Forcing pension funds to lend government money will not solve the problems with economic growth. Opening up the economy will, says economist.The ANC wants to use an apartheid tool, prescribed assets, for investment, and economist has said. The ruling party has promised before to implement this measure but failed. It is simply dusting off a previous proposed economic policy used at its manifesto launch.
Since 1994, South Africa has integrated into the global economy, with foreign investors becoming increasingly important players in the investment sphere. A serious problem with the proposed plan to force asset managers to lend the state the money is that the government’s credibility is shot. South Africa’s investment rate has been dropping since 2013 in the public as well as the private sector, limiting the economy’s capacity to generate sufficient employment growth and expand the supply of goods and services.
After South Africa lost its final investment-grade credit rating in early 2020, resulting in the country being ejected from the FTSE World Government Bond Index and triggering a sell-off of government bonds as the last of the WGBI tracker funds exited their positions, the post-pandemic reality has seen domestic macroeconomic fundamentals deteriorate more rapidly.
“These savings were accumulated over a lengthy period as individuals collectively save for retirement and other reasons. The magnitude of these savings has, again, drawn government’s attention as a possible solution to the country’s growing and unsustainable debt problems,” Van der Linde says.