Well-managed infrastructure investments give retirement funds steady, long-term returns that move with inflation, help spread risk, and often funds projects that benefit members and the environment.
Every time you drive on a road, switch on a light, or take your child to a clinic, you’re using infrastructure. These are the services and structures that help our country to function — roads, bridges, schools, hospitals, water pipes, electricity grids, and more.
But did you know that through your retirement savings, you may be helping to build and maintain these things? Investing in these assets is called infrastructure investing, and it’s a way for large investors, like retirement funds, to grow their money while also building the country.
So what is infrastructure investing, really?
When a retirement fund invests in infrastructure, it puts money into long-term projects that are essential for public use. This could, for example, mean helping finance the construction of a wind farm that brings power to rural communities, or supporting the rollout of fiber internet in townships.
In return, the fund earns a steady income over time — usually through government or private companies that pay to use the infrastructure. For example, large investors funded the upgrade of Bakwena Toll Route and they now earn steady returns from toll collections that increase with inflation.
Because these are long-term projects with tangible (physical) assets like roads and power plants, they’re usually more stable than shares or high-risk private equity investments — and less affected by daily ups and downs in the stock exchange.
Infrastructure and Regulation 28
South African retirement funds can invest up to 45% of their assets in infrastructure. According to Regulation 28, infrastructure includes any project or asset that helps build, maintain, or run things like roads, power plants, water systems, or technology that provides essential services (like internet) to people and the economy.
Why should trustees care?
- Infrastructure investments is a long-term asset that can grow retirement money. It can give strong, reliable returns — especially over 10, 20 or 30 years. That helps retirement savings grow.
- Infrastructure earns cash flows that move with inflation and owns hard assets that keep their value, making it a natural way to protect (hedge) against inflation. This happens because as inflation increases, the value of the infrastructure and the revenue it collects also rise. For example, as inflation rises, so does the price of electricity, tolls, and school fees, so these types of investments grow alongside inflation.
- It helps build the country. These projects often create jobs, improve services in your community, and support long-term development. So the money works for you now and when you retire.
- Infrastructure investment helps retirement funds diversify their portfolios by adding an asset class that behaves differently from other asset classes like shares and bonds.
In short, well-managed infrastructure projects can bring financial (yearly returns) and social (jobs, services) benefits.
Making the world a better place
The Sustainable Development Goals (SDGs) are 17 interconnected global goals adopted by the United Nations in 2015 as objectives to achieve a better and more sustainable future for all by 2030. Infrastructure investment supports nine of the United Nations’s 17 SDGs by funding essential services like energy, transport, and water, that all drive inclusive growth and improve living standards.
Further learning
To learn more about infrastructure investments, check out the Infrastructure Investments Information Hub. Or if you would like more in-depth knowledge, Atleha-edu and the ASISA Academy offer workshops for South African trustees and members of retirement funds on Infrastructure investments and other themes.
Sources
African Infrastructure Investment Managers: AIIM successfully exits South African toll road asset
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