New investment options for Pension Funds? Let’s walk the talk Minister!
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February 12, 2020
The press has of late been awash with news about government coming up with some initiatives to help protect the Pensions and Insurance Industry. Some of the proposals relate to an introduction of a ‘…number of derivatives and investments assets by the end of the first quarter, which will help soften pension fundsskewed investments in the equities market and property sector’ and permission to invest offshore.
On paper this looks fair and dandy! Digging deeper however exposes serious flaws with these so called proposals:
For starters, it’s not the prerogative of the government nor the Minister (we know he likes these fancy products) to come up with or introduce new products. The industry is awash with talent and the required expertise can be harnessed to come up with these products. All government has to do is create that conducive environment and as they say the rest will follow. An example is the Prescribed Asset debate. Government should be asking themselves why they have not been able to raise funds in the required areas, and work to fix those disincentives, before considering measures such as Prescribed Assets. The appetite is indeed there for well-conceived public investment programmes.
Secondly and more importantly, Pension Funds already own some offshore assets like Nedbank, Quilter, SeedCo International, etc. If government really means well, they should start by allowing holders of these assets to sell them and keep the proceeds offshore or reinvest in any other assets of their choice. At the moment all proceeds from these assets, including dividends, are required to be remitted back home.
In conclusion, we think this is just a token approval. Where will the money to invest offshore come from? We need YUWESI for investments outside the country! Should we start with the list of critical items needing hard currency?
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