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The government wants taxpayers and pension fund managers to invest in its planned infrastructure development projects, but questions remain about corruption and whether the money will actually be used properly.
Responding to this question in a written parliamentary question and answer session, Finance Minister Tito Mboweni acknowledged that the government would have to work hard to “inspire confidence” when it comes to the use of pensions for investment.
“The best way to inspire confidence in any government project is to generate economic growth, rid our country of corruption and inefficiency, and ensure that the people of our country can trust the public servants who manage the projects in which they invest. your funds. ” he said.
“The government does not determine where the retirement funds invest. It is the board of trustees of a retirement fund that determines the investment policy for that retirement fund as part of its fiduciary duty towards the fund and its members ”.
“Retirement fund trustees, like most investors, want to invest in a project, whether in the public or private sector, as long as they have confidence in those who manage those projects in a way that generates the returns that those investors expect. ”.
Mboweni added that the extent to which retirement funds can invest in any asset class is governed by Regulation 28 of the Pension Fund Law.
“The recent Medium Term Budget Policy Statement outlines the steps the government intends to take to stabilize our debt and generate more confidence, investment and economic growth.”
After months of talking with the private sector and banking institutions, the government said it is in talks with the pension fund managers of possible investment in infrastructure in the country.
At an investment conference in November, Dr. Kgosientsho Ramokgopa, head of the Office of Investment and Infrastructure of the Presidency, said the country’s pension funds are sitting in a ‘large pool of liquidity’ and are now beginning to explore investment in infrastructure as an additional asset. class.
“Before, when we had conversations of this nature, pension funds were not on the table. Now they are on the table and are part of the co-creation exercise, and we believe that by doing so we can take advantage of that large pool of liquidity.
Ramokgopa said that the previous funds for infrastructure had been taken directly from the government portfolio, but that the impact of Covid-19 had caused a severe decrease in the treasury.
“Essentially, we need to look for new sources of funding. But for you to get projects financed off the government balance sheet, they have to be solid projects. “
Unclaimed money
In another question, Mboweni was asked about the possibility of using unclaimed pension money as a source of funding for the Covid-19 pandemic.
However, the finance minister said that such funds are not centralized or held in a single fund, and neither the government nor any of the financial sector regulators own or manage such funds.
“Unclaimed benefits are no different from any other retirement fund benefits, which means that these benefits belong to members and beneficiaries.
“Therefore, they are maintained and administered by boards of directors of these funds, and not by the government. Therefore, the government is not in a position to access or use the unclaimed retirement fund benefits. “
Mboweni said three recent court cases have also considered how such funds can be used under current law.
The use of unclaimed benefit funds should be properly legislated, and the upcoming Financial Institutions Conduct Bill (COFI Bill) takes the first steps in this direction, but is only expected to be signed into law by the end of the next year, he said.
“We deeply sympathize with the difficult situation South Africans face as a result of the Covid-19 pandemic, and it is for this reason that the government has put in place a series of measures to ease pressure on workers.
“In addition, as announced in the recent Medium-Term Budget Policy Statement, the government will introduce the necessary legislative amendments next year to allow limited withdrawals from retirement funds in certain circumstances, but linked to mandatory retention requirements.”
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