Infrastructure investments for SA Retirement Funds

In a recently proposed amendment to Regulation 28, pension funds could now be permitted to invest up to 45% of their assets into South African infrastructure projects. Whereas some private infrastructure projects have previously had the benefit of investments from retirement funds, the investment opportunities brought about through this amendment are limited to state-owned projects only.

The amendment outlines that “infrastructure” refers to “public installations, structures, facilities, systems, services or processes in respect of which projects may be designated as strategic integrated projects”. This also refers to projects that are a part of the national infrastructure plan.

This can include:

• Airports
• Education institutions
• Communication and IT installations
• Health care facilities
• Sewage works and sanitation
• Public roads
• Mines
• Oil or gas pipelines, refineries or other installations
• Water works and infrastructure
• Electricity transmission and distribution
• Waste infrastructure
• Railways
• Power stations or energy sourcing infrastructures
• Public transport
• Productive rural and agricultural infrastructure
• Human settlements and related infrastructure and facilities
• Economic facilities
• Ports and harbours

Although it is not specifically defined, it is expected that pension funds will still be allowed to invest in public-private partnerships, provided the state is involved in some way.

This proposal does not force retirement funds to invest in government-approved instruments – this is a relief as the previous prescribed assets regime resulted in substantial opportunity costs for investors.

This change could potentially result in improved investment growth and better diversification for individuals with retirement funds. Added thereto, the financial upside in employment and materials acquisition would prove to be a solid boost for the economy.

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