SA growth needs investment in 'developmental assets'

Members of the fund management industry have been warned that South Africa had reached the limit of "growth via stability" and an increase in all types of investment, including socially responsible investment (SRI) was needed to underpin sustainable growth.

So said Dr Iraj Abedian of Pan-African Capital Holdings, who argued that while there was unprecedented macroeconomic financial stability in the country and a "remarkable fiscal framework", pressing socio economic issues - such as proverty, HIV/Aids, crime and inefficiency of the state - limited SA's ability to expand its supply capacity.

"The business sector should be toyi-toyiing in the streets because of government inefficiency," he said. "When it comes to developmental investment in this country it is not a problem of lack of money or political will, it is the organisational incapability of government to deliver what is required."
 
Speaking at an SRI workshop held by Futuregrowth Asset Management, he said the most important challenge for government was to get the key skills to deliver what is required.

This would require all types of investments across sectors and industries, including SRI, said Abedian. "SRI needs a larger pool of instruments to facilitate the channelling of a meaningful sum of funds," he said.

Currently only 1% of South Africas retirement funds are estimated to be invested in dedicated SRI funds.

Speaking on investment opportunities in developmental assets, Futuregrowth director Andrew Canter said that SRI gave the private sector the opportunity to partner with government in meeting its social and economic development mandate.

"SRI is a theme and not an asset class and retirement funds should make SRI investments based on the fund's own asset allocation strategy," said Canter. He said that prescription was not the answer but that funds and their consultants should set SRI strategies establishing risk return guidelines and set a target percentage to SRIs.

SRI can be achieved by a fund investing either in direct developmental assets or in fund products such as fixed income, property, equity or balanced funds that have an SRI mandate.

"Contrary to misinformed belief, SRI and financial returns are complementary," said Canter. "In South Africa, SRI has a compelling track record that indicates strong economic returns.  However, 'social impact' is hard to define and not all areas are suitable for pension funds.  Returns and social impact must be compatible."