“We've long had death and taxes as the two standards of inevitability. But there are those who believe that death is the preferable of the two. “At least,” as one man said, “there's one advantage about death; it doesn't get worse every time Congress meets.”
This quote from Erwin N Griswold, the US Solicitor General who served under two presidents and who was dean of the Harvard Law School for more than 20 years, fits South Africa to a T right now. The news from parliament is bad. The Budget this year included some nasty tax shocks, consumers will have to pay additional taxes for the new National Health Insurance scheme and there's no end in sight of the electricity tariff escalations. Already on any given day, average middle class South Africans spend 40% of their time working for the Government. When they get home, they're faced with bills for private security companies, which are stepping in for the police, medical scheme membership payments needed because public health is malfunctioning and demands to pay a licence fee for TV stations they never watch. And now, the Government also wants your pension savings. In the run-up to its policy conference mid-year, the ANC has released a discussion paper that includes a call for prescribed assets — basically, that part of your retirement savings will be forcibly invested in Government vehicles. This could potentially include the likes of the Indus- trial Development Corporation (IDC) and the National Youth Development Agency (NYDA) — architects of a pointless international youth festival, which was reportedly R100m over budget — and various major infrastructure projects. Forcing pension funds to invest in State projects is nothing new in SA. Under the apartheid regime, civil servants' retirement savings were for many years channelled to Government bonds, which funded Eskom and others. These often gave such low returns that many State pension funds were chronically underfunded. Some pensioners, particularly those who used to work for Transnet, are still feeling the pain. This time, Government apparently plans to create special products — to fund green economy projects, for example — for pension funds to invest in. It's expected that the IDC, which will lend the money from pension funds to private companies, will play a key role. There are major concerns. One person who's been involved in Government negotiations on prescribed assets admits that State institutions have been extremely good at lending and shockingly bad at collecting. “The average default rate on bank lending to small and mid-sized enterprises is probably between 5% and 10%. The average default rate on development fund lending such as that offered by Khula, the IDC or the NEF is about 30%-40%,” she says.