Amend Pension Funds Act to allow for ‘cheaper access’ to development finance, says ANC
The ruling party wants regulation 28 of the act amended to impose prescribed assets
The ANC wants the Pension Funds Act changed to enable “cheaper access” to finance for development.
After a national executive committee (NEC) meeting at the weekend, secretary-general Ace Magashule said on Wednesday the party wanted regulation 28 of the act, which governs the way pension funds invest in various classes of assets, amended.
The regulation limits the extent to which retirement funds may invest in particular assets or, in particular, asset classes to protect the members' retirement provision from the effects of poorly diversified investment portfolios.
Finance minister Tito Mboweni has supported the idea of pension funds being allowed to invest in infrastructure directly. One idea being floated is the creation of project infrastructure bonds.
As the cost of government debt has risen and the debt burden spiralled over the past five years, some in the ANC and Cosatu have suggested introducing the idea of prescribed assets.
If regulation 28 was amended to impose prescribed assets, this would set a minimum floor for the proportion of investments to be held in government stock.
Government stocks are listed on the JSE and the pension fund industry is significantly invested in them. Of the R1.1-trillion under management (excluding the Government Employees Pension Fund), pension funds hold R202bn in government stock and another R28bn in state-owned enterprises and municipalities.
Magashule said sustainable financing of economic recovery would require close co-ordination of fiscal and monetary policy to ensure ongoing access to capital markets, reduce the cost of borrowing, and strengthening the role of development finance institutions.
Regulators should also be vigilant to ensure increased competition in the banking sector, he said.
“While working to restore fiscal stability, SA needs to deploy macroeconomic policy instruments compatible with economic reconstruction. Reconstruction programmes must be sufficiently financed and financially sustainable,” Magashule said.
He said National Treasury, the SA Reserve Bank, development finance institutions and private financial institutions all had a role to play.
“The mobilisation of funds for increased investment in infrastructure and key productive sectors, will inevitably require a combination of public and private resources.”
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