Prescribed assets risk

It is no surprise that the issue of prescribed assets, which arises in SA from time to time, has been raised by the ANC in an election year (“Asset managers to dig in heels as spectre of prescribed assets returns”, February 26).

The governing party’s recently launched manifesto identifies prescribed assets as a means for government to secure access to considerable funds. It was similarly raised in 2019 before the last election.

We have long warned about the risk prescribing assets poses to South Africans who have saved diligently, and we will continue to raise the alarm at any attempts by the government to get its hands on the assets of responsible South Africans to help fund itself.

Stuart Theobald (“It’s time for an overhaul of SA’s foreign investment regime”, February 26) does an excellent job of explaining the problem with prescribed assets and why it is actually a retardant to SA’s economic development. However, one argument he doesn’t make is that asset managers would voluntarily increase their exposure to SA if economic fundamentals were stronger and political risk was lower.

If the SA economy was well managed and growing rapidly there would be no shortage of foreigners wanting to invest here, and South Africans would not be seeking to invest abroad or hedge themselves to the degree they are now.

In contrast, as long as the government pushes policies guaranteed to destroy wealth and prosperity — such as expropriation without compensation and the National Health Insurance scheme — more and more people (locals as well as foreigners) will reduce their exposure to SA.

Forcing people to invest in particular assets is not only harmful to savers but also papers over governance cracks. The government should not look to legislation to increase investment in SA but rather fix what is fundamentally wrong with the economy.

Marius Roodt

Institute of Race Relations