Ramaphosa courts retirement funds for investment

Head of the investment and infrastructure office in the Presidency Kgosientso Ramokgopa told a webinar on infrastructure impact investing that the Eskom Pension and Provident Fund and other retirement funds were under-represented in public projects and benefits existed to changing this.

Ramokgopa on Monday said President Cyril Ramaphosa’s Economic Reconstruction and Recovery Plan placed great focus on investment in infrastructure, but more capital could still be unlocked for this investment.

Ramokgopa said the investment and infrastructure office in the Presidency had R400m for project planning and packaging, but that this was “insignificant”.

These investment ambitions faced challenges including under exposure of retirement funds to developmental impact investment while the regulatory environment grapples with improving practices to optimise investment and protect funds.

“Even in the situation where we receive generous allocations from the fiscus as the public sector, many entities do not spend at the right level. We are underspending on average by R33 billion and the primary contributors are local government, provincial government and SOEs,” noted Ramokgopa.

He pointed out South Africa was behind other nations when it came to private funds’ exposure to state-led infrastructure impact projects, with the asset allocation of the pension funds to private equities is at 2.3% in South Africa while the global average is 23%.

“A lot of the existing equity investment focus on infrastructure, but 80% of this is invested outside of the country. All the good projects that have been funded have been funded and it is up to the public sector to replenish the investment pipeline.,.

Ramokgopa added gross fixed capital underspending meant that manufacturing and construction were penalised as they experienced contractions in growth during the pandemic, which caused a haemorrhage of jobs in the economy.

“We need to put greater emphasis on the contributions of public-private partnerships. We need to raise the matrix of the PPP in infrastructure spend. We should target areas with a strong coefficient for growth and recovery,” he said.

Government also needed to get its house in order, as the financial skill capability of the state had been decimated over time, leading to government struggling to develop and strong pipeline for projects or a diverse set of investments for them.

Chief investment officer of the EPPF Ndabezinhle Mkhize said unlocking retirement funds for impact investment gave participants the power to not only choose to invest in renewable energy, but to decide on the kind of renewable energy one would like invest in.

Economist and member of the presidential advisory council Thabi Leoka said securing private sector investment was critical as the sectors that were currently driving economic growth are not the ones that should be.

“We don’t have much fiscal space. Before 2008-09 crisis, at least we had the fiscal space to help the economy. Because of this reduction in space, we have to tap into the private sector to get investment,” said Leoka.

Independent trustee and principle officer of various retirement funds Jolly Mokorosi said impact investments do serve the long-term interests of members as well as those of the public.

“We have to have parameters in place and risk objectives. We can’t do it at the expense of long-term retirement for members. We can meet both objectives through impact investments,” stressed Mokorisi.

Bowmans financial services and regulatory practice leader David Geral said the regulatory environment existed for retirement funds to enter the impact infrastructure investment space. -Fin24