The ANC’s Economic Transformation Committee has published a new proposal document which includes planned changes to how pension funds will work in South Africa.
The document indicates that the use of pension funds will be key to helping the government address funding shortfalls in areas such as infrastructure development and energy production.
To achieve this, the ANC proposes changing regulation 28 of the Pension Funds Act to boost the funding of infrastructure projects spearheaded by state development finance institutions (DFIs) using private capital.
South Africa’s main state-owned DFIs are the Industrial Development Corporation and the Development Bank of Southern Africa.
Regulation 28 limits the extent to which retirement funds may invest in particular assets or in particular asset classes. The main purpose is to protect the members’ retirement provision from the effects of poorly diversified investment portfolios.
“Changes should be made to Regulation 28 under the Pension Funds Act to enable cheaper access to finance for development,” the ANC said.
“Furthermore, regulators should be vigilant to ensure increased competition in the banking sector, which frequently displays the kind of oligopolistic tendencies which limit access to finance particularly for SMME’s and for households in historically disadvantaged areas.”
The ANC said that the amendment of regulation 28 of the Pension Fund Act can also help DFIs to access private savings to fund long-term infrastructure and high-impact capital projects.
“In the meantime, the asset classes with the highest impact must be investigated, in line with the resolutions of the 54th National Conference,” it said.
One of the key ways that pension funds are likely to be deployed is to help the embattled power utility Eskom.
The ANC said that ‘there is a need for continued support for Eskom to overcome its immediate financial and technical challenges’ and to ensure reliable electricity supply.
“A solution needs to be found to Eskom’s debt problem, including the possibility of pension funds being mobilised to take over certain restructured Eskom assets,” it said.
“This is linked to the broader restructuring and unbundling of Eskom’s corporate structure to achieve the vision set out in the 1998 Energy White Paper.”
Eskom announced the return of load shedding on Friday (10 July), with the coming week’s outlook remaining bleak.
The utility said despite its best efforts to return additional generation units to service following a number of breakdowns that occurred during the past week, it has not made sufficient progress to suspend load shedding.
“Implementing load shedding tomorrow is also necessary in order to replenish the emergency generation reserves to better prepare for the week,” it said.
“Eskom wishes to assure the public that implementing load-shedding is the last resort, in order to protect the national grid.”