The Institute of Race Relations warns against planned pension grab

According to a Bloomberg report, using the pensions of South Africans in both the private and public sectors is envisaged as a way to help kick-start the economy.

This comes on the heels of comments by Enoch Godongwana, the head of economic transformation in the governing ANC, that private pension fund managers be allowed to invest directly in state finance institutions.

In a statement, the IRR said it strongly opposes the forced use of private or public pensions to fund infrastructure projects or other schemes as a way of trying to stimulate the economy post-Covid-19.

Prescribed assets – where fund managers are compelled to invest at least some money in sectors or projects determined by the government – must not be used to fund vanity projects.

“While the use of prescribed assets by the apartheid government is often suggested as a justification for doing the same today, returns on money invested via prescribed assets were far lower than the returns on equities, making South Africans poorer at retirement than they would otherwise have been.

“Implementing a regime of prescribed assets will not be difficult, as it will require only a change in Regulation 28, which governs how pensions and retirement annuities can be invested.

“Instead of looking to the savings of ordinary South Africans, the government should implement real reforms that will unlock the economic potential of the country and its citizens, rather than continuing to rely on ideas which have failed dismally over the past decade of governance.

“Real action must be taken on corruption, and the government should abandon the idea that it can continually bail out failing state-owned enterprises,” said the IRR.

“We have long warned of the threat of prescribed assets to the retirement funds of ordinary South Africans,” said senior policy researcher at the IRR, Marius Roodt.

“We will continue to pressure fund managers to work with us and others to keep the government’s hands off South Africans’ nest eggs.

“Instead of looking to taking the pot of money that South Africans have scrimped and saved to build up, the government must implement true reform which unlocks the enormous potential of our country, instead of once again looking to failed ideas which we know do not work.”

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