Leon Campher, CEO of the Association for Savings and Investment SA. Picture: HETTY ZANTMAN
Leon Campher, CEO of the Association for Savings and Investment SA. Picture: HETTY ZANTMAN

It is becoming clear that pension funds will not be forced to put a certain amount of your savings into government-approved financial instruments such as bonds issued by state-owned enterprises (SOEs). And that’s a good thing.

Last week, Leon Campher, CEO of the Association for Savings and Investment in SA, a fund management industry lobby group, said at meetings the government and labour are singing the tune that the prescribed assets policy is a bad idea.  Instead, they have thrashed out a plan to fund president Cyril Ramaphosa’s proposed R1-trillion infrastructure investment push through a variety of financial instruments that include listed project bonds.

“Everyone agreed that in the context of SA, our need to attract foreign capital, our need to de-stress the state’s balance sheet and prescribed assets wasn’t the solution,” Campher told us this week. We could not agree more.  

Ramaphosa’s economic revival plan (on which he has staked his political reputation) was always going to be an uphill battle, as he took over the country battling with a dangerously high debt to GDP ratio — one that was dragging down the sovereign credit rating — and a ballooning budget deficit.  For his infrastructure-led economic recovery to materialise, he needed to enlist the help of the private sector, including those that invest pensions on your behalf.

With government finances backed into a corner, and the industry flaunting huge sums in private investors’ money, it was easy for ANC politicians embarrassed by growing inequality to train their sights on a R4-trillion pot of pensions, which is already subject to regulations that set out how much a pension fund can invest in which assets.

But the idea that found its way in the ANC 2019 election manifesto was a nonstarter. For one, pensioners are justifiable in their scepticism that their money would ultimately flow back to corrupt politicians who had laid waste to state-owned enterprises such as Eskom, Denel and SAA under the despicable state capture project.

And now the ANC wants to use regulations under the Pension Fund Act to direct money from fund managers to revive state-owned enterprises? It is not hard to imagine that had the idea gone past the exploratory phase, investors would have withdrawn their pensions en masse and left many companies in the industry scrambling for survival.   

Even if the industry wanted to demonstrate its commitment to breaking the country out of recession by deploying their clients’ large pool of capital on structurally important but ailing companies such as Eskom, it would be reckless to put investors’ pensions into financial instruments that have been shown to hurt investors.  

The policy was first pursued by the apartheid government, but a commission set up to see if it was any good for investors recommended in the 1980s that it be scrapped as pensioners received a real return of about 9% less than they would have got the decade earlier. That policy had stipulated that pension funds should invest between 33% and 75% of their assets in government-approved assets such as sovereign bonds.  

Perhaps the most important grouping to join the growing consensus that the prescribed assets idea is ill-thought is Cosatu — which until several months ago appeared to be still committed to using workers pensions to cut Eskom’s mountain of debt and prop up failing companies. Labour leaders have woken up to the reality that, unlike in the 1970s when the apartheid government pursued the idea,  it is the workers who would be left picking up the pieces at retirement.

In those days, one could make the point that it was companies that faced the risk. Not anymore. Workers will pay for bad investment decisions via lower pension payouts and longer working lives.  

It’s true that the ANC has never tabled prescribed assets as a policy since it emerged in its 2019 election manifesto, and there was no mention of it in its latest economic revival plan. It would give investors much-needed clarity for the party to come out explicitly saying that it has stopped exploring the possibility of prescribing which assets pension funds must hold.

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