Government is looking to use pensions to address some of its big issues – including the new SAA

Finance minister Tito Mboweni says that government is looking at a number of options to help fund the establishment of the ‘new SAA’, including the use of pension funds.

In an answering affidavit to a case filed by the Democratic Alliance, Mboweni said that government would not use state funds to rescue the bankrupt national airline.

Instead, other options on the table include seeking money from strategic partners or private equity, as well as tapping pension funds and global financial institutions.

While the DA has welcomed the commitment to not use state funds, it expressed concerns about the use of pensions.

“On the basis of Mboweni’s commitment we are satisfied that there is no need for an urgent hearing, although we remain on high alert for other illegitimate attempts to fund SAA,” the party said in a statement.

“However, Minister Mboweni’s affidavit, belatedly filed in response to the DA’s court challenge, raises new alarms about how SAA might be bailed out using other means.

“Most worryingly, he suggests using pension funds to ‘invest’ in SAA, which raises the prospect of the Public Investment Corporation being forced to give money to SAA.

“The DA will oppose any publicly-funded bailout of SAA, whether through direct cash, government-guaranteed loans, or an attempt to abuse pension funds.”

Economists have also criticised the idea of using pensions to help fund the airline, which they said could require a change to Regulation 28 of the Pension Funds Act.


Changing regulations

In a proposal document published by the ANC’s Economic Transformation Committee at the start of July, the ruling party indicated 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.

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.


Read: Government commits to fund ‘new’ SAA – with at least R10 billion needed

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Government is looking to use pensions to address some of its big issues – including the new SAA