As one of the largest fixed income asset managers in South Africa, with client funds of R197 billion under management, Futuregrowth is committed to financing the economic growth and development of our country. For more than 20 years, we have actively invested in the infrastructure sector as a fiduciary asset manager on behalf of our retirement fund clients*.
In the wake of the nation’s immense economic and social upliftment challenges, Futuregrowth agrees with the preamble of National Treasury’s document: “The combination of low growth and rising unemployment means that South Africa’s economic trajectory is unsustainable. Government should implement a series of growth reforms that promote economic transformation, support labour-intensive growth, and create a globally competitive economy.”
The keyword is “implement”: Government needs to apply single-minded determination and focus on execution and delivery. Bold, urgent and sustainable decisions need to be made in order to create the environment needed for job creation and inclusive economic growth. There are immediate investment opportunities that we believe could easily be unlocked by decisive government action and thereby re-ignite investor confidence in the future of the country.
The National Treasury correctly calls for reforms and interventions in a number of sectors. We believe that investors stand ready to invest in well-considered and well-structured projects that will raise the infrastructure capacity of this country and kick-start the sustainable job creation and inclusive economic growth.
Critically, projects must be financially and operationally sensible and sustainable. As an example of what is possible and has been successfully executed, one only needs to look at the Renewable Energy Independent Power Producer Procurement (REIPPP) Programme, which to date has seen over R220 billion in investment since 2012. With over 80 projects an additional 6329 MW of renewable energy has been procured to date, of this, 4065 MW is currently connected to the grid. Arguably, these amounts could have been greater, and the timeline shorter, had policy confusion and vested interests not stalled the programme for almost two years.
Furthermore, the REIPPP projects to date have been delivered on time, on budget and without any allegations of malfeasance, corruption, or impropriety. By government’s own estimates, the REIPPP Programme has:
created 38 701 job years for youth and women from the surrounding communities in which these projects are located;
benefitted local communities through over R1bn spent by the projects on education, bursaries, health facilities, feeding schemes and supporting old age homes and early childhood development;
helped establish more than 1 000 small enterprises; and
provided black South African companies with, on average, 33% ownership in the projects.
Notably, over the life of these projects the programme will provide qualifying communities with R27.1 billion in net income from the dividends generated by their shareholdings in these projects.
Futuregrowth manages retirement funds, and we are one of the custodians of the nation’s savings. It is imperative that investors allocate capital to entities and projects that are sustainable and will deliver an appropriate risk-adjusted return. The National Treasury document highlights a number of sectors that we believe could roll-out a similar programme to the REIPPP Programme, including further rounds of REIPPP, as well as new projects in agriculture, telecommunications, tourism, water infrastructure and transport networks.