The ANC still wants to take pension money for Eskom and Transnet
ANC government officials said they remain committed to using South Africans’ pension funds to invest in government projects, particularly state-owned enterprises (SOEs).
This was revealed by Deputy Minister of Trade, Industry and Competition Zuko Godlimpi during the 18th Annual Competition Law Economics and Policy Conference 2024.
Godlimpi told delegates that the ruling party wanted to reintroduce the prescribed assets policy in South Africa.
This is in direct opposition to comments from deputy finance minister and chair of the Public Investment Corporation (PIC) David Masondo, who said that the government has no intention to move towards the policy.
Prescribed assets were introduced in South Africa in 1956 when the Pension Funds Act was promulgated.
Pension funds were forced to invest a percentage of their assets under management in government bonds. The level of prescription peaked in 1977.
It started to fall in the eighties and was scrapped in 1989. During these 30 years, funds were required to invest more than half their assets in SA government and parastatal bonds.
In the mid-2000s, the government briefly discussed the policy before stiff private-sector opposition resulted in scrapping its reintroduction.
The ANC revived the concept of prescribed assets in its 2019 election manifesto, which contained the following two references:
- Investing in the economy for inclusive growth – Investigate the introduction of prescribed assets on financial institutions’ funds to unlock resources for social and economic development investments.
- Transform and diversify the financial sector – Investigate introducing prescribed assets on financial institutions’ funds to mobilise funds within a regulatory framework for socially productive investments and job creation while considering the risk.
The 2019 mentions of prescribed assets indicated that the party was still considering its merits. However, the ANC’s 2024 election manifesto was more forthright.
The party said it would engage and direct financial institutions to invest a portion of their funds in industrialisation, infrastructure development and the economy through prescribed assets.
Although it was not government policy, the ANC decided that prescribed assets would be implemented.
Ministers support prescribed assets
Minister of Trade, Industry and Competition Parks Tau said his department will consider amending Regulation 28 of the Pension Funds Act to reintroduce prescribed assets.
The latest rendition of the prescribed assets proposal goes beyond forcing pension funds to invest in government bonds and support state-owned enterprises like Eskom and Transnet.
“Our agenda would be informed by placing industrial policy as the centrepiece of economic policy in the country,” he said.
Tau added that “it is about ensuring that we drive programs of industrialisation and reindustrialisation”.
Deputy Minister Zuko Godlimpi repeated the plan to re-introduce prescribed assets during the 2024 Competition Law Economics and Policy Conference.
“In terms of how the structure of the economy looks, our financial markets are extremely liquid, but capital allocation is where the problem comes in,” Godlimpi said.
“That is what merits the discussion about using the entire balance sheet of South Africa Inc,” he said.
“It includes essentially pension funds, and if we don’t do that, we’ll keep on believing that we are capital starved when we are not.”
He added that they believe the government needs to protect the South African economy from capital flight.
“The best way to do that is to maximise the use of local capital, most of which is concentrated in our pensions industry,” he said.
Godlimpi explained that most pension funds’ assets are allocated towards what he termed unproductive industries and are concentrated within the top 100 companies on the JSE.
“If you look at the profile of most of them, they are not in productive industries in the economy. It’s MTN, it’s Telkom.”
He used the example of the Public Investment Corporation (PIC), which is heavily invested in JSE-listed companies.
“The PIC is the largest shareholder of almost any major company in South Africa. You go to any tech company, and the PIC is at the top,” Godlimpi said.
He then claimed that the PIC is absent from companies that require real capital for real production.
Godlimpi said this is because pension funds are viewed as private assets and not part of the discussion around national development.
He explained that, in his personal view, pension funds should be seen as national assets rather than private assets.
Thus, the discussion around them must be a national development conversation rather than a personal investment discussion.
“It is unsustainable that South Africa has a high unemployment problem and poverty, but we have a very liquid capital market.”
“We need to have this conversation about recalibrating their balance sheets as well by being allowed access to the pension industry.”
“If we don’t have that conversation and we’re all cowards, then we will end up being marched out of these comfortable seats by the people across the M1 in Alexandra,” Godlimpi said.
Read: South Africa’s millionaire life insurance bosses – earning up to R32 million
Loading ...
