'Something disappeared from my speech.’ The mystery over Mboweni’s pension fund announcement

Business Insider SA
Tito Mboweni
Finance minister Tito Mboweni delivering the supplementary budget speech on Wednesday. (Parliament of SA)
  • There was a last-minute change to Finance minister Tito Mboweni's supplementary budget speech - and it had something to do with where pension funds can invest.
  • Mboweni said that an announcement relating to Regulation 28 was dropped shortly before he delivered his speech.
  • It may have something to do with allowing pension funds to invest in infrastructure projects.
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Finance minister Tito Mboweni was supposed to make an announcement about where South African retirement funds can invest in his emergency budget speech on Wednesday – but it was pulled at the last minute.

“There's something that disappeared from the speech," Mboweni said during the media briefing after his budget speech. "What happened to Regulation 28?" he asked an aide.

Regulation 28 of the Pension Funds Act puts limits on where money in retirement funds can be invested. For example, a retirement fund cannot invest more than 75% of its savings in shares, and there are also limits about how much can be invested abroad, in listed property and in other assets.

Mboweni said that the Regulation 28 announcement was still in his speech on Tuesday night. Talking to his aides, he said from the podium: "You made me memorise it, it's so unfair." Mboweni said he was forced to do research "in detail" about the regulation.

"We decided we would ease it in properly," a clearly uncomfortable Dondo Mogajane, Director General at National Treasury, said, before abruptly changing topic.

In theory, radical changes to Regulation 28 could usher in prescribed assets – which would force retirement funds to buy government-backed assets like bonds. But this is highly unlikely, given Treasury’s repeated opposition to the approach.

A likelier option is that Regulation 28 could be changed to allow retirement funds to invest directly in government’s infrastructure projects.

See also | SA’s coronavirus budget: What you need to know

Earlier this month, ANC head of economic transformation Enoch Godongwana told Fin24 that Regulation 28 needed to be “tweaked” so that infrastructure is "properly covered" in the law. This would allow retirement funds to invest in "real assets" and fund infrastructure and capital projects, he said.

Importantly, this would not force pension funds to invest in these projects. Instead, it would only include infrastructure projects - or investments in these projects via the Industrial Development Corporation and the Development Bank of Southern Africa - on the list allowed as part of Regulation 28.

This week, President Cyril Ramaphosa announced that there were 276 “shovel-ready" projects that have been fully developed in energy, healthcare, water, transport and ICT infrastructure, with billions in private sector investment already committed to these projects.

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