The ANC’s manifesto pledge to force retirement fund managers to invest in SOEs and state-run infrastructure projects has been met with strong criticism from the financial sector.
The Association for Savings and Investment South Africa (ASIA) told the Sunday Times that reintroducing prescribed assets could result in significant negative outcomes for investors and members of retirement funds.
“Prescribing a minimum level of investment in certain assets is not the best global practice,” said an ASIA spokesperson.
“Prescription is not synonymous with an open economy that should be encouraging attractive investment opportunities and would in fact deter investment.”
“When government policies direct capital that ultimately belongs to the country’s retirement fund members and investors towards a particular investment, often at below-market returns, the outcomes can be less than optimal for savers and, over the long term, for the economy,” said the ASIA spokesperson.
Stanlib CEO Derrick Msibi said that the ANC’s policy misunderstands what South Africa’s issues are and could “result in misguided actions.”
“It is essential to remember that the funds at stake do not belong to asset managers but to pensioners, widows, orphans, and depositors,” said Msibi.
“As stewards and fiduciaries, we act on their behalf.”
All Weather Capital CIO Shane Watkins added that “capital follows returns and does not need to be told where to go.”
“Whenever you need to compel an investment by legislation, the implication is that the returns will be lower, or the risk is higher,” said Watkins.
Private sector keeping economy alive
These comments follow Standard Bank chief economist Goolam Ballim stating that private investments are keeping South Africa’s economy alive.
This is particularly true regarding private sector investment in areas where state-run utilities are failing — such as with energy, water, and logistics.
However, he warns that these investments, although critical, are not driving long-term economic growth, but merely subsistence.
Long-term investment in growth would require a fundamental shift towards policy stability, fast work to reform and address infrastructure issues, and actions and policies that deliver improved confidence in the economy.
Election season
The ANC’s pledge to force investment in state companies and infrastructure forms part of its election campaign.
South Africans will cast their vote on 29 May 2024, and based on opinion polls, these elections are expected to be the least successful for the ruling ANC party since it first entered the ballot in 1994.
These polls show that the ANC is at risk of losing its majority, meaning it would have to partner with other parties to continue ruling the country.
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