President Cyril Ramaphosa has given the clearest indication yet that the African National Congress (ANC) is considering increasing the availability of pension funds to finance infrastructure projects.
Responding to a journalist’s question during his visit to Cape Town on Friday, Ramaphosa said this is “a discussion that must ensue.”
“This is a discussion that must ensue. No one is saying, go back to the horrible past, but we are saying, let’s embrace the future. Let’s see what is in the interest of all of us as South Africans as we move forward and trustees having the fiduciary responsibility of governing the monies of their members,” Ramaphosa said.
ANC discussion document
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.
A leaked ANC discussion document, which is authored by Economic Transformation Committee chairperson Enoch Godongwana and is dated 22 May, has proposed amending Regulation 28 of the Pension Funds Act.
Godongwana explained that this would be done 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 development finance institutions (DFIs) and financial intermediaries at a reasonable rate of interest.”
Ramaphosa said labour federation COSATU has already proposed using its members’ pension funds managed by the Public Investments Corporation (PIC) to help reduce Eskom’s debt.
‘Impact assets’
He added, “We live in a country which in the past had prescribed assets, where government prescribed that pension funds [and] life offices must, on a compulsory basis because it was embedded in legislation, invest a high portion of their assets in infrastructure and [other projects].
“It is through this that the apartheid government was able to build enormous infrastructure projects like Eskom and Transnet.”
Ramaphosa said the government is looking to invest heavily in “impact assets” and infrastructure while ensuring that trustees of pension funds continue exercising their fiduciary responsibility to “take right decisions.”
“I’m happy that there is a discussion now [about] this matter. It needs to be properly discussed in the typical way that we are as South Africans – we discuss matters, we arrive at a consensus and we move forward,” the President said.
The Democratic Alliance (DA) has however dismissed the proposal as “economic insanity.” In a statement on Monday, DA MP Geordin Hill-Lewis said the ANC wants to “force pension funds to lend money to state-owned enterprises and other DFIs” such as the Land Bank and a future State Bank.
He 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.”