JOHANNESBURG – The Institue of Race Relations (IRR) has slammed Finance Minister Tito Mboweni’s recent endorsement of the idea of using South Africans’ pensions and savings to fund government expenditure, describing it as a sinister development.
This as the ANC’s Economic Transformation Committee suggested pension funds take over some of the assets of the indebted state-owned power utility Eskom.
The proposal to transfer parts of Eskom Holdings into non-state hands was made in a discussion document dated July 8, which considered responses to the coronavirus-induced economic slump, according to a Bloomberg report. The ANC’s labour union allies oppose privatisation of Eskom assets.
“There is a need for continued support for Eskom to overcome its immediate financial and technical challenges and to ensure reliable electricity supply,” the committee said in the document. A solution needs to be found to Eskom’s debt problem, including the possibility of pension funds being mobilised to take over certain restructured Eskom assets.”
Eskom, which has hindered economic growth by subjecting the country to periodic power cuts, is labouring under a debt burden of at least R450 billion, and cannot meet its costs, Bloomberg reported.
IRR deputy head of policy research Hermann Pretorius said on Wednesday it was clear the pensions and savings of hard-working South Africans, who had played by the rules and made responsible decisions on their own investments and income, were now in the firing line of an SACP-ANC government that had lost billions to corruption and state capture, and trillions to “economic lunacy and mismanagement”.
“Having run out of taxpayers’ money, the government has made clear in recent months its intention to capture whatever assets it can to either throw at failing government-run entities and projects in the ideologically naïve and wrongheaded hope of generating positive economic results, or funnel to cronies in its patronage network to keep the engine of cadre enrichment chugging along,” he said in a note.
Through all this, corporate South Africa and investment fund managers have remained largely silent, he said. “This must now change.”
Pretorius said the IRR would be launching an extensive open-letter campaign to engage prominent investment fund managers on what they would be doing to protect the hard-earned pensions and savings of millions of South Africans.
“Using pensions and savings to fund the SACP-ANC government is nothing but a new form of state capture. The question is, will investment fund managers side with their clients – the people who trust them to look after their money and financial well-being – or, in silence, only appease a government intent on expropriating pensions and savings?” he said.
Bloomberg's Antony Sguazzin reported that: The proposals around Eskom form part of a broader strategy proposed by the committee to help the economy recover from the impact of the coronavirus pandemic, which it said had highlighted the country’s inequalities.
“The pandemic has brought sharply to the fore the persistent problem of the existence of two distinct economic realities in South Africa – one poor and mainly black, and one rich and mainly white,” it said.
South Africa needs to deploy a wider range of pro-growth and pro-investment monetary policy instruments that are compatible with the reconstruction of an economy,” it said. “The Covid-19 crisis has provided a clear indication of the role the monetary authorities can play in injecting resources into the economy and in using bond purchases to stabilise capital markets and put downward pressure on longer-term interest rates.”
The committee also urged the government to:
Finalise the Petroleum Resources Development Bill to accelerate the development of oil fields and push ahead with a plan to build a new oil refinery and petroleum complex
- Create a state-owned pharmaceutical company to produce anti-Aids drugs.
- Resolve regulatory disputes within the mining industry
- Create a special economic zone for renewable energy in the eastern province of Mpumalanga to preserve jobs as coal-fired power plants in that region gradually close
- Push ahead with a long-delayed auction of additional telecommunications spectrum; and
- Accelerate the creation of a state-owned bank.
Notably, there was no mention of South African Airways, the bankrupt state airline which needs a government bailout if it is to survive. While the public enterprises ministry has backed rescuing the airline, the National Treasury has said it would be best to close it. The ANC has previously said the country needs a national airline.