Pensions on the line as ANC seeks to avoid IMF bailout for SOEs

Pensions on the line as ANC seeks to avoid IMF bailout for SOEs

- The ANC is reportedly considering borrowing money from pension funds to help SOEs

- A senior party member, Enoch Godongwana, says this is to avoid an IMF bailout

- However, the proposal has raised concerns

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The ANC says it is considering using private and public pension funds to support cash-strapped SOEs.

Enoch Godongwana, head of the party's subcommittee on economic transformation, says that R6 trillion could be borrowed this way.

He argues that this would be preferable to turning to the International monetary Fund (IMF) for a bailout.

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Godongwana claims that there are significant funds in the asset management industry which the state could borrow, Briefly.co.za has gathered. According to Business Tech, he says this would be cheaper than a loan from an institution such as the World Bank. 

He made the statement in a recent interview with the Sunday Times, in which he added that he believed that borrowing from pensions would also come with "little exchange rate risk".

His comments about the IMF are rather odd, however, as the IMF says South Africa has not approached it for help. In fact, the IMF says it does not think that the country even needs a loan as the state currently does not have a balance-of-payments problem.

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The government has not yet provided more details around how it would go about its plan to borrow from the asset management industry. However, some have already raised concerns about this proposal.

DA MP Geordin Hill-Lewis, for example, says the plan is a veiled attempt to force pension funds to loan money to bankrupt parastatals. He added that, for many South Africans, their pension fund represent represent their entire life savings and, as a result, these funds should be handled with the "utmost care", according to fin24.

Additionally, some experts have suggested that such a move by government could trigger capital flight, as people may pull out of pension funds for fear of government interference.

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Source: Briefly.co.za

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