Sup­port projects, warns Masilela

For­mer PIC CEO warns more money needs to be poured into de­vel­op­men­tal projects if it wants to avoid an es­ca­la­tion of so­cial chaos

Business Day - - FRONT PAGE - Londiwe Buthelezi Busi­ness & Fi­nan­cial Writer [email protected]­nesslive.co.za

For­mer Pub­lic In­vest­ment Cor­po­ra­tion (PIC) CEO Elias Masilela warned on Wed­nes­day that the in­vest­ment in­dus­try had to start pour­ing more money into de­vel­op­men­tal projects if it wanted to avoid the es­ca­la­tion of so­cial chaos in SA and be­ing forced to prop up ail­ing state-owned en­ter­prises.

For­mer Pub­lic In­vest­ment Cor­po­ra­tion (PIC) CEO Elias Masilela warned on Wed­nes­day that the in­vest­ment in­dus­try had to start pour­ing more money into de­vel­op­men­tal projects if it wanted to avoid the es­ca­la­tion of so­cial chaos in SA and be­ing forced to prop up ail­ing sta­te­owned en­ter­prises.

Speak­ing at Alexan­der Forbes’s In­vest­ment Ind­aba, Masilela, who is now a di­rec­tor of eco­nomic re­search at DNA Eco­nomics, cau­tioned in­vest­ment firms and asset con­sul­tants that if they con­tin­ued with their “short-ter­mist” thinking, the so­cial up­heaval that SA was wit­ness­ing would get worse.

Masilela said while the pri­vate sec­tor made com­mit­ments at the Na­tional Eco­nomic De­vel­op­ment and Labour Coun­cil to al­lo­cate at least 5% of their cap­i­tal to­wards de­vel­op­ment, many com­pa­nies had not done so. Even among pen­sion funds, he said, only a few had al­lo­cated more than 10% of their assets to­wards de­vel­op­men­tal assets.

The short­age of cap­i­tal flow­ing to­wards de­vel­op­men­tal assets is one of the rea­sons the ANC govern­ment has said it will in­ves­ti­gate whether pre­scribed assets are nec­es­sary.

Pres­i­dent Cyril Ramaphosa has now called for a na­tional di­a­logue on the is­sue.

Masilela said that while he did not think pre­scribed assets would be the so­lu­tion to SA’s debt and de­vel­op­men­tal chal­lenges, the fi­nan­cial sec­tor would do well to re­flect on whether it had done enough to change the so­cial cir­cum­stances of many South Africans.

“We can see the so­cial strife in SA to­day, we can see the ten­sion but we still have con­sul­tants who don’t be­lieve it’s worth in­vest­ing in Soweto, who don’t be­lieve in BEE.”

He warned com­pa­nies and their boards of di­rec­tors that “the fires that we are see­ing in Pre­to­ria and Joburg will come to Sand­ton” if they do not change the way they do things.

Masilela said the coun­try did not need more pol­icy in­ter­ven­tion such as pre­scrip­tion, but “at least the pre­scribed assets de­bate is forcing us to en­gage”.

The head of in­vest­ment con­sult­ing at Alexan­der Forbes, Jan­ina Slawski, said the fact that in­vest­ment man­agers had pre­scrip­tion hanging over their heads showed that, to some extent, the in­dus­try had not done enough. But even then, Alexan­der Forbes was op­posed to any reg­u­la­tion, in­clud­ing pre­scrip­tion, that could “lead to sub­op­ti­mal in­vest­ment out­comes”.

“We want to make a dif­fer­ence in our coun­try, we want to avoid pre­scrip­tion, so let’s ig­nite im­pact in­vest­ing,” she said.

Ma­batho Seeiso, an independen­t trustee and MD of women em­pow­er­ment cen­tre The Bridge, said the in­dus­try had started mov­ing in the right di­rec­tion. She said trustees sup­ported the fund­ing of de­vel­op­men­tal assets but were “sus­pi­cious of govern­ment” be­cause it had not en­gaged the pri­vate sec­tor on what the pro­posed pre­scrip­tion would look like.

She said the as­sump­tion they had was that peo­ple’s pen­sions would be used to prop up the likes of Eskom. “In fact, in the pen­sion fund in­dus­try, we have stopped ask­ing ‘should we do im­pact in­vest­ing?’ to say­ing ‘how should we do it’,” she said. The in­dus­try was re­al­is­ing that its in­vest­ment strate­gies had to re­flect re­al­i­ties on the ground be­cause most pen­sion fund mem­bers “can’t run to Aus­tralia”, Seeiso said.

Alexan­der Forbes’s chief econ­o­mist, Isaah Mh­langa, said in­vest­ment pro­fes­sion­als had to change the way they cal­cu­lated re­turns be­cause to keep their op­er­a­tions sustainabl­e and the coun­try sta­ble, they needed to place so­cial and en­vi­ron­men­tal im­pact in­vest­ment in the same league as fi­nan­cial re­turns.

“The so­lu­tion is not to stop burn­ing build­ings com­ing to Sand­ton, it’s to stop all burn­ing build­ings.”

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