The case for responsible investment of pension savings in infrastructure

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Projects can be a source of competitive returns if fund managers carry out thorough due diligence

The investor can freely change their investments to adapt to changing market conditions and investment goals. Picture: DOROTHY KGOSI

At the same time, the theory goes, retirement funds are able to contribute to national development through growth and employment, and everybody wins. However, one problem is that SA’s track record in terms of managing large projects and state-driven enterprises is notoriously bad, due mainly to questionable viability, poor management and corruption.

That is not surprising given finance minister Tito Mboweni’s warning that SA could face a sovereign debt crisis within three years if government debt is not reined in. Our inability to pay the interest or the capital on amounts borrowed would have serious economic consequences. Mboweni has also indicated support for the idea of pension funds being allowed to invest in infrastructure directly. One way of doing this would be to use infrastructure bonds.

 

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