It is a fair question.

The savings and investment industry holds several trillion rands on behalf of members, and the infrastructure financing gap runs to several trillion rands over the remainder of this decade. The temptation to connect the two by regulation is understandable. It is also, in our view, the wrong instinct. The three threads of this debate, asset allocation, the offshore limit and prescribed assets, are best understood together, because each one turns on the same underlying principle: whose money is it, and who should decide where it goes.

The scale of the need, and the scale of the savings

Two numbers frame everything that follows. On the need side a joint World Bank and Development Bank of Southern Africa report published in January 2024 and still widely cited, estimated that South Africa must spend between R4.8 trillion and R6.2 trillion between 2022 and 2030 on transport, water and sanitation, and education alone, equivalent to roughly 8.7% to 11.2% of GDP a year. Infrastructure South Africa has separately told Parliament that meeting the National Development Plan's target of raising gross fixed capital formation to 30% of GDP by 2030 requires around R1.7 trillion of additional investment, or roughly R140 billion more each year. The Minister of Finance has committed public infrastructure spending of more than R1 trillion over the current three-year period. Whichever measure one uses, the number is in the trillions, and the public balance sheet cannot carry it alone.

On the savings side, the industry is substantial by any measure. The local collective investment schemes industry alone closed 2025 with R4.58 trillion under management, according to ASISA, and the broader savings and investment industry, spanning asset managers, life offices and retirement funds, holds considerably more.

On paper the match looks obvious. A large pool of long-term savings sits alongside a large infrastructure need, and the gap between them invites a regulatory bridge. But the savings are not idle capital waiting to be assigned. They are deferred wages held in trust for members, and that distinction is the heart of the matter.

Asset allocation: whose money is it?

The primary purpose of a retirement portfolio is to meet the long-dated, often inflation-linked liabilities a fund owes its members. The job of the trustee and the manager is to build the portfolio that best matches those liabilities on a risk-adjusted basis. Everything else flows from that duty, and nothing should be allowed to override it.

This reframes the infrastructure conversation in a way that matters. Infrastructure debt is not a charitable allocation or a national-service obligation. It is an asset class that earns its place in a well-built portfolio on its own merits. It offers contracted, often inflation-linked cash flows, long tenors that map neatly onto pension liabilities, and returns that are largely uncorrelated with listed equity and bonds. The case for a meaningful infrastructure allocation can therefore be made entirely from within the logic of prudent portfolio construction. We do not need to compel it. We need to make the opportunity set investable enough that managers choose it freely.

The offshore limit: diversification versus keeping capital local

Since 23 February 2022 a single harmonised prudential limit of 45% has applied to the offshore assets of retirement funds, long-term insurers and collective investment scheme managers, inclusive of a 10% allowance for the rest of Africa. This replaced the previous split of 30% offshore plus 10% for Africa. The limit is set by the Reserve Bank and given effect through Regulation 28 of the Pension Funds Act. Crucially, it is a ceiling, not a target.

In practice most managers have not run to the cap. Industry commentary at the time of the change noted that South African managers were expected to settle their offshore exposure in the region of 30% to 35% over time, driven by valuations, the level of the rand and individual mandate design rather than by the limit itself. As one commentator put it, the fact that funds may now take 45% offshore does not mean they have to, or that they necessarily should. That single observation should temper much of the debate, because it tells us the offshore limit is not the binding constraint on domestic infrastructure investment. Most portfolios are simply not pressed against it.

Periodically the suggestion surfaces that the offshore limit should be cut, the better to keep capital at home and channel it into local infrastructure. The argument deserves a fair hearing on both sides.

The case for keeping capital local

There is a respectable version of this view. The JSE has shrunk in listings over the past decade, the local opportunity set is narrower than it once was, and South African real assets are arguably under-owned and attractively valued. Local infrastructure debt is rand-denominated, which matches the rand liabilities of most funds without introducing currency mismatch. On this reading a thoughtful tilt towards domestic real assets can be genuinely return-accretive and liability-aware, not merely patriotic. There is also a system-level argument that deep domestic capital markets and a healthy local project pipeline are themselves good for long-term returns, since members ultimately retire into the South African economy.

The case for offshore access

Against that sits the more compelling case for preserving offshore flexibility. The JSE, for all its quality, represents, according to figures reported by the World Federation of Exchanges, only around 1% of global equity market capitalisation. Confining members' savings predominantly to the domestic market concentrates risk in a single small, commodity-sensitive and politically exposed economy. Offshore allocation is not capital flight or disloyalty. It is the fund discharging its duty to diversify on behalf of members whose human capital, home equity and earnings are already overwhelmingly South African. Cutting the limit to force money home would transfer the cost of weak project delivery onto pensioners, and it would not even achieve its stated aim, because the obstacle to infrastructure investment has never been a shortage of willing capital.

