RETIREMEMNT FUNDS WANT TO INVEST IN DIRECT INFRASTRUCTURE

STANDALONE retirement funds anticipate investing 6.6 percent of their assets, on average, or almost R300 billion, in direct infrastructure, according to the 40th Annual Sanlam 2021 Benchmark Survey. Sanlam Corporate Investments head of tailored investments Darryl Moodley said the funds allocated would be well short of the required amount to plug the funding gap. “Unlike investing in listed stocks or bonds, the amazing characteristic about infrastructure investments is the opportunity to build something tangible, it’s about procuring land, sourcing materials, and most importantly, job creation. Investing in infrastructure really is at the core of improving society’s productive capacity and espousing confidence,” he said. Ageing and inadequate infrastructure are a major obstacle preventing South Africa from realising its economic growth potential, and the infrastructure funding gap is estimated at R1.7 trillion over the next 10 to 15 years. Proposed regulatory changes will allow retirement funds to increase their investment in infrastructure projects. Umbrella funds were anticipating spending some 4.7 percent of their assets on infrastructure. Historically however, retirement funds have been reluctant to invest in infrastructure mainly due to its seemingly complex nature. The asset class is largely illiquid and unlisted. The large quantum and long-term nature of the contracts – with the government often a central role player – make these investments complicated to structure and they have limited flexibility postinvestment. | Edward West