The state’s proposal to force pension funds to invest in bonds issued by government and state-owned enterprises, like Eskom, is effectively theft, Parliament heard.
The National Assembly on Tuesday debated the proposal to investigate the policy of prescribing assets, with most opposition parties expressing their disapproval.
The prescription of assets refers to a policy where the state obliges institutions such as pension funds and insurance companies to invest a part of their funds in state institutions or bonds. The apartheid government had maintained the policy for 33 years (between 1956 and 1989).
Several analysts have suggested that the investments would be directed towards bailing out failing SOEs, Fin24 previously reported.
The DA, which called the debate, started off proceedings with MP Geordin Hill-Lewis, who claimed that instead of fixing SOEs government is opting for a policy from the apartheid regime.
“The ANC has resorted to copying policies of a failing apartheid government. Some may call it moral and political bankruptcy,” Hill-Lewis said.
He warned that the policy would leave South Africans with smaller pensions when they retire.
“It is pension theft,” he said. “This government is proposing to steal pensions of hardworking South Africans to pay for their mismanagement.
“Stealing from people’s future pensions is still theft and should be fought by every South African who has diligently saved for their retirement,” he told the National Assembly.
In response, ANC MP Phoebe Abraham defended the policy proposal. “The ANC is not a reckless government. We are a caring government,” she said.
Abraham went on to explain the ANC’s reasoning for considering the policy. With the economy being under strain the governing party is coming up with solutions and wants to support the president’s “exploratory direction”, she said.
Abraham recalled how the policy was used by the apartheid government to stimulate economic growth and while the white minority benefited from it, the majority of the oppressed remained “uncatered” for.
She echoed a previous statement by President Cyril Ramaphosa that the ruling party is pursuing policies that will advance the interests of South Africans.
ANC MP Gijman Skosana also defended the ruling party for taking the responsibility to lead and bringing an intervention to address the poverty, inequality and unemployment challenges in the country.
He slammed the DA for only being concerned about the quality of return from the pension funds and not growing the economy and creating jobs – which is what the prescription of pension funds is envisioned to do.
The EFF seemed to side with the ANC as their MP Floyd Shivambu called the DA out for “raising false alarms” about the prescription of assets. “There is no debate worthy of the sensationalism created by the DA,” Shivambu said before adding that regulation 28 of the Pension Funds Act regulates how pension funds should be invested.
He said there is nothing wrong with the prescription of assets – as long as it falls within a defined development programme.
He suggested that the various municipal pension funds be consolidated into one and that an asset manager should be appointed to invest a portion of the funds towards developments such as municipal infrastructure, job creation and labour absorbing sectors in the economy.
IFP MP Elphas Buthelezi, however, was not on the same side of the fence as the ANC and EFF, and said that government would be “gambling” pension funds with the prescription policy.
“We cannot trust the government to make the right investment decisions for people … Take hands off the pension kitty,” he said. The majority of South Africans are saving money in funds not to necessarily enjoy retirement but to make provision for their families, he added.
FF Plus Wouter Wessels warned the ANC from following implementing a policy with good intentions, without considering the unintended consequences.
He urged government to learn from the mistakes of the apartheid government, who sought to stimulate the economy through the prescription of assets – but this strategy left the government employee pension fund “completely depleted” by 1994.
“Learn from the past,” he said.
“Pension fund holders will have to increase their contributions and work longer and contribute for a longer time to account for the poor performance of investments,” Wessels said.
He said government should rather fix SOEs, which have been plundered, than look into a policy of prescribed assets. “The poorest in South Africa will suffer the most through this policy,” he said before adding that history repeats itself and that the ANC is following the path of the now defunct National Party.
NFP MP Shaik Emam shared the view that government should rather make sure SOEs turn profitable before investing any more funds in them.
“Until we get our house in order and manage affairs better, we must leave funds alone,” he said.
“The idea is good but the timing is not good,” he added.