Alternative Investments

Retirement funds set up forum to boost infrastructure investment

Twelve South Africa retirement funds with an estimated R3 trillion in assets under management (AUM) have established a forum to collaborate regarding infrastructure investment in South Africa.

The new entity is known as the Asset Owners Forum South Africa (Aofsa).

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Read: Treasury listens to industry on Regulation 28

United States Agency for International Development (Usaid) and Mobilizing Institutional Investors to Develop Africa’s Infrastructure (Mida) Advisors will provide technical and advisory support to the new forum. The World Bank is offering capacity building and advice on infrastructure investments.

The Batseta Council of Retirements for South Africa convened the forum’s launch and provided secretarial services.

The 12 funds that form part of Aofsa are:

  • The Government Employees Pension Fund with AUM of R2.1 trillion at the end of March 2021;
  • Eskom Pension and Provident Fund with AUM of R184 billion;
  • Electrical Industry KwaZulu-Natal Pension Fund;
  • Mineworkers Provident Fund;
  • Motor Industry Retirement Funds;
  • National Fund for Municipal Workers;
  • SABC Pension Fund;
  • Transnet Retirement Fund;
  • Telkom Retirement Fund;
  • KwaZulu-Natal Joint Municipal Pension/Provident Funds;
  • The Transport Sector Retirement Fund; and
  • South African Local Authorities Pension Fund.

The forum’s chair is Ndabezinhle Mkhize, who is also CIO of the Eskom Pension and Provident Fund. Vice chair is Jolly Mokorosi. She is a chartered principal executive officer, an independent trustee and a Batseta director.

Mkhize said the forum aims to support infrastructure investments by sharing knowledge, resources and due diligence costs.

Tremendous growth

Over the past 20 years, there has been tremendous growth in the alternative investments asset class, according to Mkhize. The allocation to alternative assets has increased from 7% in 2000 to 26% in 2020.

The formation of the new entity comes as National Treasury reviews Regulation 28 of the Pension Funds Act to make it easier for retirement funds to invest in infrastructure.

“This is the only forum whose reason for existence is to enable asset owners to invest meaningfully and responsibly in the infrastructure and real asset strategies,” Aofsa said in a statement.

During the launch, Kgosientsho Ramokgopa, head of investment and infrastructure in the Office of the Presidency, said that infrastructure would be the flywheel to help achieve local GDP growth.

Olano Makhubela, divisional executive for retirement funds supervision at the Financial Sector Conduct Authority, said the new forum is well-positioned to make a difference in South Africa. He suggested the forum should be known as the Active Asset Owners Forum South Africa.

“I’m glad you have chosen the name asset owners forum because being an asset owner attaches specific responsibilities. However, I’m slightly disappointed that you omitted the word ‘active’,” Makhubela said.

“You must be active as asset owners. If you are not active, you will lose your relevance quickly. You need to ask important questions about unequal gender pay, diversity, discrimination, the environment and company practice. You need at times, as difficult as it might be, to vote with your feet.”

During the launch, US Consul General in Johannesburg Vincent Spera said the US government is committed to working with the forum to lay the groundwork for enabling local pension funds to invest in alternative asset classes such as infrastructure and private equity.

Justin Brown is a journalist at Citywire, which provides insights and information for professional investors globally.

This article was first published on Citywire South Africa here, and republished with permission.

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