Our own position is that the limit should remain at least where it is. The honest route to more domestic infrastructure is not to close off the alternative but to improve the local proposition until managers allocate to it by choice.

A necessary clarification on the 45% infrastructure allowance

It is worth being precise here, because the headline figure is widely misunderstood. The July 2022 amendments to Regulation 28 introduced an overall limit of 45% for exposure to domestic infrastructure across all asset classes, with a further 10% available for the rest of Africa. That 45% is frequently quoted as though a fund may simply place almost half its assets into infrastructure. It cannot. The 45% is an aggregate ceiling that sits on top of the existing per-asset-class limits, and it is those underlying limits that usually bind first.

Infrastructure was not made a separate asset class. It is recognised for measurement and reporting purposes within the existing categories of equity, debt, and so on, and each of those carries its own cap. Listed equity is limited to 75% with sub-limits by market capitalisation. The per-issuer limit across all instrument types is 25%. Most importantly for an investor, unlisted debt that is not issued or guaranteed by the government falls within a 15% limit, and that single allowance must accommodate infrastructure debt alongside every other form of private debt a fund holds. Debt issued or guaranteed by the government is excluded from the 45% infrastructure figure altogether. In practice, then, a fund seeking exposure to unlisted infrastructure debt typically meets the 15% private-debt constraint long before it approaches the 45% headline. The regulatory headroom is real, but it is more modest, and more nuanced, than the single number suggests.

Prescribed assets: why it should not be on the agenda

Prescription means the state directing funds to hold particular assets, whether government bonds, state-owned enterprise debt or specified projects, regardless of their risk-adjusted merit. The idea was revived in the governing party's 2024 election manifesto, which spoke of directing financial institutions to invest a portion of their funds in industrialisation and infrastructure through prescribed assets.

Giving this legal force would not be a simple act of will. Regulation 28 is the instrument that governs how retirement funds may invest, and it currently contains no power to compel allocation to specified assets. It is our understanding that prescription would require the Minister of Finance to amend Regulation 28 itself, following a formal consultation process with the industry and its representative bodies. That is a deliberate and public legislative step, not an administrative one, which is part of why successive iterations of the idea have stalled. We are not supportive of it, and the reasons are practical rather than ideological.

The first is that the problem is misdiagnosed. The constraint on infrastructure investment in South Africa is not a lack of capital. It is a lack of bankable, well-structured and properly governed projects. The clearest evidence sits in the national accounts. South African gross fixed capital formation was running at just 14% of GDP in early 2026, according to economist commentary published alongside the 2026 Budget, well below the National Development Plan target of 30% and the 25% or more that economists typically regard as appropriate for a developing economyThe figure is also moving in the wrong direction: gross fixed capital formation fell by 2.7% over the first nine months of 2025 against the same period a year earlier, on Deloitte's February 2026 reading of the Stats SA data, even as the economy returned to modest growth. For context, India invested close to 30% of GDP in fixed capital in the year ending March 2025 and China has remained around 40% in recent years, both on World Bank and national accounts figures. South Africa commits roughly half the share of its economy to building things that comparable emerging markets manage, and the gap is widening.

This is not the profile of an economy starved of savings. As noted, the local collective investment schemes industry alone closed 2025 with R4.58 trillion under management, the bulk of it fully invested. The regulatory headroom to direct far more of this towards infrastructure already exists. What is missing is not permission or money but a pipeline of projects that can be underwritten with confidence. Prescription treats a project-preparation failure as if it were a capital-supply failure, and so prescribes the wrong medicine. Compelling funds to allocate into a shortage of bankable assets does not create good projects. It simply forces savers to buy whatever is available, at whatever price, which is precisely the outcome a fiduciary exists to prevent.

The second reason is the cost to members. Directing savings towards assets at below-market returns, or towards entities that cannot price their own risk, produces sub-optimal outcomes for the savers whose money it is. Where those assets are linked to enterprises with a recent history of financial distress, members would in effect be asked to underwrite delivery failures that are not of their making. That is difficult to reconcile with the fiduciary duty at the heart of the system, and it requires a capable, well-governed counterparty to have any prospect of success.

