EDITORIAL: Pule Mabe’s tin ear for pension plunder
To force funds to put pension money into uncreditworthy SOEs, which can’t raise money elsewhere, is to force them to accept lower returns on their savings
You couldn’t have asked for a more tin-eared statement from the mouthpiece of the ANC. At a time when global markets are in freefall, and people’s pension savings are ebbing away thanks to panic over the Covid-19 virus, ANC spokesperson Pule Mabe waded in to suggest yet another ill-conceived line of assault on your savings.
Speaking at the Black Business Council Summit, Mabe said: "To address the small and medium enterprise funding gap, there is an urgent need for us to look at the role of pension funds, or more broadly the savings industry, in facilitating financial inclusion and in particular expanding funding to SMMEs and other developmental projects."
Mabe won’t have got the deep irony of that statement. The fact is, your pension is largely invested in local equities, through the JSE, which is the obvious avenue through which growing companies raise funding. In a normal world, businesses list on the JSE to get capital, and your pension savings are deployed to fund them, in the expectation of earning a decent return. So, whisper it softly to Mabe, but SA’s pensions are already at the service of small business.
But there’s a deeper problem with Mabe’s sentiment. The ANC has already flighted the idea of "prescribed assets" — effectively mandating that a certain percentage of your pension be hived off to bail out ailing state-owned enterprises (SOEs). It’s an idea that has, rightly, met stiff resistance.
To force funds to put pension money into uncreditworthy SOEs, which can’t raise money elsewhere, is to force them to accept lower returns on their savings. Redirecting pensions to small business, which can’t raise money elsewhere, is equally problematic.
And, it has to be said, it’s not as if SA pension funds are rolling in cash. As it is, funds are mostly invested in local equities, through the JSE, which is hostage to the wider economic gyrations in the country. And the economy has endured a bruising few years thanks to the muddled thinking, poor policy and even worse implementation of the ANC.
Nonetheless, after a negative 2018, the JSE last year grew 8.2%. It sounds passable but, actually, the JSE was weighed down by poor GDP growth, power outages and worries over land expropriation. In other words, your pension fund returns were hurt by the decisions of Mabe’s own party — and now he talks of wanting a greater slice of your pension.
In recent days, the JSE and your pension took a further battering due to the Covid-19 hysteria. On "black Monday" this week, the JSE tumbled 6.2%. Overseas, it was worse: the US S&P 500 fell 7%, the biggest single-day drop since the 2008 financial crisis. It was the same in London, with the FTSE 100 down 7.7%.
For South Africans, it means that in an already depressed economy, the JSE’s all share index has lost 16% of its value since mid-January. So your pension, which is invested in the JSE, is likely down to a similar extent.
In this context, Mabe’s high-handed call to appropriate pension money to fix the ANC’s policy failures couldn’t have come at a worse time. It was, in fact, so ill-timed that Mabe’s statements were even slammed by Cosatu, which said the ANC shouldn’t be looking to use people’s pensions as a piggy bank to "deal with policy failures".
Rather, said Cosatu spokesperson Sizwe Pamla, the ANC ought to focus on cutting red tape and "improving access to affordable finance".
Cosatu, on this score, has it right. The ANC not only sees your retirement savings as yet another piggy bank to raid, it has no shame in loudly asserting its right to do so.