In short
Alternative investments are the ones outside the ordinary portfolio of cash, unit trusts, exchange-traded funds and listed shares. In South Africa the practical list is physical property to let, private lending, private equity and venture capital, offshore assets, gold and commodities, crypto assets, and collectibles such as art and wine. There is no legal definition and nobody maintains an official list. The label says nothing reliable about risk or return. What it does tell you is that four things have changed: nobody is quoting you a price, you cannot leave when you choose, supervision ranges from a licensed fund to nobody at all, and if something goes wrong the route is usually the courts rather than an ombud. Private lending is one entry on that list, and for a large share of the people reading this it is not the right one.
Alternative is not a description of an asset. It is a description of where an asset sits relative to the ordinary portfolio — cash in the bank, a unit trust, some shares, maybe a property. Anything outside that set gets called alternative, which is why the label covers things as unlike each other as a Krugerrand, a wind farm and a loan to a builder.
So the word tells you almost nothing about risk, return or difficulty. What it reliably tells you is that four things have changed, and those four are the subject of this page. Private lending is one entry on the list below. For most South Africans it is not the right one, and section 05 says who should stop reading.
01 — The definitionWhat actually makes something alternative
There is no regulatory definition in South Africa and no list anyone maintains. The useful test is not what the asset is but what changes when you buy it, and four things do.
- Nobody is quoting a price. A listed share has a price every second the market is open, set by strangers with their own money at stake. Most alternatives have no price at all between the day you go in and the day you come out. What you have instead is a valuation, and a valuation is somebody's opinion.
- You cannot leave when you want to. On the JSE you sell in seconds. In an alternative you leave when the asset is sold, the loan is repaid, the fund permits it, or a buyer appears. Sometimes that is months. Sometimes there is no exit at all and you hold to the end.
- Somebody else is not watching it for you. A unit trust manager is licensed and supervised. In much of the alternative market nobody is checking the arithmetic on your behalf, and the work you decline to do yourself does not get done by anyone.
- If it goes wrong, the route is different. Not necessarily worse — but different, and usually slower, more expensive, and more dependent on documents you signed at the start than on a complaint you make at the end.
Every entry in the next section changes all four to some degree. The degree is the whole question, and it varies more between two alternatives than it does between a unit trust and a share.
02 — The listWhat is actually available in South Africa
This is the honest set, including the ones this Association has nothing to do with. Minimums are indicative of how the market generally behaves rather than rules, and they move.
| The thing | How you get in | How you get out | Who supervises it |
|---|---|---|---|
| Listed property (REITs) | A share on the JSE, from any broker. Small amounts. | Sell on the market, same day | JSE and the FSCA. Fully supervised. |
| Physical property to let | Deposit and a bond. Large, and lumpy. | Sell the property. Months. | Nobody, for the investment decision |
| Private lending | Lend your own money against security, directly or through an intermediary | The loan is repaid, or you enforce. Often no earlier exit. | Depends entirely on the structure. Frequently nobody. |
| Private equity and venture capital | A fund, usually with a high minimum, or directly into a business | When the fund sells. Five to ten years is normal. | The fund may be licensed. The businesses are not. |
| Offshore assets | Your annual allowances, through a bank or platform | Depends on what you bought | The foreign regulator, not ours |
| Gold, Krugerrands, commodities | A dealer, or a listed instrument that tracks the price | Sell to a dealer or on the market | Nobody for the price. It is what it is. |
| Crypto assets | An exchange | Sell on the exchange, usually instantly | A licensed exchange is supervised as a financial service. The asset is not. |
| Art, wine, classic cars, collectibles | Dealers and auctions | Find a buyer. Can take a very long time. | Nobody |
Unit trusts, exchange-traded funds, fixed deposits and RSA Retail Savings Bonds are deliberately absent. They are the ordinary portfolio the word alternative is defined against, and each has its own comparison on this site.
03 — The tradeWhat you are actually being paid for
Across all of them the return has to come from somewhere, and in the alternative market it comes from one of three places. Knowing which one you are being paid from is more useful than knowing the headline number.
- A risk somebody else declined to take. A builder who cannot get a bank loan pays more because the bank said no. That is a real source of return, and the reason the bank said no is the thing to understand before you accept it.
- Inconvenience. You are paid for not being able to leave. That is genuine compensation for a genuine cost, and it is the cleanest of the three — as long as you actually did not need the money, which people routinely misjudge.
- Somebody else's loss. A price that only rises because the next buyer pays more is not a return, it is a transfer. This is the one that gets dressed up as the other two.
A return that cannot be traced to the first or second is worth treating as the third until shown otherwise. Whether an arrangement is lending or a scheme turns on exactly this question, and the red flags are mostly flags on this one point.
04 — Private lendingWhere private lending sits in all this
Private lending is retail-scale private credit: you are the lender rather than a shareholder, you are paid interest rather than growth, and you are usually secured against something. It is one of the more conservative entries on the list in structure, and one of the least supervised in practice. Those two facts together are what makes it easy to get wrong.
What distinguishes it from most alternatives is that the return is contractual. A share might go up. A loan is owed. That is a real difference and it is the reason people are drawn to it — where the money actually comes from is set out separately, as is what a private loan actually looks like.
What it shares with every alternative is that being owed money and being paid are different things. Recovery runs through security, default and enforcement, and it takes as long as those take.
Whether the law reaches it
Unlike most of this list, private lending sits against a specific statute. The National Credit Act covers every loan to an individual, and does not reach a loan to a business whose assets or turnover reach R1 million. Which side you are on changes your obligations completely, and whether you must register follows from it.
Two boundaries matter more than people expect. Taking money from the public in order to lend it out is deposit-taking, which requires a banking licence — that is the line nobody means to cross, and it is where pooled private lending arrangements most often go wrong. And a lender outside the National Credit Act is still an accountable institution under FICA, so the FICA duties apply regardless.
05 — HonestlyWho should not be doing this
This Association is funded by the private lending market, so it would be reasonable to expect this page to conclude that private lending wins. It does not, and for a large share of the people reading it the right answer is one of the other rows.
A reader who works through this page and decides private lending is not for them has used it correctly. That outcome is recorded as a success in the Association's own awareness directive, which is a strange thing for a funded body to publish and the reason it is published.
06 — The checksFive questions that work on any of them
These apply to a loan, a fund, a crypto product and a wine portfolio equally. Anything that cannot answer all five in writing is not ready to take your money.
- Who exactly owes me, and what is their name on a document? Not the brand, not the platform, not the person who called you. The legal entity.
- What am I holding if they stop paying? A registered bond over property is not the same as a signed promise, and neither is the same as a page on a website showing a balance.
- How do I get out, and what is the earliest realistic date? If the answer is a range, ask what the longest case looks like and assume it.
- Who is regulated here, for what? A licence to give advice is not a licence to hold money, and neither is a guarantee of the investment. Check the licence covers the thing you are worried about.
- Where does the return come from? If the answer is a number rather than a source, you have not been told.
The patterns that should end a conversation are in risk and red flags.