Workers’ trillions should rebuild SA for all, not feed financial speculation for the few

The Public Investment Corporation and Government Employees Pension Fund need to move away from financial markets and private deal-making to where billions of rands are released to fund public housing, water, transport and job-creating infrastructure projects.

Brian Ashley is the founder and director of the Alternative and Information Development Centre (AIDC).

South Africa labours – excuse the pun – under possibly the most extreme unemployment crisis in the world. Deindustrialisation has hollowed out once-important centres of production, leaving an industrial and social wasteland in its wake.

At the heart of this catastrophe is a chronic lack of investment in the productive economy. Yet there is an extraordinary contradiction. While South Africa is starved of productive investment, the Public Investment Corporation (PIC) manages more than R3-trillion, overwhelmingly workers’ pension money.

Instead of being mobilised to overcome the investment crisis, much of this enormous pool of capital is managed according to the priorities of a financialised economy: investments on the stock market, placed offshore, entrusted to asset managers and channelled into private deals, including controversial investments such as that involving the privately operated Lanseria International Airport .

The current turmoil at the PIC therefore raises a much bigger question than whether particular executives or transactions were corrupt.

Why is one of Africa’s greatest concentrations of workers’ capital being managed primarily to accumulate more financial wealth, primarily benefiting asset managers when the economy desperately needs investment in jobs and productive capacity?

For decades, the Alternative and Information Development Centre (AIDC) has tried to persuade public-sector unions to confront this question, largely without success. A crucial reason is the deeply entrenched idea that the Government Employees Pension Fund (GEPF) must operate like the pension fund of a private corporation. But the GEPF is not a private corporation.

Before the neoliberal era, state-guaranteed pension systems commonly operated substantially on a pay-as-you-go basis. Contributions from today’s workers financed benefits for today’s pensioners, with reserves providing a buffer against changing circumstances.

This makes sense for an enduring state pension system. Governments do not go bankrupt, close down, dismiss their entire workforce and simultaneously have to settle every pension liability extending decades into the future.

The rise of neoliberalism changed the prevailing philosophy. Public pension funds increasingly came to be judged according to the logic of private pension funds: accumulate financial assets today sufficient to cover projected liabilities far into the future.

Its latest statutory actuarial valuation found it to be 119% funded before contingency reserves.