In a bold and strategic move, the government of Ghana has directed all pension funds in the country to invest at least 5% of their assets into local venture capital (VC) and private equity (PE) markets. This decision could change the story of startup financing across the African continent, where access to capital—not lack of ideas—remains one of the biggest obstacles for innovation.
For years, African startups have struggled to raise funds locally. Many young businesses rely heavily on foreign investors who are not only risk-averse but also far removed from the realities of local markets. Ghana’s decision aims to break that dependence by tapping into the country’s pension funds, which hold billions of cedis in assets.
According to financial data and reports from Pitchbook and Partech Africa, venture capital investments in Africa have dropped drastically. In 2023, equity funding fell to $2.2 billion from $4.9 billion in 2022. This means that capital from global investors is drying up, mainly due to economic instability and tighter financial conditions worldwide. It is within this context that Ghana’s pension fund policy is seen as both urgent and smart.
Many African entrepreneurs have long said they prefer to work with investors who understand the local environment. However, a study by the International Finance Corporation (IFC) shows that only 20% of funding for African startups comes from local sources. This leaves a huge gap that must be filled by local institutions like pension funds, insurance firms, and sovereign wealth funds.
The new policy in Ghana is not just about regulation; it is a clear message that the country wants to develop its own capital markets to support its young and innovative entrepreneurs. It also signals a move toward a more self-reliant growth model powered by African money and African minds.
To fully understand the impact such a move could have, let’s look at the example of Morocco. As of 2024, Morocco’s public pension fund—Caisse de Dépôt et de Gestion (CDG)—had about $33 billion in assets under management. Yet, Moroccan startups raised just $82 million in equity that same year. If CDG followed Ghana’s 5% rule, over $1.65 billion would go into local innovation. That’s about 20 times what Moroccan startups currently raise.
Still, this approach is not without risk. Venture capital is known to be a high-risk area of investment. Many of the businesses involved are still in the early stages, often without steady revenue, and their valuation is difficult to measure using regular financial tools. For pension fund managers, whose main job is to secure the future of retirees, this adds a new level of responsibility.
That is why implementation must be done carefully. Experts say pension funds should start by making small investments and then gradually increase their exposure. It is also important to work with fund managers who have experience in venture capital, and to carry out proper checks on any company receiving investment. Good governance and proper oversight will be key to protecting pensioners’ money.
Demographics also matter. Funds with more retirees than active workers will likely have less flexibility to invest in illiquid and long-term assets like venture capital. This makes it important to design investment frameworks that suit the profile of each pension fund.
Despite these challenges, many believe the benefits far outweigh the risks. By investing in local startups, African countries can create jobs, grow their economies, and support innovations that are designed to solve local problems. It also reduces dependency on foreign donors and investors who may come with strings attached.
This policy in Ghana should also serve as a wake-up call for other African countries. Policymakers, regulators, and educators must start building the systems and skills needed to support venture capital and private equity at home. This includes training more fund managers, analysts, lawyers, and risk experts who understand how the system works.
From Nairobi to Lagos, from Cairo to Johannesburg, the big question is now on the table: how can Africa fund its own growth? Ghana is offering one possible answer. If successful, the country’s pension reform could be a model for the rest of the continent and spark a new era where African innovation is powered by African capital.
