South Africa: National Treasury makes changes in Pension Funds Act for public comment

Last updated on September 11th, 2021 at 07:58 am

The National Treasury in March 2021 had published a draft amendment to regulation 28 of the Pension Funds Act for public comment in South Africa. 

It is expected to make it simpler for retirement funds to expand interest for the people of South Africa. However, there are still queries about whether people will like to invest their cash into these projects, a new review from Sanlam reveals.

The head of investments at Sanlam Corporate Investments Darryl Moodley said “While 6.6% may seem moderately little allocation, we should consider that retirement subsidizes hold R4.5 trillion in assets, this means nearly R300 billion will be in direct infrastructure investments, yet still well shy of stopping the R1.7 trillion funding gap.” 

There are various reasons why funds might think changing to investments that can give good returns while tending to the social difficulties and megatrends of things to come in the future, Moodley added. 

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“In the course of the last 20 to 30 years, South Africa has not put enough in the infrastructure to keep up the needs of the arising economy”. 

One reason is that the number of organizations available in the recorded market is declining, both locally and internationally, and this implies that the changes set for retirement funds to invest in listed assets keep on reducing. 

The enormous quantum and long haul nature of the agreements with the government is often playing an important role, making these investments complex and have restricted flexibility post the investments. 

However, Moodley stated that with the proposed changes to Regulation 28 of the Pension Funds Act, apparently it has been created around this asset class and trustees need to connect profoundly in fusing infrastructure assets into fund portfolios. 

The Government and controllers need to establish a helpful administrative atmosphere with policies that assures to guarantee that the large numbers being invested in infrastructure will benefit high-impact sectors of the economy, and not just white elephants, Moodley expressed.