South African Regulation 28 amendments and the implications for pension fund investments in infrastructure

Abstract

This thesis is premised on the argument that while infrastructure investments offer promising opportunities for economic development and portfolio diversification in South Africa, the regulatory mechanisms that facilitate such investments must be carefully evaluated within their historical, political, and socio-economic context. Focusing on the 2023 amendment to Regulation 28 of the Pension Funds Act in South Africa which permits retirement funds to invest up to 45% of their assets in infrastructure, this study interrogates the implications of the reform for retirement fund members, particularly the working-class majority who rely on these savings as their sole source of post-retirement income. The central argument posits that while infrastructure investments can contribute to economic growth and potentially enhance fund performance, the South African political economy is uniquely marked by public sector inefficiencies, governance failures, and a deeply contested history of asset prescription. These conditions raise critical questions about whether the reform serves developmental objectives without compromising the fiduciary duty to protect retirement savings. Employing a qualitative research methodology, the study draws evidence on document analysis of government reports, regulatory drafts, stakeholder submissions, policy statements, and media commentary to trace the motivations, contestations, and risks associated with the amendment. The research is situated within public-private partnership theory and institutional theory, allowing for a dual analysis of the transactional dynamics between government and retirement funds, and the enduring legacy of state intervention in pension fund governance. The findings highlight three key dynamics: first, the regulatory amendment was shaped by the state’s need to address infrastructure backlogs without reviving the politically fraught policy of prescribed assets; second, infrastructure investments are shown to offer diversification and long-term return benefits, especially through their low correlation with traditional asset classes and muted volatility in unlisted markets; third, investment appetite is dampened by persistent risks, including political instability, environmental vulnerabilities, and the rise of organised crime groups within the infrastructure sector. The study’s contribution lies in its critical examination of how retirement reforms, though economically rational on the surface, can reproduce historical patterns of state-fund entanglement if not buttressed by governance, transparency, and appropriate risk safeguards. It calls for more contextually grounded investment policy that accounts for South Africa’s institutional fragilities while prioritising the long-term security of retirement fund members.