ANC eyes pensions to boost SOEs
The ANC wants retirement funds and other asset managers to be compelled by law to invest in infrastructure projects and work done by state-owned enterprises.
In its manifesto released yesterday, the party proposes to “engage and direct financial institutions to invest a portion of their funds in industrialisation, infrastructure development and the economy, through prescribed assets”.
The governing party has always pushed for the asset management industry to invest more in infrastructure projects and other sectors of the economy, but has so far shied away from directing where the trillions of rands held by pension funds, long-term insurers and other fund managers should go.
The proposal was first mooted four years ago, when finance minister Enoch Godongwana was head of the ANC’s economic transformation committee.
It was contained in a discussion document produced by the committee titled “Reconstruction, Growth & Transformation: Building a New and Inclusive Economy”. The document proposed amending regulation 28 of the Pension Funds Act to “increase access [to] the savings of South Africans to fund long-term infrastructure capital projects managed by development finance institutions”.
However, the asset management industry has always been opposed to the prescription of assets.
Alexander Forbes CEO Dawie de Villiers said in Business Day the industry did not support the proposal.
“Prescription should not happen, and we are dead against it, and we think it will not happen. The right way to do it, and which we would be very keen to support, is [to make] the projects accessible for pension funds to invest [in them] by ensuring appropriate governance is in place and suitable risk-adjusted returns are achievable.”
The report quoted De Villiers as saying not much, if anything, needed to be done to regulation 28 (the law stipulating how retirement funds should be invested) to facilitate the investment of hundreds of billions of rands held by the private sector in infrastructure. “I think there is ample room in the current regulations for retirement funds to allocate capital to these projects,” he said.
At the time, Gondongwana said discussions with the pension fund industry were about how to make it possible for pension funds to invest directly in infrastructure, rather than through intermediaries.
“We have an infrastructure programme that has to be developed. If properly packaged, there’s no reason why pension funds should not invest in that infrastructure directly, instead of using third parties in the form of asset managers. It just increases the cost [of] development,” he said.
In its manifesto, the ANC also unveiled ambitious plans to “finalise the establishment of [a] sovereign wealth fund” that would prioritise investment in infrastructure.
Other plans include establishing “development and sectoral banks” that would be aligned with industrial policy goals. These proposals include creating financial institutions in provinces. It is unclear where the money for this would come from.
Gauteng has also announced plans to create a provincial government-owned bank.
Ithala Bank, owned by the KwaZulu-Natal provincial government, is struggling in the current economic climate. However, this does not seem to have deterred the ANC from promising to create more banks.
“The ANC will empower co-operative banks by removing regulatory barriers to entry, including the review of the National Credit Act, and support the growth of co-operative banks. We will ensure affordable access by the co-operative banking sector to the national payment system, including ATMs and debit and credit cards,” the manifesto says.
The party said its government would invest in roads, railways, bridges, dams, fibreoptic networks and energy infrastructure. “Investment [in] energy, in particular, is necessary to end load-shedding and ensure a secure supply of electricity.”
Other promises included installing geysers in households and developing gas, nuclear and hydropower projects. The party also plans to create a national oil company to restore domestic refinery capacity.