No panacea, but state prescribed assets ‘can help’

As the ANC continues to mull prescribed assets, the debate is intensifying over what will destroy more value for pensioners: bankrupt state-owned entities (SOEs) or governmentenforced investment in them.

Investors concerned about government interference in their pension funds miss the point that their investments are under threat from the economic downturn that would result from the failure of SOEs, former CEO of the SA Post Office Mark Barnes said on Wednesday.

Speaking in a debate on Business Day TV on the controversial proposal to force pension funds to invest in SOEs or government bonds, Barnes said an assumption cannot be made that the proceeds from prescription would be wasted.

“There is no question in my mind that prescribed assets are not the panacea to solve the problems of SOEs,” Barnes said. Investors have to consider the future of the economy and support investment in basic infrastructure.

“You wouldn’t resort to something such as prescribed assets unless it had a need to fill. It’s an instrument, potentially of its time for a time,” he said.

“It could be a very necessary element of a broader solution. If you pay tax, you already invest in parastatals, whether you like it or not, so we are already in prescribed assets.”

The proposal to use prescribed assets has raised concerns that employees will resign to preserve their pensions, while the DA has warned that pensioners would face destitution.

It says if the government proceeds with the policy, it will propose legislation that allows individuals to withdraw their pensions without having to resign in order to get access to their pension funds.

Futuregrowth chief investment officer Andrew Canter said such a policy would inevitably result in lower savings by SA citizens, and pointed out that there is already plenty of money available if the government gets its house in order.

“Pension funds themselves are already huge investors in national infrastructure. It’s estimated that 25% of domestic pension funds, not counting the Government Employees Pension Fund [GEPF], are in government bonds, SOE bonds or other tangible developmental investments,” Canter said.

“There is no lack of willingness to do more. What we need is the government to do its job properly. There is no example in the world of a government that prescribed how pension funds should be invested that turned out to be a success,” said Canter.

“The ones that were terrible, Ghana, Nigeria, Egypt and a couple of others across Africa, were disastrous. Argentina nationalised its pension funds in 2009; Argentina subsequently had to go to the International Monetary Fund because it destroyed its savings culture.”

Said Canter, “Please, show me where government is efficient at being a capital allocator.”