Support projects, warns Masilela
Former PIC CEO warns more money needs to be poured into developmental projects if it wants to avoid an escalation of social chaos
Former Public Investment Corporation (PIC) CEO Elias Masilela warned on Wednesday that the investment industry had to start pouring more money into developmental projects if it wanted to avoid the escalation of social chaos in SA and being forced to prop up ailing state-owned enterprises.
Former Public Investment Corporation (PIC) CEO Elias Masilela warned on Wednesday that the investment industry had to start pouring more money into developmental projects if it wanted to avoid the escalation of social chaos in SA and being forced to prop up ailing stateowned enterprises.
Speaking at Alexander Forbes’s Investment Indaba, Masilela, who is now a director of economic research at DNA Economics, cautioned investment firms and asset consultants that if they continued with their “short-termist” thinking, the social upheaval that SA was witnessing would get worse.
Masilela said while the private sector made commitments at the National Economic Development and Labour Council to allocate at least 5% of their capital towards development, many companies had not done so. Even among pension funds, he said, only a few had allocated more than 10% of their assets towards developmental assets.
The shortage of capital flowing towards developmental assets is one of the reasons the ANC government has said it will investigate whether prescribed assets are necessary.
President Cyril Ramaphosa has now called for a national dialogue on the issue.
Masilela said that while he did not think prescribed assets would be the solution to SA’s debt and developmental challenges, the financial sector would do well to reflect on whether it had done enough to change the social circumstances of many South Africans.
“We can see the social strife in SA today, we can see the tension but we still have consultants who don’t believe it’s worth investing in Soweto, who don’t believe in BEE.”
He warned companies and their boards of directors that “the fires that we are seeing in Pretoria and Joburg will come to Sandton” if they do not change the way they do things.
Masilela said the country did not need more policy intervention such as prescription, but “at least the prescribed assets debate is forcing us to engage”.
The head of investment consulting at Alexander Forbes, Janina Slawski, said the fact that investment managers had prescription hanging over their heads showed that, to some extent, the industry had not done enough. But even then, Alexander Forbes was opposed to any regulation, including prescription, that could “lead to suboptimal investment outcomes”.
“We want to make a difference in our country, we want to avoid prescription, so let’s ignite impact investing,” she said.
Mabatho Seeiso, an independent trustee and MD of women empowerment centre The Bridge, said the industry had started moving in the right direction. She said trustees supported the funding of developmental assets but were “suspicious of government” because it had not engaged the private sector on what the proposed prescription would look like.
She said the assumption they had was that people’s pensions would be used to prop up the likes of Eskom. “In fact, in the pension fund industry, we have stopped asking ‘should we do impact investing?’ to saying ‘how should we do it’,” she said. The industry was realising that its investment strategies had to reflect realities on the ground because most pension fund members “can’t run to Australia”, Seeiso said.
Alexander Forbes’s chief economist, Isaah Mhlanga, said investment professionals had to change the way they calculated returns because to keep their operations sustainable and the country stable, they needed to place social and environmental impact investment in the same league as financial returns.
“The solution is not to stop burning buildings coming to Sandton, it’s to stop all burning buildings.”