Alexander Forbes says that the African National Congress ‘plan’ to introduce prescribed assets is a ‘low-probability event’.
In its election manifesto, the ANC outlines a plan to investigate the introduction of prescribed assets on financial institutions’ funds to unlock resources for investments in social and economic development.
The idea would be to force pension funds to invest in struggling state-owned companies including Eskom, as government looks for cash to keep SOEs afloat, which Intellidex analyst Peter Attard Montalto said should serve as a wake-up call for the local asset management industry.
“The hunt for solutions to Eskom will likely lead to a debate around the need to dictate that the asset management community and banks lend to Eskom to keep it afloat,” Attard Montalto said in a note earlier this month.
However, according to Isaah Mhlanga, executive chief economist at Alexander Forbes Investments, the discussion is “a political party process ahead of the elections” in May. “It’s not a government process,” he told journalists at the company’s head office in Sandton On Wednesday (30 January).
Alexander Forbes is the country’s largest pension fund administrator, with a reported 1.4-million members under administration. “The moment it becomes a government process, then we’ll engage. But it’s a long-term risk and a low-probability event,” said Mhlanga.
South African Post Office CEO, Mark Barnes told the Money Show’s Bruce Whitfield that placing pension funds in SOEs could be a positive for the economy. “Within our South African ecosystem, the money’s got to come from where the money is made. You have some choices to make…Are we going to increase taxes?
“It’s just a question out of which pool of capital it is most sensible to take this unpleasant necessary money. This is capital to save us from mistakes and to fill holes… this is necessary foundation capital,” he said.