• Alexander Forbes Media Release

Enoch Godongwana in conversation with Alexander Forbes

On Tuesday 25 August 2020, Alexander Forbes had the opportunity to engage with Enoch Godongwana, the ANC’s head of Economic Transformation, on the country’s developmental agenda and prescribed assets.

The topic of prescribed assets has been a recurring talking point across key political and corporate spheres since 2017. While we may not have the full picture just yet, prescribed assets are increasingly being reported on in the media with some headlines causing concern for our clients and investors generally. We took this opportunity to get clarity and perspective on the issue, in relation to the ANC’s developmental agenda. This note provides the key takeaways from our interaction with Mr Godongwana and our views on the developmental agenda.

Key themes

Mr Godongwana began the discussion by highlighting the economic challenges that have resulted in sub-optimal economic growth for South Africa. Unemployment and the country’s recent credit rating downgrade to junk status are just some of the issues that have created this economic environment. We have learnt that there are two main problems that have led to this precarious economic and social environment that we find ourselves in:

There is a high level of underdevelopment and poverty in our country that needs our attention, and this is where infrastructure plays a critical role. The central point of contention is how this infrastructure will be funded and if prescribed assets would be introduced to force the private sector into participating in capital provision.

The possibility of prescribed assets was referred to as something to be investigated and it is not something that could be instated without substantial consultation and a robust review process by government.

Regulation 28

A common discourse that has been used to justify prescribed assets is that investment capital is not being made available for infrastructure projects and it seems that there is a possible ‘investment strike’. A view that was shared was that Regulation 28 of the Pensions Fund Act may be too restrictive to facilitate infrastructure investment. We gathered that if there is a conducive environment within the regulatory framework - such as Regulation 28 - institutions such as pension funds will invest on a voluntary basis, and prescribed assets would not be necessary to force investment in infrastructure.

However, it was also noted that deregulation could assist in encouraging direct investments related to big infrastructure projects.

Funding for infrastructure

We learned that the infrastructural build in terms of the Sustainable Infrastructure Development Symposium (SIDS) from the Infrastructure and Investment Office in the Presidency will require substantial funding. As a result, the private sector should focus on how it can contribute to this mission as the successful raising of funds will negate the need for prescription.

Alexander Forbes believes that the conversation on encouraging investment into developmental infrastructure is necessary and positive for the future success of South Africa. We are hugely supportive of all efforts to seek and channel voluntary investment into infrastructure from both local and international investors. We recognise that clients currently have a lot of anxiety around their investment outcomes, particularly considering challenging circumstances that have been heightened by the Covid-19 pandemic. It was acknowledged that heightened concerns would arise due to conversations on the investigation on prescribed assets. However, we learnt that it is not the ANC’s intention to instate a policy of prescription if there are alternative, commercially viable sources of funds to invest into the country’s infrastructure and developmental objectives. It was determined that the large international investors that were being approached in terms of the SIDS initiative would be looking for jurisdictions with investor-friendly policies, and that would be contrary to a prescribed assets approach.

In terms of Regulation 28, Alexander Forbes recognises that pension funds can substantially invest into infrastructure – listed and unlisted – across assets classes such as equity and property. The challenge is not the regulatory limitations in Regulation 28, but rather the nature of most retirement funds in South Africa that are defined contributions in nature and therefore are restricted in terms of their profile from investing substantially into non-liquid assets.

Alexander Forbes believes that a lot of attention must be paid to creating liquid opportunities for pension funds to invest into infrastructure and the industry was encouraged to be creative in driving these initiatives as this would lessen any risk of prescription.

It was clarified that the SIDS initiative has been in deep engagement with local industry bodies, including ASISA (Association for Savings and Investment South Africa) and BATSETA (Council for Retirement Funds for South Africa). Engagements have also been taking place with international investors, especially development finance institutions, to build a collaborative effort to develop a viable project pipeline that will attract investment.

Issue of skills shortage

It was recognised that there is a massive structural challenge, with a demand for skills, and a critical supply shock due to an absence of skills. The ANC are calling for a social collaboration between business, civil society and government to deal with this.

