A leaked African National Congress (ANC) draft discussion document has proposed the amendment of regulatory frameworks to increase access to pension funds to finance development projects.
The document, titled Economic Reconstruction and dated 22 May, was authored by Enoch Godongwana, the chairperson of the ANC’s economic transformation committee.
Godongwana argued that development finance institutions (DFIs) have limited access to funds “at a cost that allows for developmental interest rate.” Local DFIs include the government-owned Industrial Development Corporation (IDC) and Development Bank of Southern Africa (DBSA).
Godongwana proposed that the government should urgently finalise the establishment of a State Bank, which would then have “a special relationship with DFIs that allows for developmental interest.”
‘Amend Pension Fund Act Regulation’
He added, “Amend Regulation 28 of the Pension Fund Act in order to increase the access of the savings of South Africans to fund longterm infrastructure and capital projects, [and] as a result increase the availability of funds to DFIs and financial intermediaries at a reasonable rate of interest.”
The Democratic Alliance (DA) has slammed the proposal, describing it as “asset prescription” and “economic insanity.”
In a statement on Monday, DA MP and shadow finance minister Geordin Hill-Lewis said the ANC wants to “force pension funds to lend money to state-owned enterprises (SOEs) and other DFIs” such as the Land Bank and a future State Bank.
Hill-Lewis added, “The DA will fight this proposal every step of the way, because it is fundamentally destructive to economic confidence, and it undermines the pension savings of millions of hard working South Africans.
“The ANC cannot run SOEs properly, and will not sell them, so now wants to force citizens to pay by sacrificing pension returns. It is a lie for the ANC to say that asset prescription is necessary, or ‘developmental,’ when they refuse to consider every better policy option.”
‘Let’s have a discussion’
During a Parliamentary question-and-answer session in August last year, President Cyril Ramaphosa called for a “national dialogue” on the prescribed assets.
He said, “We need to have a discussion as a country. We are faced with a situation where our financial resources have been depleted, and quite often pension funds make good returns on infrastructure development projects. Let’s have a discussion.”
The last time South Africa had a policy of prescribed assets was during the apartheid era when the government compelled retirement funds to invest half of all savings in government bonds.
The DA has uploaded Godongwana’s presentation on its website and is available here.