The third reason is that better alternatives exist, built on de-risking rather than coercion. The Credit Guarantee Vehicle is the most prominent current example, though it is important to be accurate about its status. It is a plan in progress rather than a working facility. The World Bank board approved the supporting programme in early March 2026, and the vehicle is to be incorporated as an independent, privately governed non-life insurer, with an initial capital base in the region of R9 billion scaling towards a multi-year target of around R45 billion, subject to development partners confirming their participation. The Treasury is targeting operational readiness in the second half of 2026, with a first guarantee earmarked for independent transmission projects. If it delivers, the logic is sound. By providing market-based guarantees that reduce both the probability of default and the loss given default, it should widen the universe of investable projects and improve the risk-adjusted returns on those we finance, particularly in greenfield clean energy and transmission where construction and offtake risk are otherwise hard to price. The outcome will depend on the quality of the project pipeline, the efficiency of its processes and the commitment of partners to provide actual capital. These are reasons to watch it closely, not to assume the job is done, but the model points in the right direction: make projects investable and capital arrives voluntarily, priced correctly and aligned with members' interests.

Why infrastructure debt deserves a serious look

Set the policy debate aside for a moment, because the investment case for infrastructure debt stands on its own. This is the part of the conversation that too often gets lost beneath the argument about limits and prescription. Infrastructure is fundamental to economic growth and poverty reduction, and its benefits are tangible and well understood. Better infrastructure improves access to markets, creates employment, lowers the cost of production, stimulates trade and contributes directly to economic growth and development, with positive environmental and social impact running through all of it.

For an investor, the appeal of infrastructure debt is that it captures these benefits through a conservative, downside-protected instrument rather than through equity-style risk. The returns come from the revenue generated by the underlying asset, typically underpinned by long-term contracts with private or government counterparties, rather than from betting on asset appreciation. Our lived experience at Prescient is that default probabilities on well-structured South African infrastructure debt remain low, with returns that have been attractive on a risk-adjusted basis. That combination of predictable, contracted, often inflation-linked cash flows and genuine capital preservation is rare, and it is precisely what a long-term liability-driven investor should want.

The opportunities are concentrated in the sectors that are least glamorous but most essential, and they are real rather than theoretical:

  • Power and transmission, where the opening of the transmission grid to private investment for the first time, with international consortia prequalified to bid on independent transmission projects, marks a structural shift in the opportunity set.
  • Water and waste, where the country faces a 17% water supply deficit and more than half of municipal systems are failing or barely passing, and where projects such as nature-based water funds and waste-to-energy plants combine clear revenue models with measurable impact.
  • Rural connectivity, where targeted investment can extend telecommunications infrastructure into underserved provinces that mobile operators will not reach on cost grounds alone, supported by evidence that a 10% rise in broadband penetration lifts GDP growth by between 0.25% and 1.4%.
  • Transport, logistics and agricultural infrastructure, including rail corridor rehabilitation and solar-powered irrigation for smallholder farmers, which deliver employment, food security and climate resilience alongside a clear return.

The role of an infrastructure debt fund is to convert these opportunities into investable instruments. That means providing patient capital with realistic return expectations, conducting rigorous credit analysis, stress-testing assumptions before the base case is ever entertained, and structuring deals with the contractual protections that safeguard members' money. It also means remaining flexible on structure and timing, because infrastructure projects reward collaborative problem-solving rather than rigidity. This is the discipline that turns a national need into a sound investment, and it is the reason investors should be looking hard at this asset class now, on the merits, without anyone having to compel them.

The common thread

Asset allocation, the offshore limit and prescription are three versions of a single question about who decides where retirement savings go. The answer should be the trustees and managers who owe a duty to members, exercising judgement within sensible prudential limits.

The offshore allowance should stay, because diversification protects members.

Prescription should stay off the agenda, because it solves the wrong problem at the saver's expense. And infrastructure deserves a far larger allocation than it currently receives, not because anyone is forced to provide it, but because, structured and de-risked correctly, it is simply a good investment.

The capital is willing. The task is to make the projects worthy of it.

Disclaimer

Prescient Investment Management (Pty) Ltd is an authorised Financial Services Provider (FSP 612) in terms of the Financial Advisory and Intermediary Services Act, 2002 (FAIS).

The information in this document is provided for general information purposes only and is not intended to constitute financial advice (as defined in FAIS), investment advice, a recommendation, or an invitation/offer to issue, sell, subscribe for, or purchase any financial product. Any views or opinions expressed are those of the author (unless otherwise stated) and may change without notice. Past performance (if referenced) is not necessarily indicative of future performance, and no guarantee is given as to future returns. While reasonable care has been taken in preparing this document, no representation or warranty (express or implied) is made as to the accuracy, completeness, or fairness of the information, and Prescient Investment Management (Pty) Ltd and its affiliates disclaim liability for any loss, damage, cost, or expense (whether direct, indirect, or consequential) arising from reliance on this information. This document may contain proprietary material and is protected by copyright law. For more information visit www.prescient.co.za