Warnings for pensions in South Africa

 ·3 Mar 2024

Asset managers across South Africa have criticised the ANC’s plan to introduce prescribed assets in their investments.

In its 2024 general election manifesto, the ANC said it would direct financial institutions through prescribed assets to invest funds in public projects.

Prescribed assets, which have been touted in several previous ANC manifestos, may require retirement funds to invest a portion of their funds in government-approved instruments, with the aim of “unlocking” funds for infrastructure and social development projects.

This would need an amendment to Regulation 28 of the Pension Fund Act to come into effect.

Speaking with the Business Times, Stanlib CEO Derrick Msibi said that using prescribed assets as a solution to the nation’s infrastructure woes is misinterpreted, arguing that while current investment frameworks allow asset managers to invest in such sectors, policy uncertainty results in major obstacles for mobilising the necessary capital.

Shane Watkins, CIO of All Weather Capital, said that when investment drivers are driven by legislation, the implication is that the return will be lower or risk will be higher.

“Whenever you need to compel an investment by legislation, the implication is that the returns will be lower, or the risk is higher.”

Sygnia’s CEO, Magda Wierzycka, also criticised the ANC’s plan to use retirement savings for government projects.

“First, they rob South Africans through taxes. Then, by mismanagement of the economy, the rand collapsed. Now it’s a raid on our retirement savings,” she said.

She noted that South African asset managers already hold over 20% of government bonds, with question marks over what percentage would be enough,

She also previously expressed concern that the prescribed assets could force capital away from major corporations that create jobs and contribute to the economy to fund bankrupt SOEs.

Speaking on the PSG Think Big Series, National Treasury Director General Duncan Pieterse said that recent reforms introduced for infrastructure aim at facilitating private sector investment into infrastructure without the need for prescription.


However, Zuko Godlimpi, deputy chair of the ANC’s economic policy formulation subcommittee, said the reaction to the prescribed asset proposal was alarmist.

“The reaction so far has been ‘Oh no, they are raiding our pensions; they want us to buy government bonds’. The manifesto is not predicated on a lunatic misunderstanding of how markets and the economy function,” Godlimpi said.

He said that the ANC is trying to fix an anomaly where most private retirement fund assets are invested in the JSE’s top 100 listed firms, meaning that most companies outside the top 100 do not have as much access to the country’s investment and savings.

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