South African retirement funds are sitting on a mountain of untapped potential, with allocations to private capital remaining stubbornly below 2% of total assets, despite regulatory provisions that allow up to 15% to be channeled into private equity and alternative investments. The stark disparity has drawn criticism from industry experts who argue that the conservative approach is not only limiting returns but also failing to address the country’s pressing infrastructure and development needs.
According to Selina Nalane, a senior investment analyst with extensive experience in the retirement fund sector, the current allocation pattern represents a missed opportunity on multiple fronts. “Private markets—spanning infrastructure, private credit, and growth capital—offer a dual benefit,” Nalane explained. “They can help finance critical national priorities such as energy, water, and housing, while simultaneously enhancing portfolio diversification and long-term returns for pensioners.” She noted that global pension funds have dramatically increased their private capital exposure since the early 2000s, growing allocations from under 5% to approximately 20% of total assets.
The primary obstacle to increased private investment in South Africa remains the issue of illiquidity. Fund managers and trustees have historically shied away from long-term commitments, preferring the relative ease of listed markets. However, Nalane argued that this concern is often overstated. “Illiquidity is not a barrier—it’s a feature that can be managed through careful portfolio construction, appropriate diversification, and alignment with fund-specific cash flow needs,” she said.
With the country facing a funding gap for critical infrastructure and an urgent need to stimulate economic growth, the case for unlocking private capital has never been more compelling. Industry bodies have begun advocating for a shift in mindset, urging trustees to embrace a more forward-looking approach. For South Africa’s retirement industry, the question is no longer whether to move—but how quickly. The billions waiting on the sidelines could be the key to building the future the country urgently needs.
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