ASISA must know that denying the risk of prescribed assets is naive – IRR

7 October 2020 - To deny that asset prescription is on the table is either naive, ignorant or disingenuous, the Institute of Race Relations (IRR) said today in response to a statement by the Association for Savings and Investment South Africa (ASISA).

To deny that asset prescription is on the table is either naive, ignorant or disingenuous, the Institute of Race Relations (IRR) said today in response to a statement by the Association for Savings and Investment South Africa (ASISA).
 
ASISA said in its statement that it ‘has taken note of the most recent attempt by the South African Institute of Race Relations (IRR) to once again draw ASISA members into the prescription debate’, adding that ASISA CEO Leon Campher ‘says this seems to be a deliberate endeavour by the IRR to stir up panic amongst South African investors during a time when calm and rationality is needed more than ever.’
 
IRR deputy head of policy research Hermann Pretorius responded: ‘President Cyril Ramaphosa and ministers Pravin Gordhan and Tito Mboweni have all placed prescribed assets on the table, with the ANC’s head of economic policy, Enoch Godongwana, stating in so many words that prescribed assets will (not “might” or “could”) apply in cases where people are unwilling to invest.’
 
He said it was clear the ANC barely recognised the distinction between party and government, and for anyone to ‘cling to such a theoretical separation – and put the savings and pensions of clients at risk – is to betray a disengagement from reality’.
 
Pretorius said it was plain that the ideological, political and economic constraints on the government meant that ‘it can’t tax, borrow or cut’ its way out of financial difficulties, which meant the only remaining options were to print money or grab assets.
 
‘The questions that arise with regard to assets are: will the government reduce the legal proportion of offshore exposure? And will it reduce the legal proportion of equity exposure? Doing this would mean introducing prescribed assets by the backdoor, as government bonds would essentially remain the most feasible investment destination.’
 
Noting ASISA’s argument that it had answered questions put to it by the IRR more than year ago, Pretorius said: ‘Even ASISA must be aware of the enormous difference between July 2019 and October 2020 in the finances of ordinary South Africans, in the economy, the fiscal situation, and in government expenditure plans.
 
‘We've heard the most slithering rhetoric from corporates, willing to use the savings and pensions of ordinary people as bargaining chips: “‘no’ to prescribed assets … but, if you absolutely must...”.’
 
He said ASISA could be judged noble in trying to deflect criticism of corporate SA, ‘but South Africans aren't clients of ASISA’.
 
‘When will corporate SA learn from the failures of the mining sector, which sought to placate an overtly ideological government into pragmatic policy only to see itself decline as a feasible sector in the country?
 
‘The best time to stop a disastrous policy is before it is implemented. Corporate SA seems to insist we take a “wait and see” approach. Well, we've been waiting and we've been seeing. But perhaps more tellingly, investors have seen as well, and their money is doing the talking through walking.’
 
Pretorius concluded: ‘Perhaps it would be pertinent to ask Mr Campher whether he is as insouciant with his own money and assets as he expects South Africans to be with theirs?

‘The cost of opposition to bad policy is vigilance. Those tasked with managing the savings and pensions of South Africans are paid to be vigilant. As the economic reality of the country and the constant flow of money leaving our shores show, sentiment, on which Mr Campher places such high value, is a terrible basis for sound commerce or finance.’

 
Media contact: Hermann Pretorius, IRR Deputy Head of Policy Research – 079 875 4290; hermann@irr.org.za 
Media enquiries: Michael Morris Tel: 066 302 1968 Email: michael@irr.org.za
Kelebogile Leepile Tel: 079 051 0073 Email: kelebogile@irr.org.za

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