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Retirement funds have the power to transform the future

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Retirement funds in South Africa are the custodians of more than R5 trillion. Naturally, these funds hold immense power, but can they do more? Yes! By redirecting investments to infrastructure, innovation, and communities, they can secure retirees’ futures and fuel economic growth.  

The investment of retirement funds’ (RFs) assets has moved from an obscure topic for actuaries to an issue that raises political attention at the highest level. RFs wield immense financial power, managing trillions of rands in assets locally and internationally.

Traditionally viewed as vehicles for securing retirees’ financial futures, RFs have the potential to serve a broader societal purpose by investing in developmental initiatives. By so doing, RFs can contribute to growth and social progress, and mitigate the long-term risks associated with a weak economy. In turn, a strong and stable economy leads to a larger pool of workers who will contribute to these very funds in the future.

RFs can support development in these ways:

  1. Investing in infrastructure: RFs can finance essential infrastructure projects, such as renewable energy plants, communication infrastructure and efficient public transport. These investments not only generate long-term returns but also lay the groundwork for a thriving economy.
  2. Nurturing innovation: Venture capital and private equity offer exciting avenues. RFs can allocate resources to funds focused on areas like healthcare, education, or clean technology. This fosters innovation in crucial sectors while potentially generating strong returns.
  3. Empowering communities: RFs can invest in real estate projects focused on affordable housing or commercial development in disadvantaged areas. This injects capital into local economies, creates jobs, and improves community resilience.
  4. Partnerships for progress: RFs can leverage the expertise of development finance institutions (DFIs) that specialise in financing developmental projects. South Africa has several large DFIs like the Industrial Development Corporation, Development Bank of South Africa and the National Empowerment Fund. By collaborating with DFIs, RFs share risks and expertise while contributing to impactful goals.

For example, the Government Employees Pension Fund (GEPF), through the Public Investment Corporation, invested R281 million on behalf of GEPF members and pensioners in the construction of the Roggeveld Wind Farm in Matjiesfontein, on the border of the Northern Cape and the Western Cape. Roggeveld started feeding much-needed electricity into the Eskom grid in February 2022 – enough to power 49 000 households. At construction peak, the project provided 851 jobs.

Of course, an RF’s core fiduciary duty will always remain the financial security of members. But, if done in a strategic and balanced manner, it can catalyse economic development, improving the country’s and ultimately the fund’s future.

This article was funded by

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