Looming elections generally de-stabilise a country’s currency – and this is especially true during a period of political and economic uncertainty such as South Africa is currently experiencing.
Investors are also concerned, and rightly so, about a proposal in the ruling ANC party’s election manifesto that, while lacking in detail, seems to suggest that it will be mandatory for pension and provident funds to invest around 50% of their capital in state assets.
The relevant section reads: “We will… investigate the introduction of prescribed assets on financial institutions’ funds to mobilise funds within a regulatory framework for socially productive investments (including housing, infrastructure for social and economic development and township and village economy) and job creation while considering the risk profiles of the affected entities.”
Pierre De Vos, who teaches constitutional law at University of Cape Town (where he also serves as deputy dean and holds the Claude Leon Foundation Chair in Constitutional Governance) put into words what many don’t even dare to think, when he blogged: “Will 53% of salaried workers’ pensions be flushed down the toilet to prop up failing state-owned enterprises, and to finance the looting of these enterprises by the politically connected?”
With the ANC’s re-election being a foregone conclusion, many feel that they have no choice but to wait and see what might happen. If De Vos’s question is answered with a ‘yes’, a constitutional challenge might protect our pensions. But then again, it might not.
“Now – before the Rand plummets – is the time to act,” says Sovereign Trust SA chairman Tim Mertens. “South African pension scheme members should be setting up a structure to limit their exposure and secure their future. We would recommend using our Conservo product, which is a tax-efficient, Guernsey-based international retirement fund that ensures investor freedom and stability.”
For further information or to set up an appointment to discuss your particular situation, please contact Richard Neal by email or by phone on +27 21 418 2170.