Battle over state’s interference in pension investments intensifies

The opening shots in the battle on government plans to force pension funds to invest a percentage of the money they manage for those saving for retirement into prescribed assets were fired in Parliament yesterday, and it is clear that it is going to be a tough battle in which no quarter will be given.

The government plan, which has not been finalised in detail yet, is basically to force pension funds to invest a part of the money they manage into state bonds and/or state-owned entities like Eskom, the SAA and Denel. These entities are struggling to attract money elsewhere.

“A very expensive mistake”

DA MP Geordin Hill-Lewis, who requested the debate and was therefore the first speaker in it, claimed that government was going to make a very expensive mistake for which South Africans will have to pay with the money they put away to ensure a decent standard of living when they are too old to work.

According to the DA, the only reason why the ANC government wants to take this route is because they are in such deep trouble – trouble the ANC itself created, which for instance, has the effect that foreign borrowing is becoming prohibitively expensive.

Hill-Lewis castigated trade unions for not mustering the guts and the wherewithal to stand up to government on a policy which will leave trade union members poorer in their old age. He reminded Parliament that a policy of prescribed assets had been tried in South Africa once before – between 1986 and 1989 under then-President PW Botha, because the apartheid state’s ideology and its effects had in practice bankrupted the country, which had run out of financing options in an unsympathetic world.

“And now you want to take this page from a bankrupt apartheid state which was on its last legs. How low can you go?” asked the DA MP, who reminded Parliament of the dire straits in which the policy had left South African pensioners, specifically in the civil service, at the time.

Government ‘stealing’ South Aricans’ pensions

He claimed the state was simply stealing people’s pensions, and that the DA will fight the policy all the way. According to Hill-Lewis’ calculations, if Government obligates pension funds to invest 3% of pensions in prescribed assets, as current indications would have it, any 35 year old currently saving R2 000 per month towards their retirement will end up R1,4 million poorer than they would have been because of this new ANC policy, because the policy of prescribed assets would only ascribe investment in assets which pension fund managers would otherwise not buy due to low or non-existent yields – otherwise the prescription would not be necessary.

The next speaker, ANC MP Phoebe Abraham, said that the ANC was not a reckless government. The ANC had to admit that the economy was in trouble, and as a responsible government the ANC had to come up with a workable solution, in the national interest of the country and all its people.

She pointed out that the policy had been implemented in the past. It was above board, it is nothing new and the ANC had learnt from those implementation mistakes made in the past, so as not to repeat them.

Abraham pointed out that it was untrue to claim that the ANC had not received the mandate for the policy from South African voters. It was stated explicitly as ANC policy in the ANC’s election manifesto, which the majority of South Africans supported and endorsed in this year’ general election.

Other MPs raise concerns over prescribed assets

EFF Chief Whip Floyd Shivambu said his party supported the policy of prescribed assets for pension funds in principle, provided is in implemented well. He pointed out that the Public Investment Corporation (PIC), which is often expected to make such investments as those foreseen to be prescribed in the new policy, generally achieves laudable returns on investments, and chalked up its worth loss with its investment in the private sector company Steinhoff, not due to an investment in a state-owned entity.

On behalf of the IFP, Inkosi Elphas Buthelezi opposed the prescribed assets policy. He said the ANC is distrusted, corrupt and incompetent, and no-one wants to allow corrupt and incompetent people to invest your personal retirement money on your behalf.

Freedom Front Plus MP Wouter Wessels warned the ANC to reconsider the policy. He said the ANC always blamed unforeseen circumstances for their failed policies, but in this case the failure was entirely foreseeable.

Wessels reminded the ANC that similar actions and a similar policy contributed hugely to the once powerful National Party’s downfall, and predicted that the ANC is on the same path to political oblivion.