Prescribed assets were introduced in South Africa in 1956 when the Pension Funds Act was promulgated.<\/p>\n\n\n\n
Pension funds were forced to invest a percentage of their assets under management in government bonds. The level of prescription peaked in 1977.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
In the mid-2000s, the government briefly discussed the policy before stiff private-sector opposition resulted in scrapping its reintroduction.<\/p>\n\n\n\n
The ANC revived the concept of prescribed assets in its 2019 election manifesto, which contained the following two references:<\/p>\n\n\n\n
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- Investing in the economy for inclusive growth<\/strong> \u2013 Investigate the introduction of prescribed assets on financial institutions\u2019 funds to unlock resources for social and economic development investments.<\/li>\n<\/ul>\n\n\n\n
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- Transform and diversify the financial sector<\/strong> \u2013 Investigate introducing prescribed assets on financial institutions\u2019 funds to mobilise funds within a regulatory framework for socially productive investments and job creation while considering the risk.<\/li>\n<\/ul>\n\n\n\n
The 2019 mentions of prescribed assets indicated that the party was still considering its merits. However, the ANC\u2019s 2024 election manifesto was more forthright.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
Although it was not government policy, the ANC decided that prescribed assets would be implemented.<\/p>\n\n\n\n
Ministers support prescribed assets<\/strong><\/h2>\n\n\n\n
![\"\"](\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2024\/09\/3-Zuko-Godlimpi-1024x576.jpg\")
<\/a>Deputy Minister of Trade, Industry and Competition Zuko Godlimpi <\/figcaption><\/figure>\n\n\n\n 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.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
\u201cOur agenda would be informed by placing industrial policy as the centrepiece of economic policy in the country,\u201d he said.<\/p>\n\n\n\n
Tau added that \u201cit is about ensuring that we drive programs of industrialisation and reindustrialisation\u201d.<\/p>\n\n\n\n
Deputy Minister Zuko Godlimpi repeated the plan to re-introduce prescribed assets during the 2024 Competition Law Economics and Policy Conference.<\/p>\n\n\n\n
\u201cIn terms of how the structure of the economy looks, our financial markets are extremely liquid, but capital allocation is where the problem comes in,\u201d Godlimpi said.<\/p>\n\n\n\n
\u201cThat is what merits the discussion about using the entire balance sheet of South Africa Inc,\u201d he said.<\/p>\n\n\n\n
\u201cIt includes essentially pension funds, and if we don\u2019t do that, we\u2019ll keep on believing that we are capital starved when we are not.\u201d<\/p>\n\n\n\n
He added that they believe the government needs to protect the South African economy from capital flight.<\/p>\n\n\n\n
\u201cThe best way to do that is to maximise the use of local capital, most of which is concentrated in our pensions industry,\u201d he said.<\/p>\n\n\n\n
Godlimpi explained that most pension funds\u2019 assets are allocated towards what he termed unproductive industries and are concentrated within the top 100 companies on the JSE.<\/p>\n\n\n\n
\u201cIf you look at the profile of most of them, they are not in productive industries in the economy. It\u2019s MTN, it\u2019s Telkom.\u201d<\/p>\n\n\n\n
He used the example of the Public Investment Corporation (PIC), which is heavily invested in JSE-listed companies.<\/p>\n\n\n\n
\u201cThe 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,\u201d Godlimpi said.<\/p>\n\n\n\n
He then claimed that the PIC is absent from companies that require real capital for real production.<\/p>\n\n\n\n
Godlimpi said this is because pension funds are viewed as private assets and not part of the discussion around national development.<\/p>\n\n\n\n
He explained that, in his personal view, pension funds should be seen as national assets rather than private assets.<\/p>\n\n\n\n
Thus, the discussion around them must be a national development conversation rather than a personal investment discussion.<\/p>\n\n\n\n
\u201cIt is unsustainable that South Africa has a high unemployment problem and poverty, but we have a very liquid capital market.\u201d<\/p>\n\n\n\n
\u201cWe need to have this conversation about recalibrating their balance sheets as well by being allowed access to the pension industry.\u201d<\/p>\n\n\n\n
\u201cIf we don\u2019t have that conversation and we\u2019re all cowards, then we will end up being marched out of these comfortable seats by the people across the M1 in Alexandra,\u201d Godlimpi said.<\/p>\n\n\n\n
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- Transform and diversify the financial sector<\/strong> \u2013 Investigate introducing prescribed assets on financial institutions\u2019 funds to mobilise funds within a regulatory framework for socially productive investments and job creation while considering the risk.<\/li>\n<\/ul>\n\n\n\n