Business Maverick: Laying down the foundation for pensions to fund infrastructure spend

Finance minister Tito Mboweni was supposed to make an announcement about where South African retirement funds can invest in his emergency budget speech in June – but it was pulled at the last minute.

A couple of weeks later, the head of the ANC’s economic transformation committee, Enoch Godongwana, let the cat out the bag. He announced on Friday that the ruling party has had talks with the country’s top 20 pension funds, including the Public Investment Corporation. In addition, up to 10% of total funds may be invested in hedge funds or private equity. Combined exposure to both asset classes is limited to 15% in total. Retirement funds can also invest up to 10% of their assets directly into unlisted equities, rather than making the investment via a private equity fund. There is also a provision for investment in unlisted property, whether by holding properties directly or by investing in various pooled structures.

Gondwana says as things stand the regulation provides for an investment of up to a maximum of 10% in infrastructure-type developments, yet the uptake has only been around 3%. “So something is definitely wrong, and we need to know what it is so we can sort it out. Batseta’s Anne-Marie D’Altron says pension funds are already invested in infrastructure, so it is nothing new to them, but the issue is the limited availability of bankable projects that meet the criteria.

The Southern African Venture Capital and Private Equity Association has added its voice to the growing call for amendments to Regulation 28, to support South Africa’s economic recovery.

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