The ANC’s proposals for economic revival in the post-Covid-19 economy, published on Friday, argue for an infrastructure-led recovery, which will be funded in part by pension funds and other savings.
The plan does not endorse prescribed assets — or a policy which would require funds to hold a minimum level of government stock — but does aim to mobilise such savings into infrastructure projects on a voluntary basis.
The paper was published a few hours after Business for SA released its blueprint for the recovery, also calling for an infrastructure-led economic growth strategy, naming many of the same priorities such as investment in energy infrastructure, broadband expansion and roads and rail. Business for SA says that as the government will be unable to fund the recovery alone, the private sector should be able to invest in and run economic infrastructure, regulated by the state.
The ANC also recognises the importance of private sector involvement in building economic infrastructure. But it also wants pension funds and other long-term savings institutions to invest more extensively and directly in infrastructure. To facilitate this it proposes “changes be made to Regulation 28 under the Pension Funds Act to enable cheaper access to finance for development”.
Regulation 28 sets the maximum weighting of savings and pension funds in the various assets classes, but does not set a minimum, which would be prescriptive. But the exact changes to the regulation are not spelt out in any detail and economic policy head Enoch Godongwana said proposals were still being explored.
The paper also suggests that fiscal and monetary policy will have to be closely co-ordinated “to ensure ongoing access to capital markets and to reduce the cost of borrowing, as well as strengthening the role of development finance institutions”. It tones down a suggestion in the earlier draft of the paper for the SA Reserve Bank to create resources to capitalise development finance institutions, such as the Development Bank of SA.
The major political intervention of the ANC proposal is the recommendation that the recovery plan and economic growth initiatives be co-ordinated by the office of the presidency, which must increase its capacity to perform this function. While former president Thabo Mbeki’s office carried out this function well, the capacity was lost over the decade of the Jacob Zuma presidency.
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