The ANC is looking at the possibility of using private and public pension funds to rescue the country’s struggling state-owned enterprises.

In an interview with the Sunday Times Enoch Godongwana, head of the party’s economic transformation subcommittee, said that the asset management industry currently has R6 trillion under management which should be borrowed by government.

Godongwana said using this approach to gather funds is better than going the International Monetary Fund (IMF) for a bailout.

“Why would you go to the IMF and the World Bank and go and raise money when we have sufficient savings in the economy which you can borrow, probably far cheaper, and probably with little exchange rate risk?”

Godongwana added that while the ANC is also currently investigating the use of prescribed assets, this is separate from raising money through pension funds.

“Borrowing from domestic markets is not prescribed assets, that is a separate investigation,” he said.

On Thursday (15 August) the IMF stated that South Africa has not asked for its assistance, adding that it did not need a loan, currently.

The IMF doesn’t see a balance-of-payments problem in South Africa, which means there’s no need for IMF support, Montfort Mlachila said at a conference hosted by the Bureau for Economic Research in Johannesburg.

“To tell you the truth we – by ‘we’ I mean the institution – much prefer the countries to resolve their own problems and I’ve no doubt that South Africa has the capacity to address its own problems in the various areas, especially on the growth front, as well as on the fiscal front,” he said.

Prescribed assets

In its election manifesto published in January 2019, the ANC announced that it planned to investigate the introduction of prescribed assets on financial institutions’ funds to ‘unlock resources for investments in social and economic development’.

However, the government has not commented about the status of the plans or how they may be implemented, said pension fund administrator, Alexander Forbes.

In a June presentation, the company said that no detail has been provided in terms of the form that the prescription could take, however it warned that the consequences could be dire.

“The references to investments in ‘social and economic development’, ‘socially productive investments’ and ‘job creation’ are encouraging,” it said.

“But there is a concern that this could be applied to mean investment into SOEs and municipalities that have social and economic development as a part of their mandates e.g. Eskom, Transnet, Sanral, etc,” Alexander Forbes said.

The company further warned that if the plans go ahead, there may be a financial exodus as people pull their retirements funds and stop contributions so that they are not impacted by government interference.

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