South Africa should discuss using worker pension funds to finance development and infrastructure projects, a proposal that has the backing of the country’s largest labour federation, President Cyril Ramaphosa said on Thursday.
In its 2019 poll manifesto ahead of the May general election, the ruling African National Congress (ANC) mentioned investigating prescribed assets – where the government authorises the investment of retirement savings in certain developmental assets – but was short on specific details.
“We need to discuss this matter (prescribed assets) and we need to discuss it with a view to actually saying what is it we can do to utilise the various resources in our country to generate growth in a purposeful manner,” Ramaphosa told lawmakers.
“We are facing a situation where our developmental needs are enormous, and in a number of other places pension funding is utilised for developmental purposes, for infrastructure and quite often those pension funds make good returns out of infrastructure developments.”
Analysts and opposition parties have raised concerns that prescribed assets would allow government to tap funds from the Public Investment Corporation (PIC), which manages more than 2 trillion rand of government employee pensions and is Africa’s biggest fund manager.
The ANC’s economics head told the Sunday Times newspaper last weekend that the party was eyeing prescribed assets to avoid any intervention from the International Monetary Fund (IMF) due to South Africa’s precarious economy.
The IMF said earlier this month that although South Africa’s debt levels were approaching uncomfortable levels, the government had made no request for help.
Ramaphosa, who has staked his presidency on turning a moribund economy around, said the ANC’s traditional labour alliance partner, Cosatu, supported plans to consider using workers’ pensions to pay for infrastructure projects.
Cosatu, the largest labour federation with around 1.6 million workers and which is in an alliance with the ANC, said it supported in principle the proposal to access pension funds.
“We are supportive of that position but it is conditional. We believe those are the resources that can be utilised to fix a utility like Eskom that is very important to the economy,” Cosatu spokesman Sizwe Pamla told Reuters.
Regularly cited by ratings agencies as a major risk, power utility Eskom depends on government bailouts to continue operating.