‘Transform financial services sector’
Government pension fund to use the might of its R2.7-trillion assets to drive change
● The Government Employees Pension Fund (GEPF), Africa’s largest pool of retirement savings, wants to use the might of its R2.7-trillion in assets to push for the transformation of the financial services sector.
The fund has adopted a transformation policy and strategy it says will support the transformation of the sector by encouraging the development of black-owned asset managers, private equity fund managers, fixed-income asset managers, auditing firms, actuaries and other emerging financial services providers. It will also direct more of its investments to companies and enterprises that advance broad-based black economic empowerment (B-BBEE).
The Public Investment Corporation (PIC) manages the fund’s assets and invests mainly on behalf of the fund, with 1.2-million active members.
Speaking to Business Times on Friday, GEPF chair Dondo Mogajane said they were seeking to level the economic playing field in South Africa because the country’s “story is incomplete” without the wholesale transformation of the economy and enterprises.
“We are saying it is important that we should leverage the strength and the might we have as the fund. The majority of our members are black people — government employees and pensioners.
“Let us use the size of the fund to ensure that in the companies and industries that the PIC invests in, we should seek investments that endorse the transformation that I am talking about. In particular, in the financial services sector.”
Mogajane said B-BBEE and the transformation of the economy, including access to finance for black-owned companies, must become a priority again, even if it annoys those who are against the transformation agenda.
“These are uncomfortable conversations that are irritating a whole lot of people. They irritate people who are anti-transformation, and who do not want black advancement. All I’m saying is: ‘Let us talk about these things openly and ask ourselves, are we delivering on the mandate of the post-1994 promise for black people in terms of participation in the economy and ownership of the economy?’
“Policymakers seem to have lost that. Influential South Africans, or politicians, seem to have put this on the back burner and are hoping that things will change for the majority of the people. We have lost that plot. We seem to have forgotten that we have transformation imperatives that we have to follow through to ensure South Africa becomes a just society,” he said.
In a speech at the GEPF annual leadership conference in Cape Town last week, Mogajane noted that total assets with black asset management companies in South Africa were between R1.3-trillion and R1.6trillion, representing between 14% and 18% of the R9.3-trillion savings industry.
“There is something wrong with this picture, 29 years after democracy.”
The GEPF also launched a refined manager development programme at the conference, to train more black-owned asset managers. To qualify, the firm must be 51% black-owned, have 51% black representation at board level, and blacks must constitute 51% of senior management. The firm also must be based in South Africa.
“We cannot let the socio-economic status remain the way it is. We have to begin to improve that. The same members who own the R2.7-trillion [in assets]; we are talking about their brothers, sisters, cousins and children. As a fund I want us to think beyond ourselves and support socio-economic transformation.”
Efficient Group chief economist Dawie Roodt slammed the policy as “anti-white”, and said such a transformation policy meant the GEPF would make investment decisions based on social and political, and not financial objectives.
“The biggest risk is that people will not have enough money when they retire because objectives are not the same any more. Pro-black means anti-white,” he said.
Roodt added it was strange that the GEPF was pushing such a transformation objective so hard when whites made up only 7.7% of the population according to the latest census, meaning more emphasis was being placed on something that was becoming less of an issue. He said the GEPF policy would benefit existing black billionaires instead of the broader masses.
“You are going to find the same black faces on the same boards benefiting. You are going to find more black billionaires. The masses out there, especially poor blacks, are not going to benefit from this. That is what we have seen in recent years. It is wrong for the majority of black people. They are going to be the losers.”
Roodt said the policy would damage both the GEPF and the economy because the objective of a pension fund is to offer members the best possible returns.
“Your responsibility is to look after the money of your members. I am afraid this is going to damage the GEPF. It is probably going to damage the economy because a lot of money is not going to be channelled into the best investments,” he said.
“Money is going to be invested in someone with some sort of connections somewhere, or skin colour, or whatever the case may be. That is wrong. You make investments based on financial statements, profitability and sustainability; you do not make investments based on race. [If you do] you are not going to make the best investments,” Roodt added.
Black Business Council CEO Kganki Matabane commended the GEPF’s transformation policy as a “step in the right direction”.
“It is a good idea to use the money of the workers, the majority of whom are black, to push for transformation to ensure that the majority, including the pension fund members, are playing a meaningful role in the mainstream economy,” he said.
