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{JSON.stringify(article.attachments[0], null, 2)} –>Retirement funds may be overlooking an investment opportunity while remaining exposed to the economic consequences of South Africa’s infrastructure failures. With Two-Pot improving preservation and infrastructure offering potential long-term returns, trustees should reconsider the cost of not investing, argues Gumani Tshikovhi, Client Director at Old Mutual Corporate.

9 Nov 2026 Gumani Tshikovhi, Client Director at Old Mutual Corporate. Dive Deeper Speed Read Listen Dive Deeper South Africa’s infrastructure backlog is already a retirement problem. Unreliable electricity, water and transport systems weaken the economy in which retirement fund members work and save, and the communities many will return to when they retire.

Finance Minister Enoch Godongwana’s 21 October Medium-Term Budget Policy Statement put infrastructure delivery firmly back on the growth agenda, with a call to make every rand invested work harder. For retirement fund trustees, the question is whether well-governed infrastructure investments can deliver the returns members need while helping to build the country in which they will retire.

Infrastructure – roads, railways, ports, electricity, water, schools and hospitals – is often discussed in the language of GDP percentages and capital investment targets. But behind every percentage point is a person: a small business owner whose costs rise with every unplanned power outage, a retiree whose pension outcome is shaped by the strength of the economy they helped build.

For institutional investors, particularly retirement funds, South Africa’s infrastructure gap is both a national development challenge and an investment opportunity. Infrastructure assets often generate long-term, inflation-linked cash flows that align well with the long-term obligations retirement funds have to their members.

Well-functioning infrastructure improves productivity, attracts investment and enables businesses to compete. Its absence does the opposite, and the cost of that absence is ultimately carried by ordinary South Africans, including the very retirement fund members whose capital finances it.

 14.2% of GDP, well below the National Development Plan’s targeted 30%. National Treasury’s 2026 Budget Review acknowledges “systemic under-investment in public infrastructure”, while weak economic growth, limited state capacity and policy uncertainty have held back investment.

For retirement funds, this raises a question about how their capital can contribute to closing the investment gap while delivering appropriate returns for members.

Regulation 28 now permits retirement funds to allocate up to 45% to infrastructure, matching the offshore limit. This gives trustees greater scope to consider infrastructure investments in line with their fund’s investment strategy and members’ long-term interests.

However, regulatory flexibility alone has not resolved concerns about liquidity. Infrastructure has never lacked a theoretical case in South Africa.

What it has lacked is credence as an asset class that institutional investors are willing to hold the way they hold bonds or equities. The argument has traditionally been that it is illiquid, and illiquidity has always been priced as a cost against funds trying to manage unpredictable withdrawals by fund members.

This was an understandable concern before the introduction of Two-Pot retirement reforms, but that argument is now considerably weaker.

Preservation of pre-retirement savings in funds administered by Old Mutual Corporate has increased from 39% in 2024 to 55% in 2026 year-to-date, following the introduction of the Two-Pot system. With two-thirds of new contributions preserved until retirement, funds have greater scope to invest over longer periods, including in infrastructure.

Beyond liquidity, several engagements we had with pension-fund decision makers highlighted another reason for resistance to increasing infrastructure investments: a trust deficit.

This stance is sharpened by memories of the prescribed-asset era. Infrastructure projects with genuine private participation give investors greater assurance that the investment is being managed in their members’ best interests. The structural reforms that we are seeing today, are providing some comfort to retirement funds to consider this asset class.

The Old Mutual Smoothed Bonus portfolio has a large allocation to infrastructure within its alternatives building block. This allocation has proven to be resilient and contributed to strong bonus smoothing reserve levels, which ultimately contribute to consistent positive bonus declarations, even in months when geopolitical tensions hit markets.

But the benefits of infrastructure investment extend beyond portfolio returns. For many South Africans, retirement is not simply the end of a career. It is a return to community. While employment draws people to cities and economic centres during their working lives, retirement often means returning to the towns, villages and communities they continue to call home.

The quality of infrastructure in those communities – reliable power, clean water, functioning roads and schools – will shape what that return ultimately looks like.

Over more than 20 years of investing in infrastructure, Old Mutual’s allocations have contributed to more than 25,000 affordable housing transfers, over 32,000 learners at schools funded through this capital, and 3.4GW of installed renewable capacity, alongside tens of thousands of jobs supported across the portfolio.

The cost of continued underinvestment in infrastructure is borne through lower growth, fewer opportunities and weaker retirement outcomes for the very members whose savings can help finance the solution. For retirement fund trustees, the question is no longer simply whether they can afford to invest in infrastructure, but whether they can afford to overlook it. DM

Readers can learn more about Old Mutual Corporate’s retirement investment products here: www.oldmutual.co.za/retirementinvestments

Visit www.oldmutual.co.za/employeebenefits for more information on our full range of employee benefits.

Old Mutual Life Assurance Company (SA) Limited is a licensed FSP and Life Insurer.