Swaziland seeks ways to lure back pension fund capital
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Johannesburg - R20 billion of Swaziland’s investment capital, particularly cash tied up in pension funds, has flown to South Africa. The government wants at least 30 percent of that back and is devising ways to compel pension fund managers to localise their funds. Swaziland has about 200 registered pension and provident funds.
Martin Dlamini, the former governor of the Central Bank of Swaziland who was appointed as minister of finance by King Mswati III last week, said: “30 percent of capital investment within Swaziland represents R6bn worth of retirement assets that could take the country closer to its goal of First World status by 2022.”
King Mswati decreed that his kingdom become a First World country in nine years. No roadmap to achieve this goal has been devised, and the king has made clear that as a first-world country Swaziland would remain an absolute monarchy with a feudal society, with most Swazis living as landless peasants under palace-appointed chiefs.
Economists feel the repatriation of Swaziland’s pension and provident funds from South Africa will not fundamentally boost the economy due to an absence of viable local investment opportunities.
“Only someone who likes to look at King Mswati on their bank notes would keep their money in lilangeni [the Swazi currency that is linked on a one-to-one basis with the rand] instead of rands,” said an Mbabane investment adviser who preferred not to give his name because some of his clients are royal household members.
“The royal family invests abroad, but they don’t want this known and they are pushing the argument that it is patriotic for Swazis to put all their money in Swaziland,” he noted.
An economist with the Central Bank of Swaziland said: “Local investors are expressing with their choice of investment destinations their belief that South Africa’s economy offers more return than what can be obtained here.
“There’s no question that the South African economy is inviting and Swaziland’s economy is underachieving.”
Dlamini is prescribing more infrastructure projects to absorb investment funds.
“Through planned policy intervention and incentives we will encourage infrastructure development opportunities. We hope that this will be an innovative attempt to address the issue of sourcing long-term debt from investors for infrastructure projects.
“Potential investors in these will be high-net-worth individuals and institutional investors like pension funds,” he told pension fund managers.
Some economists are wary, noting that the government’s projects are high on waste and low on profitability.
One investment councillor said: “Only the private sector can create investment opportunities, and the Swazi private sector is largely moribund now due to government’s economic mismanagement.”
According to Cape Town personal financial adviser Bruce Cameron, who also spoke with Swazi pension fund managers at a function in Ezulwini, Swaziland has already achieved First World status with its retirement fund regulatory framework.
“I have taken time reading some retirement laws from around the world and I must say Swaziland has the best in this phenomenon. This country must be applauded for that. The legislation is the best even when looking at big economies like the US,” Cameron said.
However, Swaziland’s Retirement Funds Act of 2005 applies only to private funds financed by individual investors. In a country where 70 percent of the population lives in chronic poverty, few people can afford to save. - Business Report