Regulation 28_ Treasury revises restrictions on infrastructure investments

Treasury revises restrictions on infrastructure investments

National Treasury’s second draft amendments to Regulation 28 of the Pension Funds Act have relaxed the restrictions on investments in infrastructure and will prevent funds from investing in crypto assets.

Treasury said it received 39 submissions after it published the first draft in February this year, most of which welcomed the proposals concerning investments in infrastructure. However, there were three key areas of concern:

1. Restrictions on the type of infrastructure

The proposal defined “infrastructure” per section 1 of the Infrastructure Development Act: “installations, structures, facilities, systems, services or processes relating to the matters specified in Schedule 1 and which are part of the national infrastructure plan”. This excluded private sector infrastructure and infrastructure in the rest of Africa or abroad.

The definition of infrastructure has been revised to mean “any asset class that entails physical assets constructed for the provision of social and economic utilities or benefit for the public”. This definition takes better account of the United Nations’ Principles for Responsible Investment and the input from Association for Savings and Investment South Africa, Treasury said.

“The ‘social’ aspect of the definition will accommodate impact investing by retirement funds. Impact investments are investments made with the intention to generate positive, measurable social and environmental impact, alongside a financial return.”

2. Limits on infrastructure investments

Some submissions argued that the limits were too low, and others that the limits were too high, or the adjustments were not going to have any impact on infrastructure investment by retirement funds, Treasury said.

A further comment was that the investment sub-limits within existing asset classes were confusing, and it was more important to deal with availability of bankable projects for retirement funds to invest in.

The revised draft removes the sub-limits for asset classes. However, the overall investment will remain at 45% (excluding government and government-guaranteed instruments). The limit of 25% to a single issuer/project has also been retained.

3. Reporting requirements

Some submissions said the reporting requirements for infrastructure investments were onerous. The second draft eases the reporting requirements and requires funds to report on only their top 20 infrastructure investments, Treasury said.

No crypto assets

The second draft prevents retirement funds from investing in crypto assets, “because they are seen to be of very high risk”.

The draft regulation defines a crypto asset as “a digital representation of value that is not issued by a central bank but is capable of being traded, transferred or stored electronically by natural and legal persons for the purpose of payment, investment and other forms of utility: applies cryptographic techniques and uses distributed ledger technology”.

Treasury said the restriction was in line with the Intergovernmental Fintech Working Group’s policy proposal that collective investment schemes and pension funds should not be exposed to crypto assets until further notice.

The public has until 16 November to comment on the draft amendments. Comments can be sent to Basil Maseko at in the prescribed format.

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2 Responses to Treasury revises restrictions on infrastructure investments

  1. Eugene Venter 4 November 2021 at 3:40 pm #


    Please note the 45% limit includes the 10% Africa exposure.

    Moonstone interpreted the draft regulations wrong. Refer to the comments paper that was published with the draft regulations to see the limit not set at 55%.

    Overall exposure limit to Infrastructure (incl. Africa) kept at 45% (25% limit per issuer/entity)- simply said 45% local of which 10% can be Africa (no additional 10%);

    • Mark Bechard 4 November 2021 at 4:55 pm #

      Thank you. You are absolutely correct. The article will be amended.

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