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

South Africa is grappling with an unprecedented unemployment crisis, and the country's public institutions need to redirect trillions of rands from pension funds to fund essential public projects such as housing, water, transport, and infrastructure. Brian Ashley, founder and director of the Alternative and Information Development Centre (AIDC), emphasizes the urgent need to shift the focus of the Public Investment Corporation (PIC) and the Government Employees Pension Fund (GEPF) from financial markets to productive investments.

Deindustrialization has left important production centers in ruins, creating a social and industrial wasteland. The PIC manages over R3-trillion in workers' pension money, which is primarily used for investments in the stock market, offshore placements, asset management, and private deals – including controversial investments like the privately operated Lanseria International Airport.

This raises a larger question: why is one of Africa's largest concentrations of workers' capital being managed primarily for financial gain, rather than for the greater good?

The Alternative and Information Development Centre (AIDC) has been advocating for a change in how the GEPF allocates its resources, but progress has been slow. The GEPF operates under the assumption that it must resemble a private corporation's pension fund, which is driven by the accumulation of financial assets. However, this model is not suited to a public pension system that guarantees workers' pensions and security.

Before the neoliberal era, state-guaranteed pension systems typically functioned on a pay-as-you-go basis. Contributions from current workers financed benefits for today's pensioners, with reserves providing a cushion against changing circumstances. This approach made sense for a long-lasting state pension system. With the rise of neoliberalism, the focus shifted towards private pension funds and accumulating financial assets to cover projected liabilities far into the future.

South Africa's GEPF is currently overstated as "fully funded," meaning that its accumulated assets could meet the projected pension obligations of all existing members throughout their lifetimes. However, this conservative standard is too restrictive for a pension scheme backed by a sovereign state with a continuous workforce contributing annually.

The good news is that the GEPF is not struggling to pay pensions. In fact, contributions plus investment income consistently exceed benefits paid since 2011/12. The surplus generated has been reinvested to accumulate even more financial assets. The question is what to do with these surpluses. By transitioning gradually to a pay-as-you-go system and establishing a substantial prudential reserve, South Africa could unlock a significant portion of these surplus funds.

Imagine redirecting these surpluses into a mass social and public housing program. Such a program could build hundreds of thousands of energy-efficient homes near workplaces and public transport, generating demand for domestically produced materials and equipment. Additionally, the funds could be used for long-term concessional financing to rebuild commuter rail and create integrated municipal public transport systems, requiring local manufacturing of trains, buses, and components.

In conclusion, the key to rebuilding South Africa for all, rather than feeding financial speculation for the few, lies in shifting the focus of the PIC and GEPF from financial markets to productive investments. This transition could yield substantial benefits, directing tens of billions of rands annually into essential public projects, creating jobs, and fostering sustainable development.