Regulations in South Africa are set to be amended to allow pension funds to invest in government infrastructure projects and government-backed assets.
Treasury is looking at making changes to a regulation (Regulation 28) by introducing prescribed assets which would force retirement funds to allocate a portion to government-backed assets or invest directly in government infrastructure projects, according to a report on moneyweb.co.za.
Regulation 28, which is tied to the Pension Fund Act, limits the extent to which retirement funds may invest in certain asset classes. Among several provisions, only 15% of pension funds may be invested in alternative investments as such private equity, hedge funds and unlisted property. There is no allocation for investment in infrastructure.
The African National Congress, which is the ruling party, has been in discussion with some of the country’s top pension funds on possible proposed changes.
The Business for South Africa (B4SA) recently released its economic recovery plan for the country. Both proposals said using savings and retirement funds to finance infrastructure projects with the purpose of driving economic growth should be looked into. B4SA was formed in response to the COVID-19 pandemic and represents the majority of business organisations.