Growing the economy will require the increase of both foreign and domestic financial capital, says deputy finance minister David Masondo.
Speaking at a recent private investors conference, Masondo said that while government was working to attract overseas investment, there is also ‘enormous power’ in the size of long-term fund managers, such as pension funds.
“At this point, let me be clear about our views. Firstly, from a Finance Ministry perspective, the savings of workers must be protected. In this regard, they should never be exposed to risks emanating from poor financial management in either the public or the private sector,” he said.
“Second, the onus must be on economic actors to ensure that the value proposition of the investment is sound. Government can never compel asset managers to invest their clients’ money in unsound or poor-return projects.
“But let us not forget that the size of long-term fund managers such as pension funds alone is a source of enormous power and influence in driving economic growth and reform.”
Masondo said that these types of funds have the ability to secure longer-term returns by insisting on high standards of delivery, governance, and social responsibility.
“We need to ask ourselves that: what prevents the full potential of these instruments from being unleashed on the economic potential before us?” he said.
In August, President Cyril Ramaphosa said that South Africa should investigate using worker pensions to finance development and infrastructure projects.
“We need to discuss this matter (prescribed assets) and we need to discuss it with a view to actually saying what is it we can do to utilise the various resources in our country to generate growth in a purposeful manner,” Ramaphosa said.
The ANC has also previously floated the idea of using pensions to help fund embattled state-owned enterprises.
The DA’s Natasha Mazzone has said that the use of prescribed assets would cause incredible damage to the savings of millions of South Africans, and is unlikely to help the country’s state-owned enterprises to recover from debt.
“South Africa has hundreds of SOEs, many of them are either completely dysfunctional, bankrupt, or frankly serve no purpose other than lining the pockets of the connected few,” she said.
The DA’s Geordin Hill-Lewis added that the proposal was equivalent to theft.
“This government is proposing to steal pensions of hardworking South Africans to pay for their mismanagement,” he said.
Article by Business Tech