The government has no intention of forcing South Africa’s pension funds to invest in specific infrastructure projects, Deputy Finance Minister David Masondo told Parliament on Wednesday.
Masondo was responding to a question from Democratic Alliance (DA) MP Dion George following reports that the government is planning to amend Regulation 28 of the Pension Funds Act.
According to government and African National Congress (ANC) documents, the amendment is meant to provide state-owned development finance institutions (DFIs) access to cheaper finance from pension funds for infrastructure projects.
George asked whether or not this would compel pension funds to invest in such projects, a policy similar to prescribed assets. Masondo said this will not be the case because pension fund trustees will still retain their fiduciary responsibilities.
He explained, “There is no intention from government to oblige retirement funds on how to invest, be it in government infrastructure or any other projects or investments. All investment decisions are ultimately the duty of the board of trustees who decide which assets retirement funds should be invested in as per the fund’s investment mandate.”
The Deputy Minister said amending Regulation 28 is only aimed at broadening the scope of what pension funds, including the Government Employees Pension Fund, can invest in. “[It will] enable trustees to have a wider choice. The intention is not to force them to invest in particular investments that government prefers.”
Not bailing out SOEs
Masondo’s clarification follows a similar one by ANC policy guru Enoch Godongwana during a webinar last week. Godongwana also disputed claims that the government plans use pension funds to bail out state-owned enterprises (SOEs) and the planned state-owned bank.
He said, “I want to dismiss and debunk the claim that we want to utilise pension funds to bail out collapsing SOEs. And the latest theory is that we want to fund the state bank. All of those things are mischievous, with the intention of discrediting our argument. That’s not where we are at the moment.
“You will recall that in our conference, we emerged with a proposition which suggests that we should look at prescribed assets. When we talk about tweaking Regulation 28, we are moving in a slightly different [direction] from what conference said.
“We are moving from an environment where there is no enforced prescription, but you create an environment where trustees can be able to invest in infrastructure projects, as long as those infrastructure projects are profitable.”
Trade union federation COSATU also weighed in on the debate on Wednesday after its Central Executive Committee meeting earlier this week. It urged the government to end corruption first before having discussions on using pension funds.
“A corrupt government that pushes anti-worker and anti-poor policies cannot automatically count on the unconditional support of workers when it comes to the use of their pensions. Before the government talks about workers’ pensions, we demand to see real change in fighting corruption and also the implementation of pro-poor policies,” it said.