Coverage from the POA Winter Conference in Johannesburg
Government officials encouraged principal officers of South African pension funds to do more to boost local job creation.
Fundisa Mgidi, senior economist from the government’s Economic Development Department said pension funds could play a role in bringing South Africa’s so-called New Growth Path (NGP) to fruition.
Speaking to attendees at the Principal Officers’ Association in Johannesburg in June, she said: “The president emphasised that this year is the year he will emphasise job creation, and he introduced the New Growth Path just to guide how we will achieve our goals.”
The goal of the NGP is to create five million new, decent jobs by 2020.
South Africa’s unemployment rate has crept up from 24% to 25% from the end of 2010 through the first quarter of 2011, according to statistics from the Economic Development Department. Meanwhile, the income gap between the richest and the poorest has been yawning.
“There has been some improvement since 1994 in income, but that has unfortunately created more of a gap rather than bridging it. Unemployment still remains high,” said Mgidi.
“We would like to involve people like you, because that’s where the money is, and to challenge you to put more money into the development initiative. If you could, please come...play your part and see how we can work together to achieve this.”
One of the paths the government has considered to achieve its job creation goal is to create investment vehicles for the private sector to invest in. Among those could be developmental bonds geared towards pension funds and other investors.
But one speaker railed against the proposal.
Andrew Canter, chief investment officer at Futuregrowth Asset Management, an asset manager specialising in socially responsible investing called the proposal a “red herring”.
“Who’s going to define developmental? If the government says you need to buy a developmental bond and you must to do it at a subsidised yield, I question whether that is constitutional...it’s a tax on your returns. Let’s not miss the big point.
“The problem in South Africa is not money. There’s plenty of money. What’s happening here in this country is a skills problem on the ground to get this done. It’s a governing issue, not a money issue. So the prescription of a developmental bond...it’s not going to solve the problem.”
Mgidi said: “We do not have anything final on this matter. Government would obviously take into account the fact that for any investment there has to be some returns. We are still working on a mechanism, the aim being to develop an appropriate investment instrument for development work which is not necessarily a development bond but also does not exclude a possibility of it.”
Almost all listed asset managers have now signed up to the transparency code that launched 12 months ago to help local government funds get better cost data, writes Stephanie Baxter
This week's top stories include MPs questioning the regulator's leadership in a letter to the watchdog's chairman, and FTSE 100 schemes post accounting surplus for first time in decade.
While the majority of UK's largest pension funds have taken action on climate change, parliament says there are still some that are failing to manage their schemes responsibly.
Master trusts will have just one chance to demonstrate to The Pensions Regulator (TPR) that they should be authorised under the upcoming regime, the watchdog has said.