The 3.2 percent contraction in South Africa’s economy in the first quarter of this year will have a negative impact for retirement fund members. Supplied
The 3.2 percent contraction in South Africa’s economy in the first quarter of this year will have a negative impact for retirement fund members, particularly if it becomes entrenched, financial services provider Momentum Corporate said yesterday.

Statistics South Africa on Tuesday attributed the decline in gross domestic product (GDP) mainly to shrinkages in the manufacturing and mining sectors, saying seven of 10 industries slid during the first three months of 2019.

“A drop of 3.2 percent in GDP means that companies are not growing as much as what we had hoped for - and this has an impact for many retirement fund members,” said Momentum Corporate’s head of strategic initiatives, Regard Budler. “Our retirement fund savings are often invested into many listed companies which are unlikely to do as well as what we would see when the economy is growing well. This would certainly have a negative impact on your retirement investments, especially if the low economic growth becomes a long-term trend. The average retirement fund member will therefore have to invest more to reach their goal of a comfortable retirement,” he added.

Budler, however, said there was no need to panic, pointing out that if a retirement fund followed an outcomes-based investment strategy it would make provisions for short-term fluctuations in investment values. Retirement fund trustees, asset managers and asset consultants would ensure that investments were well diversified to soften the blow of these fluctuations, he added. 

 African News Agency (ANA)