SA's pension pot at risk as government seeks funding

The pension pot in South Africa, one of the largest in the world, could be under threat as government, whose debt is growing every year, looks for new funding sources.

This according to the Institute of Race Relations (IRR), which warned of a threat by government to stipulate what the pension funds of about 16 million South Africans should be invested in.

In its election manifesto, the ANC said it would investigate the introduction of prescribed assets on financial institutions’ funds to unlock resources for investments in social and economic development.

The IRR said this meant pension fund managers could be forced by law to invest in certain sectors prescribed by the government.

The IRR said government had been spending more money than it received for more than a decade.

As taxpayers could no longer be squeezed for much more money, and turning to international lenders was politically unpalatable, pension funds were an obvious target, said the head of campaigns at the IRR, Marius Roodt.

Economist Mike Schussler made a presentation at Thursday's media briefing by the IRR,  showing the scale of the country’s retirement savings pot.

Schussler said in 2017 that there were 17 million pension fund accounts in South Africa.

“We have one of the greatest assets in the world in our pension fund assets. It is the eighth biggest asset pool in the world, in dollar terms. It is the fifth biggest in GDP terms,” Schussler said.

Schussler said there were 83 countries for which the Organisation for Economic Co-operation and Development kept data on pension funds assets.

He said the country’s pension fund assets were bigger than German pension fund assets, which were in ninth place.

Schussler said Korea, Russia, Colombia, Sweden and New Zealand combined had $310bn, while SA had $316n in pension fund assets in 2015.

Schussler said as the country was in debt, it had the option to approach the International Monetary Fund for assistance.

He said government did not want to be told by another organisation where to cut spending.

A reluctance to seek outside help meant that channelling retirement pension savings was an attractive option for government.

“Very simply put, if government changes the rules that money has to buy the debt of government, we would not need to go to the IMF.

“The problem with that is that they would not have anybody looking over their shoulder to see the corruption or to see the inefficiencies and stop the unnecessary spending, and we would retire poor,” Schussler said.

Roodt said rather than looking to the pensions of ordinary South Africans, government should sell state-owned entities, reduce its wage bill and create an environment that was conducive to investment and job creation.