Kenya’ s Vision 2030 envisions privatesector-led industrial transformation; Rwanda’ s Vision 2050 targets per capita incomes of US $ 12,000 by mid-century; Tanzania’ s Development Vision 2025 aims for sustained, inclusive growth.
Each of these national plans shares a common thread: a vibrant, well-financed private sector is critical to success.
The Case For Evolving Investment Strategies
Reimagining the Role of Institutional Capital
Globally, institutional investors are becoming more active in private markets- especially in infrastructure, technology, and impact sectors. In Africa, countries like South Africa, Nigeria, Botswana, and Namibia are leading the way by allocating part of their pension or insurance portfolios to alternatives, within prudent risk frameworks.
East Africa is well-positioned to follow suit- but with models that are uniquely adapted to our local economic context.
This doesn’ t mean abandoning caution. It means broadening the investment toolkit to include blended finance, structured equity, SME-focused private credit, and sector-specific private equity funds.
Tailored Investment Approaches Work Better Than Imported Models
Standard Western-style PE and VC frameworks often struggle in East Africa, where businesses are smaller, growth is episodic, and exit timelines are longer. For this reason, indigenous LPs and GPs must co-create context-sensitive investment thesis that better reflect local dynamics. Some examples include:
• Agri-processing private credit funds, de-risked with offtake agreements and technical assistance.
• Blended finance platforms targeting infrastructure, logistics, and energy.
• Mezzanine debt for family-owned SMEs looking to scale without giving up control.
• Venture capital funds with longer investment horizons and local anchor LPs.
• Revenue-based finance for lowmargin, high-volume consumer goods companies.
Addressing Legitimate Concerns
Risk, Governance, and Capacity Are Real- but Manageable
Many LPs worry about governance risks, lack of fund manager track records, and difficulties in evaluating alternative asset classes. These concerns are valid. But they are also solvable. Here’ s how:
Build internal capacity within LP institutions- train investment teams on due diligence, valuation, ESG, and fund structuring.
Leverage partnerships with DFIs, experienced GPs, or global asset managers through co-investment structures.
Start with pilot allocations- dedicate 2-5 % of the portfolio to carefully selected funds or blended finance vehicles.
Benchmark with peers across Africa- share insights with RBA Kenya, NSSF Namibia, PIC South Africa, etc.
Policy and Regulation Must Also Evolve
Regulatory frameworks currently cap exposure to alternatives in many East African countries. Policymakers and capital market authorities have an opportunity to rethink allocation ceilings, allow longer-duration vehicles, and create liquidity-enhancing mechanisms to encourage institutional participation in private markets.
In the same spirit, sovereign and government-linked funds( such as UDB and EADB) can play an anchoring role, absorbing early-stage risk and enabling crowd-in capital from pension and insurance players.
A Practical Framework For Institutional Participation
Benchmark by evaluating your current exposure to alternatives viz a viz your peers in the industry. This will help identify gaps and opportunities.
Do pilot launch in small, targeted allocations( 2-5 %) in well-structured local funds. This will help build comfort as well as manage risk.
Seek partnerships. Work with DFIs, experienced GPs, and advisory firms. This will open doors for you to access expertise and co-investment capital.
Build capacity by upskilling internal teams and boards. It will strengthen governance and independence.
Influence policy by engaging regulators for more flexible guidelines. This will help ensure alignment between capital and national goals.
The Returns Are There- And So Is The Impact
Well-structured private investments across Africa have delivered 15-25 % IRRs- outperforming traditional assets in many cases. Beyond the numbers, these investments are creating: Jobs; Export revenue; Tax receipts; Gender-inclusive value chains; and Innovation ecosystems. In short, returns with responsibility- a perfect match for the long-term nature of pension and insurance capital.
Conclusion
Leadership in Capital Allocation is leadership in Nation Building. The private sector in East Africa is ready to scale. Entrepreneurs are doing their part. Policymakers have set clear strategic directions. Development banks are offering support.
It’ s time for institutional investors to step into this opportunity with confidence and clarity. You don’ t have to take outsized risks. But you do have to take considered ones.
Let’ s evolve from passive stewards of capital into active enablers of economic transformation. Because the true legacy of an institution is not just in the profits it posts- but in the country it helps build.
Innocent Bagumira Tibayeita is an Executive Coach, Private Equity Buyer and M & A Expert. You can commune with him via email at: Bagumira78 @ gmail. com.