Despite South Africa’s unique infrastructure investment opportunities, less than 2.7% of the country’s R5.8 trillion in pension fund savings is allocated to private markets, with infrastructure investment representing only a fraction of that.
To address this gap, Sanlam Investments has launched the Property Impact Fund, an innovative equity investment vehicle that integrates sustainability and inclusion to meet the country’s critical infrastructure needs.
The fund focuses on delivering property facilities in the form of affordable housing, student accommodation, rural and township retail, education and healthcare – sectors vital to South Africa’s ‘missing middle’, which includes teachers, nurses, police officers and entry-level professionals who make up 23-30% of the population.
Context
South Africa’s stark inequality has left many lower middle-income earners without access to quality social infrastructure. Government efforts tend to prioritise the very poor, while private finance often overlooks this group.
“The fund aims to directly consider the needs of the lower middle-income working class, contributing to a more inclusive and sustainable economy,” says Kamogelo Leeuw, portfolio manager at Sanlam Investments.
Leeuw explains that the fund targets an investable opportunity set of over R2.9 trillion in impact-driven property assets.
“Investing in infrastructure is a way to nurture a community’s potential. These infrastructure projects attract businesses, create jobs and fuel growth,” he says.
“For example, there is a dire shortage of student accommodation that is affordable, safe and in close proximity to tertiary institutions. This impacts how future generations receive education, upskill, and ultimately grow our economy.
“Similarly in healthcare, the ‘missing middle’ should be able to receive quality medical care close to where they live, which also impacts productivity and quality of life. By investing in infrastructure, you plant a seed that lets the entire community flourish.”
Seeded with R1.4 billion from the Sanlam Group, the fund has a target size of R4 billion worth of assets under management, aiming for returns of CPI+ 9% per annum. It is structured as an open-ended fund, with a minimum investment in the investment-linked policy vehicle set at R50 million.
Investing in growth sectors
The fund will target five high-growth sectors that present significant investment opportunities:
- Education: Two million learners, with a growth forecast of 2.5% per annum linked to GDP growth, representing an opportunity of R129 billion.
- Affordable housing: Seven million homes, with a forecast of 2.5% price growth, representing an opportunity of R1.5 trillion.
- Rural and township retail: 248 small, medium and micro enterprises (SMMEs) in the fast-moving consumer goods (FMCG) sector, with 10% annual growth in trading density, representing an opportunity of R900 billion.
- Student housing: More than 600 000 beds, with a compound annual growth rate of 4.9%, representing an opportunity of R150 billion.
- Healthcare: Eight million medical scheme beneficiaries, with a compound annual growth rate of 2.2%, representing an opportunity of R200 billion.
The ‘missing middle’ represents a large, stable demographic with unmet demand for quality services, offering both first-mover advantage and long-term tenant stability for investors.
The opportunity of social infrastructure
Real estate in social infrastructure is expected to outperform traditional commercial property such as office and urban retail as rising middle-income demand drives new development.
Investors gain immediate access to a portfolio exceeding R800 million in impact property, generating competitive returns while contributing to nation-building.
The fund’s two-pronged strategy combines:
- Partnerships: Collaborating with experienced joint-venture partners who share aligned commercial and social impact goals.
- Data-driven deployment: Leveraging geospatial analytics, census data and infrastructure datasets to identify underserved areas.
“This spatial intelligence enables us to pinpoint communities where capital will have the greatest socio-economic impact,” says Leeuw. “Our property investment team has consistently delivered higher returns with lower volatility than listed property or equity markets over the past five years.”
Driving sustainability and measurable impact
The Property Impact Fund embeds impact assessment and measurement across its investment process, aligning with the United Nations Sustainable Development Goals (SDGs) – specifically:
- SDG 3: Good health and well-being
- SDG 4: Quality education
- SDG 8: Decent work and economic growth
- SDG 10: Reduced inequalities
- SDG 11: Sustainable cities and communities
Each project will be evaluated for its contribution to inclusive growth, job creation and environmental sustainability, ensuring capital serves both profit and purpose.
A call to action
With infrastructure investment still underrepresented in institutional portfolios, Sanlam Investments is calling on investors to participate in reshaping South Africa’s social and economic landscape.
“By investing in this fund, you’re not only building financial returns –you’re helping create a more inclusive and sustainable South Africa,” says Leeuw.
“Sustainability isn’t a finish line; it’s a continuous measure of how we grow together.”
Disclaimer: Sanlam Investments consists of authorised financial services providers in terms of FAIS. Disclaimers can be viewed on www.sanlaminvestments.com.
Brought to you by Sanlam Investments.
Moneyweb does not endorse any product or service being advertised in sponsored articles on our platform.