Retirement funds, which are an essential part of South Africa's capital market environment, have a role to play in the country's development, says Trade and Industry Minister Ebrahim Patel.
"Aside from underpinning equity and debt markets, they have a role to play in the development of South Africa through investment in real assets. Government's investment drive is looking not just to Foreign Direct Investment but also and very strongly to domestic investment to stimulate economic growth," said Patel on Monday.
Patel was speaking at a conference hosted by Batseta - the Council of Retirement Funds for South Africa - in Johannesburg.
He noted that the aggregate assets of retirement funds in South Africa was sitting at R4.2 trillion, according to the 2017 Registrar of Pensions Funds Annual Report, with the Government Employees Pension Fund (GEPF) accounting for 40% of the total.
"The size of the retirement funds' financial holdings mean that their decisions have a huge impact on the national economy," he said.
Ensuring good governance
Patel called on pension fund trustees to ensure good governance. Trustees, he said, have a fiduciary responsibility to ensure that governance is strong, to hold fund management accountable and to ensure that there is no mismanagement.
"This responsibility requires ongoing training of trustees, learning from best practice and constant vigilance. The economy cannot keep paying the huge price of governance lapses at public entities like Eskom or private entities like Steinhoff," he said.
He called on trustees to support increased private sector investment in the economy.
"You have the responsibility towards your members to help lift the long-term rate of growth of the South African economy as a key means of realising the pension promise. Pension Fund investments, because they are so large, generally track the performance of the SA economy, which is your investment universe.
"A sluggish economy impacts directly on the performance of your overall portfolio. A growing economy lifts your entire portfolio, hence helping to increase both the value of, and the annual return on the portfolio, to the benefit of retirement fund members."
Patel called for fund managers to take a longer-term perspective on returns. He pointed to investment opportunities off the back of the Continental Free Trade Agreement that recently came into force.
"There is a market of a billion customers that can be used to provide significant new investment opportunities," he said.
Batseta leadership welcomed Patel's invitation to engage with government after the State of the Nation Address (SONA) to share details of the new administration's vision and action and promote long-term, sustainable development
President Cyril Ramaphosa is due to deliver the SONA to a joint sitting of the National Council of Provinces (NCOP) and the National Assembly (NA) on 20 June, in Parliament.
Batseta, which was established by three trade union federations, namely the Congress of South African Trade Unions (Cosatu), Federation of Unions of South Africa, (Fedusa) and the National Council of Trade Unions (Nactu), as well as the Principal Officers Association, and subsequently Business Unity South Africa and various independent industry experts, represents the top 100 retirement funds in South Africa.