The National Treasury has published final amendments to Regulation 28 allowing South Africa’s pension funds to invest up to 45% of their capital in infrastructure projects.
Regulation 28, which is part of the Pension Funds Act, protects the savings of pension fund members by limiting the extent to which funds can invest those savings in particular asset classes.
Regulation 28 amended
The amendments, which follow two rounds of public comments, are aimed at enabling longer term infrastructure investments by pension funds, the National Treasury said in a statement on Tuesday (5 July).
“To this extent, the amendments introduce a definition of infrastructure, and sets a limit of 45% for exposure in infrastructure investment,” Treasury said.
“To further facilitate the investment in infrastructure and economic development, the limit between hedge funds and private equity has been split. There will now be a separate and higher allocation to private equity assets, which is 15% increased from 10%.”
The ANC first proposed the amendments in 2020 in a bid to unlock more private investments in the government’s infrastructure projects to spur economic growth. President Cyril Ramaphosa also expressed hope that pension funds will participate in the government’s Infrastructure Fund, which aims to unlock R1 trillion in infrastructure investments over a four-year period.
The amendments retain the prohibition on retirement funds from investing in crypto assets. They also impose a 25% limit on the funds’ exposure to any one entity (company) across all assets, not just infrastructure.
“However, one exception to the per entity limit, is debt instruments issued by, and loans to, the Government of the Republic and any debt or loan guaranteed by the Republic,” Treasury said.
“The asset allocation to housing loans granted to retirement fund members will be reduced from 95% to 65% in respect of new loans only. This is meant to curb abuse of the housing loan scheme by fund members.
“The National Treasury is mindful of the important role played by housing ownership in wealth creation and in retirement and will continuously monitor this area of investment.”
The amendments will take effect on 3 January 2023 “to enable regulators and fund managers to comply with the new regulations.”
You can view the National Treasury’s gazette notice on its website.