South Africa proposes easing infrastructure investment limits for retirement plans

The South African Treasury wants to make it easier for the country’s pension plans to invest in infrastructure.

The Treasury Department proposed amendments to Ordinance 28 of the country’s Pension Fund Act that reduce undue risk and concentration risk on assets and limit the extent to which plans can invest in a given asset or class of assets.

The proposed changes, made in response to calls for increased investment in infrastructure in South Africa’s low-growth environment, would introduce a more precise definition of infrastructure “to allow for much better data and measurements,” one said Press release.

Unlike stocks and bonds, infrastructure is not currently defined as a particular asset class. “As a result, current data from pension funds does not capture the exact investment in infrastructure.”

Other proposals would split hedge funds, private equity and other assets as separate asset classes rather than the current classification of “hedge funds, private equity and other assets not on this schedule”.

Investment limits were also set in the proposals. Infrastructure investments across all asset classes were capped at 45% for domestic risk and 10% for the rest of Africa. According to the issuer, the limit is 25% of the total plan assets.

A collective limit of 15% for private equity, hedge funds and other assets would be removed under the proposals. Private equity as a stand-alone investment would have a limit of 15%. Hedge funds and “other assets” would retain their current separate investment limits of 10% and 2.5% respectively.

The National Treasury wants to reply to the proposals by email by March 29th.

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