Retirement fund trustees will have to up infrastructure investment skills

To take advantage of ‘significant’ allowance in amended Regulation 28.
Image: Shutterstock

Retirement funds will have to invest in upskilling trustees to empower them to navigate the complex world of infrastructure investing opened up by the long-awaited gazetting of the amendments to Regulation 28 of the Pensions Fund Act.

The new Regulation 28 investment limits allow retirement funds to invest up to 45% of assets in South African infrastructure projects, effective from the beginning of January 2023. Infrastructure assets are defined as physical assets or technology constructed, developed or maintained with the main goal of providing services or facilities for the benefit of South Africa’s people, business and economy.

I welcome the introduction of the specific infrastructure investment limits, which are aimed at encouraging retirement funds to invest in infrastructure projects.

The new 45% allowance is significant; the change places an additional duty on retirement fund trustees to pick well defined infrastructure projects that contribute to building the country while also providing the returns members need on their savings over the long term without excessive levels of risk.

Trustees need to consider the new limit in the context of each retirement fund’s benefit objectives. The reality is that infrastructure investments are accessed mostly via private equity and other unlisted instruments and come with significant risk.

In order to ensure that retirement fund members benefit from the new adjustments, trustees will have to make sure that they understand the infrastructure investing space. “Retirement fund trustees as well as their asset consultants and asset managers will have to build knowledge and skills in evaluating and managing infrastructure investments.

It is important to understand that the percentages are investment limits aimed at protecting retirement fund members against the risk of an excessive concentration of assets and especially illiquid assets. They are not prescribed targets to be met.

The assets held by retirement funds on behalf of their members are considered valuable in any country, because they tend to be sizeable and available for the long term. This means that they can be used to provide the funding needed to build capacity in the country, which in turn grows the economy and creates jobs. It is important that these savings are cherished and used wisely to ensure that they meet the needs of the country while also growing members’ savings to enable them to retire financially secure.

The right infrastructure projects have the potential to deliver stable, inflation-beating returns over the long term that align well with members’ needs.

At the same time, increased investments in infrastructure projects will also be good for South Africa’s economic growth.

An important point for trustees to note in the new regulations is the requirement for retirement funds to report on their investments in infrastructure. To allow the Financial Sector Conduct Authority to monitor the assets being allocated to infrastructure as well as other exposures, the existing reporting exclusion on look-through of Collective Investment Schemes and insurance policies has been removed. This introduces an additional administrative requirement, including the need to classify all infrastructure investments as such based on the definition.

South Africa has been limping along on consumption-powered growth, which is not sustainable. We need more of the growth that is driven by construction, which requires an increase in infrastructure development. To achieve this, we need investment funding for projects.  China’s massive economic growth over the last three decades was driven by infrastructure investments and only in the last few years has this started to shift to more consumption-led growth.

The shift in investor attitudes towards a greater focus on sustainability also supports investment in infrastructure, which can support the transition to cleaner energy as an example. Buying listed company shares is merely a change of ownership but does not really help a country to move forward.  However, that an increase in funding of infrastructure projects ultimately also has a positive impact on equity markets by driving sustainable economic growth. This in turn benefits investors, both inside and outside of retirement funds.

I do not expect a rush into infrastructure investments despite the introduction of the very generous limits, because investable opportunities remain scarce.

It would not be sensible for South African retirement funds to invest in infrastructure outside of South Africa.

We should be building South Africa first. In order to achieve this we need well defined projects that are corruption proof.

This is where Infrastructure South Africa (ISA), headed by Dr Kgosientsho Ramokgopa, has an important role to play. Previously known as the Investment and Infrastructure Office, ISA was established by President Cyril Ramaphosa to remove blockages preventing the delivery of investable infrastructure projects.

Andrew Davison, chair of the Investments Committee of the Actuarial Society of South Africa (ASSA).


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The Chinese government has the ability to issue bonds to finance infrastructure projects. The People’s Republic of China is communist in name only. Their economy is more capitalist than the South African economy. They embraced the capitalist concepts of a market economy, property rights, and private enterprise. China is among the most open markets in the world. They don’t care “whether the cat is black or white, as long as it catches mice.”

South Africa, on the other hand, is one of the most socialist nations on earth today. We are capitalist, or “mixed economy”, in name only. The central planning socialist regime is highly redistributive and is embroiled in various value-destroying social engineering projects that penalize and handicap property owners and investors. True communist-style cadre deployment distributed the lethal combination of ineptitude and criminality throughout all spheres of government. We have people in decision-making positions who would have been shot in public in China for corruption and stupidity.

To make a long story short – If I want to invest in infrastructure projects, I will do so in the USA, Australia, New Zealand, or Europe. The next president will buy votes by promising to nationalize the private infrastructure projects. Under an ANC government, construction projects and infrastructure investments are nothing more than a glorified, well-camouflaged ambush to rob capitalists for the benefit of collectivists. The escalation in the Sasria insurance premium after the Zuma uprising tells the real story.

free advice : never do business with government. They drag their feet in making any decision and their management acts tie you up along with them needing politician approval for certain types of decisions of the venture. If your R20b project owns 25% of a company that owns a R500k piece of land that had to get cut off – the minister has to approve the sale of that 25%

They could change ministers four times in two years and each new minister is granted a reset of any of the time periods of approval applications your project had to submit.

End of comments.



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