THE threat of prescribed asset classes for pension funds, recommended as a policy for adoption at the African National Congress’s (ANC’s) national electoral conference, has receded and the party looks unlikely to push for legislation on the matter.
The conference is expected to discuss "directing" the resources of savings and retirement funds into infrastructure investment, either voluntarily or by compulsion. But Thaba Mufamadi, an ANC national executive committee member who serves on the party’s economic transformation committee, has said in an interview recently that the committee believes "the door should be left open" on the issue.
"We’ve had interactions with the Banking Association and their response was that they are willing to participate in infrastructure investments in partnership with government," he said. "We welcome that ."
MD of the Banking Associations Cas Coovadia last week called on delegates attending the ANC conference to be aware that their policy decisions could have a negative effect on banks. The ANC is under pressure from its members and political partners to do more to improve the socioeconomic conditions of disadvantaged South Africans.
Rating agencies have downgraded all the big banks this year, after they lowered SA’s sovereign rating on concerns about economic policy uncertainty.
Abandoning talk on prescribed asset classes is only the view of the ANC’s economic transformation committee. In a commission on economic policy, which began deliberating at the party’s conference on Monday, delegates could still push for the adoption of the policy. But the momentum has gone out of the debate.
South Africa’s pension funds do, in any event, invest extensively in infrastructure and government and state-owned enterprise bonds, which are regarded as a good fixed income source. Figures from the Reserve Bank showed that last year 21% of the R4.5-trillion pool of household savings was invested in government and state-owned enterprise bonds.
But intervention in the mining industry and the future shape and governance of parastatals will still feature high on the economic policy commission’s agenda. The "strategic nationalisation" punted by many in the ANC means acting according to the evidence in each particular case.
It further refers to the designation of a list of minerals as "strategic" for industrialisation and beneficiation, over which the government could impose price controls and duties. Higher taxes for the mining industry — on which there is still debate in the ANC over the precise form — are also expected to be endorsed by the conference.
A new governance model for state-owned enterprises, which would allow "greater shareholder activism", is also likely to be accepted. This means less autonomy for boards of directors.
Mr Mufamadi, who is also chairman of the ANC’s committee on state-owned enterprises, said achieving this would probably involve changes to the "legal environment". The Companies Act imposed obligations that needed to be "balanced" with the government’s policy objectives.
"Companies listed on the JSE are different to state-owned enterprises," Mr Mufamadi said. "There must be a distinction between the role and mandate of the state-owned enterprise and the shareholder.
"We need to find a way to synchronise that with the Companies Act.… The boards of state-owned companies need to be in line with what the shareholder expects."
Recent months have seen increasing ructions between the boards of state-owned enterprises and Cabinet ministers representing the government as a shareholder. This has led to mass resignations of directors from telecoms utility Telkom and South African Airways.
The tensions are, in large part, a result of the government’s desire to exert greater control over the strategic plans of state-owned enterprises as it grapples with joblessness. Such duties are usually the preserve of boards of directors.
In the past few years, state-owned companies and development finance institutions have taken a central role in the ANC’s and the government’s vision for building the economy.
The findings of a Presidential Review Commission on state-owned enterprises, which was completed several months ago, have not yet been publicised. However, it is believed that many of the recommendations in its report are in line with the new governance approach being advocated in the ANC.