BEE scorecard for asset managers?
• No prescribed assets, but pension funds nudged to invest in infrastructure
Deputy finance minister David Masondo says the government is looking at ways to ensure that retirement funds adhere to the financial sector s BEE
’ scorecard requirements when appointing asset managers. He says they are not acting fast enough to ensure more balanced racial and gender representation.
Deputy finance minister David Masondo says the government is looking at ways to ensure that retirement funds adhere to the financial sector s BEE scorecard
requirements when appointing asset managers, which he says are not acting fast enough to ensure more balanced racial and gender representations.
Masondo also announced that while the government will not introduce prescribed assets, it will amend regulation 28 of the Pension Funds Act to make it easier for pension funds to invest in infrastructure.
The Financial Sector Conduct Authority (FSCA) will be engaging with the country s 100 big
gest retirement funds to bolster transformation by ensuring that the BEE scorecard is applied to all service providers, including asset managers, he added.
“Discussions are taking place at the Financial Sector Transformation Council to have the BEE financial sector scorecard, for the first time, be applicable to retirement funds,” Masondo said in a keynote speech at an event in Johannesburg hosted by the Black Business Council and ASI Financial Services.
“There s currently an inprinciple agreement among all parties, [that is], between the government, retirement funds, business and labour. The scorecard will set some targets for board representation and service providers, especially asset managers used by the pension funds. Regulation 28 requires [retirement] funds to consider broad-based BEE of all service providers.”
Masondo said the government will engage with the pension funds industry on how it can incubate new and emerging black asset managers. These, he said, oversee just 9% of the total savings pool of the SA investment industry.
His comments come as the asset management industry — 26 years after the end of apartheid is under pressure to — boost the participation of blackowned companies. In August, the financial services unit of Patrice Motsepe s African Rainbow Capital (ARC) agreed on a deal to buy a quarter of Sanlam s third-party asset management business, creating a firm that will qualify as black-owned under the financial sector charter.
That is set to put it in a strong position to compete for funds from institutional investors seeking to allocate flows to empowerment firms.
The deputy minister added that the FSCA will begin offering training to new and emerging financial entities on issues such as legislative compliance and the operating requirements needed to boost their capabilities.
“As part of the current insurance act there is a requirement for insurance companies to submit plans on how they will realise transformation,” said Masondo. “This could potentially be extended to all financial institutions and is being used as part of the responsibilities of the FSCA to monitor transformation in the financial sector.”
Amending regulation 28 to make it easier for a pension fund to invest in infrastructure and not introducing prescribed assets comes after Leon Campher, CEO of the Association for Savings and Investment SA (Asisa), said on November 30 that prescribed assets were off the table and that an understanding had been reached with the government under which infrastructure would be funded at the project level.
“The National Treasury is in the process of reviewing regulation 28 to make it easier for a pension fund to increase investment in infrastructure, should the board of trustees opt to do so,” said Masondo. It is important to note that the review is not intended to prescribe which assets pension funds must invest in. This decision will still remain the responsibility of the board of trustees.”
Masondo said the government had spent almost R600bn to service its debt in the past three years and was likely to spend another R600bn over the next three. Recent downgrades to SA s sovereign debt by ratings agencies including Fitch and S&P Global, have increased the government s borrowing costs, which makes accessing funds for critical government pro
THE PENSION FUND INDUSTRY CAN PLAY A MAJOR ROLE IN SUPPLYING FUNDS FOR INVESTMENT IN A MANNER THAT STILL GENERATES RETURNS
grammes very difficult.
“The objective is to place infrastructure at the centre of economic reconstruction and recovery, which will stimulate various sectors of the economy,” Masondo said. The pension
“fund industry can play a major role in supplying funds for investment in a manner that still generates returns for clients.”
He also defended government intervention in the economy, saying that the exclusion of black people under apartheid was a consequence of political interventions for many years.
It is for that reason we should not be apologetic in supporting and promoting BBBEE,” Masondo said. We should not be apologetic in supporting affirmative action.”
David Masondo Deputy finance minister