“A transformed economy will create jobs but will also make sure that our democracy
can be maintained. GEPF funds were used and are still being used to buy into white businesses by white fund managers who are getting their allocations via the PIC. So, if funds are allocated to black fund managers they will invest in black- and womenowned companies.”
Asief Mohamed, chief investment officer at Aeon Investment Management, said the PIC on behalf of its biggest client, the GEPF, had contributed to supporting transformation and inclusion over many years.
“The efforts over many years by the PIC to diversify the management of its client’s assets has helped to improve risk-adjusted returns for the members of the GEPF.
“The next opportunity for the GEPF is to grow and support the aspirations of the local asset managers in the management of global equity mandates.”
Mogajane said the GEPF was not withdrawing from working with untransformed asset managers or investing in companies that don’t advance B-BBEE, but it would have to work with them to transform.
“We will have to work with these enterprises towards a common shared goal that advances our agenda,” he said.
We will not hesitate to scale down with the idea of total withdrawal if we are confronted with hostility, arrogance and nonresponsiveness to the realisation of our country’s democratic ideals of a just and equitable society.”
Fifa’s decision to hold the 2030 World Cup in six countries with fans flying to more than 100 games will increase the tournament’s carbon footprint and is at odds with the soccer governing body’s climate commitments, experts have warned.
Fifa allocated the 2030 World Cup to Spain, Portugal and Morocco last week but also said Uruguay, Argentina and Paraguay would host three matches to mark the tournament’s centenary.
After three games in South America from June 8-9 2030, the tournament will head to Spain, Portugal and Morocco, leading to several trans-Atlantic flights for teams and fans.
It is a stark contrast to the 2022 World Cup in Qatar, which had only 32 teams while all 64 matches were played in eight stadiums in and around Doha.
“The big problem is that they’re continuously growing the event,” said sport ecologist Dr Madeleine Orr, an assistant professor at the University of Toronto, whose research examines the impacts of climate change on the sport sector.
“Every decision that grows the World Cup is going to increase the carbon footprint of the event. That’s the unfortunate truth. It’s a tradeoff.
“You get growth economically and as a result, you’re getting a bigger environmental footprint ... Fifa itself said it is considering the environment, yet all of the actions suggest otherwise.”
Fifa said it will take all required measures to mitigate the environmental impact of the World Cup, adding that 97% of the 2030 tournament will be held in three countries that share a border or are separated by a few kilometres.
“For 101 games, the tournament will be played in a footprint of neighbouring countries in close geographic proximity and with extensive and well-developed transport links and infrastructure,” Fifa said.
Fifa previously said it was committed to a 50% reduction in carbon emissions by 2030 and achieving net zero by 2040.
But in June, a Swiss regulator said Fifa made false and misleading statements about carbon neutrality and the reduced environmental impact of the World Cup in Qatar.
Quentin Cuendet, who acted on behalf of the Swiss Climate Alliance with the association Avocates pour le Climat in their case against Fifa for “greenwashing” at the 2022 World Cup, said it was not possible for Fifa to mitigate the impact.
“The first reason is that in such big tournaments, with people coming from all over the world, most emissions are from flights. This is something Fifa cannot reduce,” Cuendet said.
“It’s too big, it’s about 80%-85% of total emissions. I cannot see how Fifa can commit to have any positive effect on those emissions.
“The second reason is that at the World Cup in Qatar, Fifa claimed it offsets part of its emissions.
“What we showed ... is that Fifa was unable to prove that the offsetting was effective and had a positive impact on the emissions of the World Cup.”
Dr Walker Ross, a lecturer in sport management at the University of Edinburgh and a member of the Sport Ecology Group, said trans-Atlantic flights alone would be responsible for one to two tons of carbon dioxide per passenger.
“For the last World Cup in Qatar, travel within the country was quite minimal because the country is so small,” Ross said.
“[In 2030] you’re going to have teams fly down to South America, play a match and then they’re going to fly back to, let’s say Spain. That just seems quite carbon intensive.”
Ross also said the actual benefits of carbon offsetting like purchasing a forest and maintaining it or planting trees will take decades to actually work its way into the system.
“Meanwhile, the actual carbon impact of those flights is very much right now, it’s not years and years down the road, which is what we’re seeing with offsetting,” he said.
‘World Cup at odds with Fifa’s climate policy’