Election Promises vs. Retirement Realities: What to Know

So prescribed assets is a phrase that kind of gained popularity in the apartheid era because government forced retirement funds to buy specific government bonds that were issued to kind of push the railways , to push ESCOM , et cetera .

And then , when we went to democracy , the retirement fund regulations kicked in in a better way and prescribed assets fell off the table . We do , however , have regulations that decide how much we can invest in different kinds of investments within our retirement funds , and that's called Regulation 28 .

And Regulation 28 will decide how much we can invest of our retirement funds in shares , in property companies , in government bonds , in cash , and also how much we can invest in South Africa and how much we can invest overseas , and also how much we can invest in South Africa and how much we can invest overseas .

And the reason why people are asking the question now about prescribed assets is that it came up in the ANC election manifesto . So remember we're talking about a political party before an election and that's a very important point to make , important point to make .

This is a political party rapidly losing votes , losing support and doing whatever it can to get votes before the election . So it is pushing this prescribed assets concept as a kind of a solution to problems of funding state-owned enterprises .

In other words , they think there's a way to encourage retirement funds , possibly through regulation , to force retirement funds to put money into the very state-owned enterprises which drove our economy into a wall .

And understandably , a lot of people are really worried about that , because the last thing you want to do is give more money to you know , the last thing you want to do is give more money to corrupt or incompetent operators of state-owned enterprises . So I get the concern . I think a couple of things to know .

One , the ANC election manifesto is not government policy , and so trying to anticipate what they're going to do based on what they say before an election is like trying to predict Donald Trump's hairstyle . It's not a good idea , it's just a waste of time . So my view is don't panic about this .

I think you need to wait to see how things unfold before you make the decision to kind of get in or out of an investment based on any kind of political , you know , kind of speak before an election . If they're going to institute prescribed assets , it will have to go through a process . There will be lots of consultation with the retirement fund industry .

More importantly , there will be lots of consultation with unions , and it's important to know that unions are the biggest representatives of the most employees in retirement funds . So they have to date not been in favor of prescribed assets at all , in fact almost violently opposed to prescribed assets .

So the chances that we go from the ANC election manifesto to actually getting prescribed assets in a short period of time , I think , is almost zero . What's more likely to happen is that they will continue . Treasury now and Treasury have always been the kind of grown-ups in the political scene in South Africa From 1940 .

Now Treasury have been the ones that have actually kind of taken the political rhetoric and kind of scaled it down to what's possible and what's practical . And I suspect that Treasury will sit down with the retirement fund industry to say what can we do to help you to choose to invest in bankable projects ?

It's already a phrase that's coming out right around the country in the retirement fund industry , because the truth is that retirement fund investment managers are not opposed to investing in bankable projects , in other words , something where they can allocate money to a wind farm now , potentially to railway cars that move coal , or railway cars that move goods or people

, potentially solar farms , etc . There is a huge amount of will on the behalf of the retirement fund industry and their members to fund projects which will be good for the economy , which will generate an income stream and hopefully , over time , will be profitable for investors as well . So there's no lack of will .

What has been lacking is bankable projects , and bankable projects is a phrase that you need to understand .

What it means is it's a project that an investor can look at and say this is likely to give me a return , either via a rent or a dividend or an interest repayment or capital growth , and it's a well-managed project that's likely to work and likely to repay me . And that doesn't describe almost anything that Transnet or ESCOM can do .

So bankable projects will be public-private partnerships , more so than prescribed assets . Coming in and just forcing us to allocate our retirement funds to ESCOM and Transnet and then them just blowing the money like they've done for the last two decades . I just don't think that that's the most likely outcome .

So for now , I think to give you the answer to your question , robin , I wouldn't change my retirement fund strategy based on what you hear around elections . I would be careful just to wait and see what's going to happen . Go to your retirement funds and just take the money .

They will have to probably look at doing something around future contributions and allocating a small portion of the money to these projects , as opposed to a wholesale change where from one day you can invest 75 in shares to the next day , where 75% of your money is feeding the fat cats at ESCOM and Transnet and all the leeches that are sucking that system dry .

I don't think that's the situation . So I think you know , just be careful here . I think always in an election you know whether it's South Africa or the US or anywhere you've got to be very careful about falling into the trap of listening to the politicians and taking what they promise very seriously .

I think you've got to wait to see who goes into government , what kind of government it will be , and then what kind of policies will be implemented , and then you can start to make some sensible calls .

If there is a big switch to prescribed assets , then it might be a good idea to kind of switch out your retirement fund contributions , going forward and actually look at , you know , obviously maximizing your tax-free saving and then building up your non-retirement fund savings , you know , whether it's via ETFs or unit trusts , you know that's not such a big , you know

big thing to worry about . But I think for now , you know , don't rely on politicians to be calm and sensible . That's your job and just let the story unfold and keep watching . Hopefully we'll do a podcast episode if there is a reason to panic and we'll be telling you it's time to panic .

And , you know , join us on our ship to the middle of Antarctica , whatever it is that we're going to do . But I just don't think we're there . I think you can kind of just carry on as normal for now . Thanks so much for your question , robin . Please keep them coming .

So 10X your future without the drama . 10x is a licensed FSP .