The ANC’s proposal to revisit regulation 28 of the Pension Funds Act should be viewed as an alternative to prescribed assets and not as a backdoor measure to bring in rules that will force pension funds to invest in government stock, the ANC’s economic policy chief Enoch Godongwana said on Monday.
The proposal was included in the ANC’s policy paper published in July, which suggested that an amendment of the regulation could lead to greater investment in infrastructure by the collective savings industry.
An infrastructure build programme is viewed by all stakeholders, including the government, business and labour, as the most effective way to stimulate economic growth. But there has been much confusion and suspicion in the market and among the public of the real intentions of the proposal.
Regulation 28 sets the maximum level that pension funds and life insurers can hold in the various asset classes, such as property, government bonds or listed shares, but does not set a ceiling that would be prescriptive.
Speaking at a webinar arranged by the ANC’s Progressive Business Forum, Godongwana said: “You will recall in our ANC national conference we emerged with a proposition which suggested we should look at prescribed assets. When we talk about tweaking regulation 28, we are moving in a slightly different direction than what conference said. We are moving from an environment where there is no enforced prescription to creating an environment where trustees can invest in infrastructure projects as long as those projects are profitable.
“I want to use this opportunity to dismiss and debunk the claim that we want to use the pension funds to bail out collapsing state-owned enterprises or fund a state-owned bank,” he said.
These were “mischievous” and made with “the intention of discrediting our argument”, said Godongwana.
Godongwana said the ANC had made a big ideological shift in its policy paper and now had agreement that private-public partnerships and build-operate-transfer models for public infrastructure were acceptable.
Also on the panel was the head of infrastructure in the presidency, Kgosientsho Ramokgopa, who said the revision of regulation 28 was under discussion because, compared to other countries, pension funds in SA were underinvested in unlisted assets, with only 2.3% of investments in this class. Regulation 28 has a threshold of 10% for investments in private equity.
Ramokgopa said the idea of project bonds, which would enable investors to invest in specific projects, was being explored. So was the idea of issuing green bonds to tap into pools of green financing money.
Business Unity SA vice-president Martin Kingston, who was also on the panel, said SA did not have adequate financial resources to fund an infrastructure-led recovery and needed to mobilise funds from wherever possible. Business had been involved in detailed discussions on the regulation 28 issue.
“We have said that capital should be mobilised from all sources, both public and private, with the caveat that it does not compromise the financial system in SA or undermine the responsibilities of trustees of pension funds or stray outside the mandates of those funds,” he said.
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