As South Africa continues to grapple with economic inequality, infrastructure backlogs, and retirement insecurity, the employee benefits industry stands at a pivotal crossroads. Pension funds – custodians of long term retirement savings – have a unique opportunity to drive not only better retirement outcomes for members, but also broader societal transformation. Two ideas gaining traction in this regard are infrastructure investment and collective defined contribution (CDC) schemes. Both offer compelling pathways to align financial returns with social impact.
Infrastructure investment: A social compact in action
Infrastructure investment is no longer just a niche asset class – it is a national imperative. With the country’s energy, transport, and water systems under strain, pension funds are increasingly being called upon to help close the infrastructure gap. Regulation 28 of the Pension Funds Act, recently amended to allow up to 45% of assets in infrastructure-related investments, has opened the door wider.
But this is not about charity. Infrastructure assets can offer stable, inflation-linked returns that match the long-term liabilities of pension funds. More importantly, they can catalyse job creation, improve service delivery, and stimulate economic growth. Responsible investing frameworks like CRISA 2.0, and ESG integration into Regulation 28 are helping trustees navigate the risks while staying true to their fiduciary duties. The key is to build robust governance and risk management frameworks.
Our own studies on infrastructure investment trends indicate these specific focus points, with a strong focus on energy and transport infrastructure, probably reflecting the current South African (and broader African) reality and opportunity.
Rapid growth of pension assets: African pension funds – especially in Nigeria, Kenya, and Namibia – have seen rapid growth. South Africa leads with over $500 billion in assets, representing 85% of the continent’s pension market.
Infrastructure as a development lever: Institutions like the Africa Infrastructure Fund advocate for pension funds to finance infrastructure as a means to drive economic growth, climate resilience, and post-COVID recovery.
Cross-border investment potential: South African pension funds are now permitted to invest in infrastructure projects across Africa, which could help address the continent’s estimated $130–$170 billion annual infrastructure gap.
Innovative financing models: There’s growing interest in pooled investment vehicles, credit-enhanced platforms, and blended finance to de-risk infrastructure projects and attract institutional capital.
Collective DC schemes:
Risk-sharing for a new era
While infrastructure investment addresses the “where” of capital deployment, CDC schemes tackle the “how” of benefit design. Traditional defined contribution models place all the risk – investment, longevity, inflation – on the individual member. In contrast, CDC schemes pool these risks across members and generations, offering more predictable outcomes without reverting to the potentially unsustainable guarantees of defined benefit plans.
Globally, CDC schemes are gaining momentum, particularly in the UK and the Netherlands. In South Africa, the concept remains nascent but promising, with some more recent discussion. The actuarial community has begun exploring hybrid models that blend individual account transparency with collective risk-sharing mechanisms.
For CDC to take root, regulatory clarity and industry collaboration will be essential. Trustees, consultants, and regulators must co-create frameworks that are fair, transparent, and adaptable to South Africa’s unique demographic and economic realities.
A broader vision: From retirement to resilience
Ultimately, the goal is not just to deliver a pension, but to build resilience – financial, social, and environmental. Pension funds can be powerful agents of change, but only if they embrace a broader vision of value. This means:
Embedding ESG deeply into investment mandates, not as a tick-box exercise but as a lens for long term sustainability.
Engaging members more meaningfully, helping them understand not just their fund balance but the impact of their savings.
Collaborating across sectors, including government, asset managers, and civil society, to align incentives and unlock scale.
The employee benefits industry has always been about promises – of dignity in retirement, of security in uncertainty. In 2025 and going forward, those promises must expand to include a better future for all.
Sources
https://www.afis.africa/en/insight/african-pension-funds-the-new-driving-force-to-financial-infrastructure/
https://www.bbc.com/storyworks/africas-new-tomorrow/pension-fund-capital-as-an-enabler-for-african-infrastructure-growth
https://cris.maastrichtuniversity.nl/en/publications/pension-fund-investments-in-infrastructure
