assets-to-GDP ratios above both the African and OECD averages.

The picture is far from uniform, with many markets still at much earlier stages of development, but the broader trend is difficult to ignore: as these funds grow, they become more complex.

Diversification is perhaps the defining theme in pension fund investing at present, as funds look beyond traditional allocations to government bonds and listed equities and into infrastructure, private markets, real estate and other alternative assets. In a number of markets, that search for diversification also extends beyond borders, with funds allocating a portion of their capital to regional and international opportunities in pursuit of broader exposure and risk-adjusted returns. There has also been considerable work around digital assets, which remain a very small part of the pension landscape but have nevertheless become a subject of evaluation by regulators and investment managers as the industry considers how emerging asset classes may fit within long-term investment frameworks.

Sustainability has also moved much closer to the centre of investment decision-making, with environmental, social and governance considerations now routinely incorporated into how and where capital is allocated. That conversation intersects with another, namely the role pension capital can play in supporting infrastructure and broader economic development. The opportunity here is significant, but so too is the responsibility. Pension funds ultimately exist to protect the long-term interests of their members, which means development objectives must always be weighed against fiduciary obligations and investment risk.

A pension fund operating across a broader range of investment opportunities and obligations places very different demands on the institutions responsible for supporting those activities. The custody function has always been an important part of that equation, but the role goes well beyond the administration of assets now.

Custodians are responsible for safeguarding investment assets, settling transactions, maintaining investment records, managing cash movements linked to investments and providing the reporting that allows funds and their stakeholders to understand what is taking place across often substantial and complex portfolios. Alongside this is an equally important responsibility around governance, oversight and regulatory compliance, helping ensure that assets are accounted for correctly and that investment activity is conducted within the frameworks established by regulators and fund mandates.

Much of this work takes place behind the scenes, which is perhaps why it receives less attention than investment performance or asset allocation. Yet for pension funds operating at scale in Africa, strong custody infrastructure plays an important role in maintaining confidence in the system. The ability to provide accurate information, support informed decision-making and maintain operational stability across large and complex portfolios has become a critical component of modern pension fund administration.

The assumption has often been that the largest and most complex custody mandates should be entrusted to international institutions. Yet domestic custody capabilities across Africa have developed considerably over time, supported by sustained investment in technology, infrastructure, governance and operational expertise. The GEPF mandate is one example of that shift. Absa’s appointment is not simply a single-bank development, but a useful marker of how African financial institutions are increasingly being expected to support custody, reporting, operational resilience and governance requirements at a scale once more commonly associated with global custodians.