In a presentation on socially responsible investing at this week’s annual conference of the Pension Lawyers Association in Cape Town, former trustees and fund consultants Jolly Mokorosi and Mabatho Seeiso spoke about an exciting project they have been involved in that benefits the fund’s members in more ways than one.
The Road Freight and Logistics Industry Provident Fund is a bargaining council fund with 72 000 active members, most of whom are truck drivers. It has assets under management of R6 billion.
In applying environmental, social and governance (ESG) principles to its investment philosophy, the fund focuses on:
A project on which the fund has embarked that is providing good returns on investment, plus benefiting its members directly, is its development of a series of truck stops on major trucking routes around the country.
Mokorosi and Seeiso explained that drivers of large articulated trucks can’t just stop anywhere on a journey. The drivers need places specially designed for them where they can park their enormous vehicles, rest, eat a nutritious meal – “not just pap” – and generally refresh themselves.
The truck-stop concept, they say:
So far, the fund has invested in one truck stop – at Harrismith on the N3 between Johannesburg and Durban – which, according to Mokorosi and Seeiso, has proved very successful. About 102 000 trucks use the stop each year, and it sells 23 million litres of diesel fuel a year. It has sleeping quarters for 60 drivers, a food court, a primary healthcare facility staffed by a doctor and a nurse, and a truck maintenance and servicing facility.
Mokorosi and Seeiso say that, based on 12 months of trading, the truck stop has generated a return of 14 percent (its benchmark is the Consumer Price Index inflation plus three percent), which is made up of cash profits of eight percent and capital appreciation of six percent.
They say the fund is looking at developing similar truck stops at Joostenbergvlakte near Cape Town, Colesburg on the N1 and East London on the N2.
WHAT YOUR FUND CAN INVEST IN
A project such as the one outlined above, which is an investment in an unlisted company, can form only a small portion of a retirement fund’s investment portfolio.
Most of the portfolio must be in prudentially sound investments, such as listed shares, bonds and cash instruments, as governed by regulation 28 of the Pension Funds Act. This is not to say that the truck-stop investment is risky, but unlisted companies are generally regarded as presenting a higher risk to investors than companies listed on the JSE.
Regulation 28 imposes a limit of 75 percent of the portfolio in equities, of which up to 10 percent may be unlisted shares. Funds may also not invest more than 25 percent of their assets in property, either directly or in shares and debentures of property companies.