South Africa has had Sector Education and Training Authorities (SETAs) in place for some time, yet a shortage of skills remains. We cannot afford to wait for the development of skills, and thus need to explore options on how to fill the skills gap. We had agreed that the country needs a provision of skills on a massive scale so they can be allocated to where they are needed in our economy.

Managing corruption concerns

One of the major reasons why investors are strongly against prescribed assets is because of concerns regarding corruption. It is essential that there are assurances in place to affirm investors that they can achieve good returns through any investment, but specifically through infrastructure investments. International investors would also require appropriate governance frameworks being established as an imperative. It was agreed that corruption was a key area of concern for all stakeholders and that the rooting out of corruption was a critical part of the successful implementation of the infrastructure build.

The role of the SARB

There has been debate about the role of the South African Reserve Bank (SARB) in the development agenda and whether the SARB could be involved in the funding efforts of the agenda as has been done with the credit guarantee scheme to help businesses. There was hope that the SARB’s support could help with the de-risking of the infrastructure projects which would attract substantially more interest from investors. It was agreed that the role of SARB is critical, but it must remain operationally independent.

How are projects prioritised and how is success measured?

We learned that several growth plans had been published and that there is a common focus on infrastructure. It was noted that investors are keen to understand how decisions will be made as to which projects will be prioritised to maximise economic growth and to understand whether capital is being allocated efficiently.

It was added that the SIDS initiative was focussed on prioritisation, and institutions such as the Development Bank of South Africa would play a key role in efficiently allocating capital.

Green finance

There have been some exciting discussions regarding attracting green finance, particularly from international investors who want to invest in green assets and projects that are aimed at achieving a just transition to green energy.

Within the overall infrastructure programme, green projects are viewed as an imperative and are fundamental in moving forward with development proposals and meeting South Africa’s commitments in terms of the Paris Agreement. It was noted that funding is not the only critical component in green infrastructure - we need to remain internationally competitive and green projects are an imperative in this regard.

The hurdle of policy implementation

A lack of execution has been a concern regarding developmental plans. Given the negative impact of the Covid-19 pandemic, there is a greater sense of urgency to successfully implement growth initiatives.

As a result of this, it was decided that this was the rationale behind the establishment of the SIDS initiative and Infrastructure South Africa (ISA). These structures have been established to attain efficiencies through having a single channel for the successful development and launching of potential infrastructure.

The SIDS initiative has engaged with the World Bank and local partners to design an institutional framework to assist in fast-tracked implementation. To ensure adequate management of municipal projects, it is proposed that a District Development Model be followed to ensure that municipal capacity is improved.

Positive social impact

The Alexander Forbes position is that we are against any form of prescription. However, we are hugely supportive of efforts to generate voluntary investment into impact investments that will deliver good risk-adjusted returns for investors while achieving positive outcomes for the South African economy, especially in job creation and the communities in which these projects are built. Development initiatives such as the building of wind farms or new roads could represent attractive investment opportunities that asset managers would consider for investment of their clients’ (including pension funds) assets.

One of the 50 projects gazetted in terms of the SIDS initiative is the building of an additional bridge at the Beit Bridge border to ease the commercial and personal traffic congestion between South Africa and Zimbabwe. This will contribute to the safety of our roads as well as present an opportunity as a viable investment option.


In closing, we thanked Mr Godongwana for taking the time to share his views with us and our clients. It was both insightful and reassuring as South Africans and investors to hear the commitment to providing a viable pipeline of investible infrastructure projects that would be attractive to both local and international investors, and including initiatives to seek liquid investment options that would enable more pension funds to voluntarily invest.

We found the discussion with Mr Godongwana encouraging in terms of a commitment to seeking voluntary investment into developmental assets rather than any intention of prescription. We believe that a focus on impact investments that represent attractive investment opportunities could make a significant difference to the growth and job creation initiatives that the country so critically requires. If compelling investment opportunities to invest in growth and job creation were to be created, particularly in the liquid space, then retirement funds and other investors would be enthusiastic potential investors in these initiatives.

Our standpoint has always been that it is not a lack of capital for investment in initiatives that has been the issue, but rather a lack of investible, including liquid, opportunities. Alexander Forbes is highly supportive of efforts within the investment industry to drive voluntary mobilisation of funds to support South Africa’s developmental imperatives.

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