On 26 February 2021, National Treasury released a proposal to amend Regulation 28 of the Pension Funds Act to make it easier for pension funds to invest in infrastructure projects. This raised concerns that government could force pension fund members to invest in infrastructure projects.

 The proposed amendment limits the amount invested in infrastructure across all asset categories to 45% in respect of domestic exposure and 10% in respect of the rest of Africa. The aggregate exposure per issuer or entity may not exceed 25% of the total assets of the fund.

 We very much agree with our research partner, Morningstar and encourage investors to see this as an opportunity. With this allowance, investors will be able to invest in a well-established asset class that previously had minimal exposure and/or was completely excluded from pension fund assets.

 This increased opportunity set provides the benefits of diversification, a steady income stream and possible capital appreciation. If applied correctly, it could also provide a much-needed economic boost for South Africa through job creation and the construction of vital infrastructure for the country. We, therefore, view this proposal by National Treasury as one that could not only benefit investors and our economy but our country too.

Opportunity or Threat