The debate around infrastructure investment by retirement funds often begins with a false choice.
On one side sits fiduciary duty – the obligation of trustees to act in the best interests of members. On the other sits the developmental imperative – the need to finance the infrastructure South Africa desperately requires unlocking growth, create jobs and improve service delivery.
Framed this way, the conclusion appears obvious. Trustees should not be expected to pursue developmental objectives at the expense of retirement outcomes. The primary responsibility of a retirement fund is to protect and grow the savings entrusted to it by members.
That principle is correct. Yet it may also be incomplete.
The challenge facing South Africa today is not whether fiduciary duty should take precedence over development. It is whether our understanding of fiduciary duty is sufficiently broad to recognise the increasingly direct relationship between long-term retirement outcomes and the health of the economy into which members will ultimately retire.
Members do not retire into portfolios. They retire into municipalities, hospitals, transport systems, electricity networks, water infrastructure and labour markets. When infrastructure fails, the cost of living rises, business confidence weakens, and economic activity and job creation are constrained. Over time, that erodes the foundations investment returns depend on.
This is why South Africa’s infrastructure deficit should no longer be viewed solely as a public policy challenge. It is increasingly becoming a long-term investment risk.
The Minister of Finance is therefore correct in one important respect: the primary obstacle is not a shortage of capital.
South Africa possesses substantial pools of domestic savings. Retirement funds, insurers and other institutional investors collectively manage trillions of rand on behalf of citizens. Regulation 28 has created significant capacity for infrastructure investment, and the industry has repeatedly demonstrated a willingness to consider opportunities that meet appropriate risk-return requirements.
The more pressing challenge is the lack of a sufficiently deep pipeline of bankable projects.
Institutional capital is not avoiding infrastructure because it lacks developmental commitment. It is avoiding projects that fail to meet fundamental investment standards.
Retirement funds require governance structures that are credible, procurement processes that are transparent, revenue streams that are predictable and risks that are appropriately allocated. Regulation can create space for investment, but it cannot manufacture investable assets.
This distinction matters.
Too often the conversation assumes that if capital is not flowing into infrastructure at the desired scale, investors are somehow failing to support national priorities. In reality, capital allocation decisions reflect the practical realities of risk management. Trustees cannot justify exposing members’ savings to projects that are poorly prepared, weakly governed or commercially unsustainable.
But acknowledging these shortcomings should not become an excuse for disengagement.
Institutional investors occupy a unique position within the economy. As providers of long-term capital, they possess both influence and credibility. Rather than standing on the sidelines waiting for perfect conditions, the retirement fund industry should play a more active role in shaping the conditions necessary for infrastructure to become a viable asset class.
This means engaging government, project sponsors and policymakers on issues such as governance standards, procurement credibility, project preparation and risk allocation. It means supporting reforms that improve transparency and accountability. It means helping build the ecosystem that enables responsible investment rather than simply responding to it.
The objective should not be to lower investment standards. The objective should be to raise project standards.
The solution is not to pressure retirement funds into accepting risks that are inconsistent with their fiduciary obligations. Nor is it to discourage diversification or constrain investment choices.
The solution is to make infrastructure more investable. That begins with project preparation. Infrastructure opportunities must be technically sound, commercially viable and supported by robust legal and financial structures before they reach institutional investors. Weak projects should not be transferred onto retirement fund balance sheets merely because government faces funding constraints.
At the same time, South Africa should continue developing pooled infrastructure vehicles and blended finance structures capable of improving diversification and reducing concentration risk. Development finance institutions and government agencies are often better positioned to absorb early-stage, political or developmental risks, allowing retirement funds to participate at risk-return profiles that remain consistent with their obligations to members.
Ultimately, the debate may require a broader shift in thinking. Infrastructure investment is not simply about financing roads, ports, energy projects or water systems. It is about financing the productive capacity of the economy itself.
Every retirement fund member depends on that productive capacity. It influences employment prospects, wage growth, corporate profitability, government finances and the quality of public services. These factors, in turn, shape both retirement outcomes and living standards.
The question, therefore, is not whether fiduciary duty should be sacrificed in pursuit of developmental objectives. It should not.
But the harder question is whether retirement outcomes and economic development can still be treated as entirely separate considerations. In a country facing this scale of infrastructure constraint, that distinction is becoming difficult to sustain.
South Africa’s infrastructure challenge is both an investment challenge and a national imperative. The opportunity for the retirement fund industry is not merely to provide capital, but to help create an environment in which capital can be deployed responsibly, sustainably and at scale.
If we succeed, the beneficiaries will not only be infrastructure projects. They will be the millions of South Africans whose retirement security ultimately depends on the prosperity of the economy they retire into.
By Mxolisi Mbekwa
