Cosatu hails Treasury’s plan to fund infrastructure
Labour federation Cosatu said on Sunday that proposed changes to the Pension Funds Act regulations will help mobilise much-needed investment in infrastructure.
On Friday, the Treasury gazetted long-awaited draft changes to regulation 28 of the Pension Funds Act aimed at encouraging the savings industry to invest in infrastructure.
The changes come after political pressure on the government to compel greater investment in areas that have a developmental function.
The solution proposed by the Treasury is seen as an alternative to the policy of prescribed assets mooted by the governing ANC as a way to meet development financing needs.
Asset prescription has been widely criticised by SA’s savings industry as a threat to the functioning of the market and ultimately to pensioners’ savings.
But the Treasury noted in a statement that the decision to invest in any asset class, including infrastructure, remains that of the board of trustees of retirement funds.
The proposed regulation sets maximum holdings of asset classes for pension funds to protect savers from exposure to any one type of asset class.
“We are happy with [the proposals]. We think it’s the right thing to do and it’s being done in the right way that doesn’t alarm anyone,” said Cosatu parliamentary co-ordinator Matthew Parks. He said the proposals did not amount to asset prescription because “no-one is forced” to invest, adding that “fiduciary duty, financial integrity and due diligence” had to be respected.
The proposed amendment does not add infrastructure investments as a specific asset class alongside the existing list of asset classes but it makes provision for infrastructure investment to be recognised within the asset classes.
These classes include cash, listed equities, government and state-owned enterprise (SOE) bonds, property and a category of unlisted equity investments, investments in hedge funds and any other investments not mentioned in the schedule. Infrastructure investments have most often fallen under the category of private equity.
As infrastructure investments could conceivably be undertaken by all the asset classes with the exception of cash, the Treasury has proposed that regulation 28 provide specific reference to investment in infrastructure within these. A definition of “infrastructure” will be added and limits for infrastructure investment will be set for each class.
President Cyril Ramaphosa’s economic reconstruction and recovery plan included a large infrastructure investment drive as a means to reboot economic growth. But analysts have pointed out that the recent budget tabled by finance minister Tito Mboweni showed little evidence of this rollout.
Infrastructure spending from across national and provincial government, municipalities, SOEs and other public entities will reach just 4.7% of GDP in 2021, which is deemed insufficient to meet existing backlogs.
The Association for Savings and Investment SA will not be commenting on the draft regulations because it does not do so while engagements with policymakers are ongoing, a spokesperson said on Sunday.
DA deputy shadow finance minister Dion George was cautious about the proposed amendments, saying it remained to be seen how the industry would digest the draft regulations, which may have different implications for private sector pension funds vs state funds such as the Government Employees Pension Fund.