It calls for more state intervention across all sectors, including speeding up the creation of a state-owned bank, establishing a state-owned pharmaceutical company to help decrease the price of medicines, and more interventions in mining, manufacturing, energy and other sectors.
The document proposes 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 (DFIs)”.
It calls for a “necessary regulatory mechanism to ensure increased pension fund investments directly into projects such as real assets, which can unlock capital that is currently not finding its way into [these] projects”.
When approached for comment, Enoch Godongwana, chair of the ANC’s economic transformation committee, said this was not an attempt to introduce prescribed assets via the back door. He said regulation 28 prescribes where pension funds should invest, which is the stock exchange and bonds, and loosening this regulation would allow fund trustees to make a decision to direct their funds to more developmental projects.
“Pension funds are not allowed to put funds directly to DFIs. Those funds have to get there through asset managers, but funds that reach DFIs have a cost structure of those asset managers.”
As a result, the bulk of the funds go to the stock exchange and bonds, and “very little goes to DFIs”, he said.
“It undermines development objectives.”
The asset management industry — which includes pension funds, insurers and other investors — has R8-trillion under management. But there has been an uproar in the past over any suggestion to force pension funds to invest in state-owned entities or government bonds. Business SA said it was against any moves towards prescribed assets.
The draft document also proposes that the Bank create a funding instrument to the tune of R500bn that will allow DFIs to access funding for infrastructure projects at favourable rates.
“This should be offered at a developmental yield to maturity, with time horizons that are beyond the appetite of funding from private commercial banks. DFIs should be allowed to deploy this funding for infrastructure projects.”
It also wants a similar engagement with the PIC, “with the aim of releasing funds for long-term projects through DFIs”.
Godongwana said there was never a difference of opinion in the ANC about the centrality of the role of the state in the economy. “The difference has been on the modus operandi. What form should that state centrality take? Clearly in the current circumstances, Covid-19 has put that on top of the agenda, because if we have to stimulate this economy it must be the state that must assume the central role.”
Economist Duma Gqubule said: “This will set them on collision course with the GEPF [Government Employees Pension Fund, on whose behalf the PIC invests] and Reserve Bank, which doesn’t see its role as funding development. We must grab popcorn and watch what’s going to happen here.”
Gqubule said it was too early for the ANC to be discussing post-Covid recovery when it had not addressed how it was going to deal with the economic crisis SA was facing. “We have immediate issues to address. How are we going to fund the doubling of the budget deficit to R700bn? How are we going to finance the next 12 to 18 months of extreme uncertainty in the economy where unemployment could reach 55%? They haven’t sorted out the immediate crisis.”
Vice-president Martin Kingston said Busa agreed there was an urgent need for interventions across many aspects of the economy for quicker recovery from Covid-19. It also supports a social compact across all sectors, but not a state-owned bank.
By Caiphus Kgosana and Sibongakonke Shoba – DispatchLIVE