New pension changes coming for South Africa before the end of February

The changes are aimed at ‘unlocking’ new investment in infrastructure by the private sector and form part of the process to amend Regulation 28 of the Pensions Fund Act to enable retirement funds to invest in infrastructure, Masondo said in his State of the Nation debate in parliament this week.

“These amendments introduce more effective maximum limits for the trustees of retirement funds to invest for the long term, in various forms of infrastructure projects,” he said.

“The National Treasury has also completed a review of the Private Public Partnerships (PPP) regulatory framework to improve the pace at which PPP projects are planned and to address regulatory challenges. This will allow greater private sector participation and crowd in higher levels of investment.”

In March 2021, the Treasury published its draft amendments to Regulation 28 of the Pension Funds Act for public comment, detailing the projects in which South African pension funds could soon invest.

Treasury said that the proposed review of Regulation 28 is informed by calls for increased investment in infrastructure given the current low economic growth climate.

The amendments proposed that the overall investment in infrastructure across all asset categories may not exceed 45% regarding domestic exposure and an additional limit of 10% in respect of the rest of Africa.

Treasury has also expanded its definition of ‘infrastructure’, which was previously limited only to part of the national infrastructure plan, which excludes private sector infrastructure and infrastructure in the rest of Africa or abroad. The revised definition is that infrastructure is ‘any asset class that entails physical assets constructed for the provision of social and economic utilities or benefit for the public’.

“This definition takes better account of the United Nations’ Principles for Responsible Investment (UNPRI) and the input from Association for Savings and Investment South Africa (ASISA),” it said at the time.

“The ‘social’ aspect of the definition will accommodate impact investing by retirement funds. Impact investments are investments made to generate positive, measurable social and environmental impact alongside a financial return.”