Unions back off from ANC notion of prescribed assets

The ANC statement in its 2019 election manifesto that it was once again considering the notion of prescribed assets for pension funds, has drawn mostly negative reaction from organised labour and the pensions industry, writes Legalbrief. Although organised labour has championed the notion in the past, it now says high levels of corruption mean that workers must be cautious about how their funds are used by the state. Business Day reports that labour federation and ANC alliance partner Cosatu, which has been at the forefront of the campaign calling for the imposition of legal requirements that pension funds dedicate a set portion of their portfolio to investment in the state, is now calling for caution on the adoption of the ANC proposal. Cosatu parliamentary co-ordinator Matthew Parks is quoted in the report as saying that Cosatu would not allow pension funds to be used as ‘petty cash for the state’. The Public Service Association (PSA), which has taken on the Public Investment Corporation’s alleged dubious dealings and the loss of worker monies through the Steinhoff debacle, has also taken a cautious approach. And the SA Federation of Trade Unions said while labour had campaigned for the introduction of prescribed assets, it was worried ‘about the levels of corruption and certainly do not want to open another trough’.

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Full City Press report

Raiding pension coffers will do little to save embattled state-owned enterprises (SOEs) or public projects, the Mail & Guardian reports experts say. The proposal, which surfaced at the ANC’s policy conference last year in June, is back on the agenda as the government grapples with ways to resolve power-utility Eskom’s acute financial distress. The report says although Eskom is the largest risk to the national fiscus, other SOEs, such as the SABC and SAA, are also desperately seeking funding after years of mismanagement and corruption. But according to the head of the ANC’s economic transformation committee, Enoch Godongwana, it is ‘incorrect to link this debate to the SOEs at the moment. The ANC is having a serious discussion on restructuring the SOEs.’ The proposal of prescribed assets is related to funding infrastructure, he says. ‘The decision is to investigate whether they can be useful in the current environment.’

Full Mail & Guardian report

Despite these assurances, financial institutions and public service unions are still nervous. Fin24 reports that the PSA has been locked in a stare-down with Eskom and other state institutions for the better part of a year over the idea of bailing Eskom out of its financial troubles by using pension funds. Eskom has already received financial assistance from institutions, including the China Development Bank and Agence Francaise de Developpement (French Development Agency), and the utility last year asked the Treasury to assume R100bn of its debt. Ashburton Investments’ head of fixed income portfolio management, Albert Botha, is quoted as saying that giving financial access to troubled entities would only serve to delay the inevitable rather than solve the problem. Botha said prescribed assets interfered with the capital allocation function of markets, distorting asset prices and allocating capital to organisations that may not necessarily deserve the amount of capital that prescription gives them access to.

Full Fin24 report