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Govt wants you to pay 12% of your earnings into a state-managed pension fund

18 August 2021 7:12 PM
Tags:
Corruption
Investment
The Money Show
Bruce Whitfield
SA government
Department of Social Development
fiscus
social welfare
retirement savings
savings culture
basic income grant
Professor Adrian Saville
Genera Capital

Who decides where the money goes? Bruce Whitfiled talks to Prof. Adrian Saville (Genera Capital) about the new government plan.

Government wants you to save 12% of everything you earn, for your old age. But there's a catch: it wants to manage the money for you!

Bruce Whitfield, The Money Show host

Are you in? asks The Money Show's Bruce Whitfield.

The new government plan is outlined by the Department of Social Development in its Green Paper on Comprehensive Social Security and Retirement Reform.

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Whitfield gets comment from Professor Adrian Saville from Gibs Business School.

Prof. Saville is also an Investment Specialist at Genera Capital.

While the intention - to establish a savings and investment pattern - is a good one, he has serious reservations.

For many, many South Africans it would remove the established behaviour of zero savings and create a broad-based social welfare net.

Prof. Adrian Saville, Investment Specialist - Genera Capital

Of course alongside the savings and investment pattern there's reference to a basic income grant, so this goes a long way towards achieving the investment, the savings, the incomes security that you want from a social welfare system.

Prof. Adrian Saville, Investment Specialist - Genera Capital

However, there are qualifications around this proposal Saville notes.

Who is going to look after the investment contributions and how do we know that these will be shepherded into the right places?

Unfortunately this comes at a time when you still have a very cynical and jaundiced South African investor and tax payer who don't yet have resolution on key issues, including the allocation of funds under the Zuma administration.

Prof. Adrian Saville, Investment Specialist - Genera Capital

Until you've got resolution on those I think it's a very, very tough sell to any investor!

Prof. Adrian Saville, Investment Specialist - Genera Capital

Could the proposal also be seen as a mechanism for a government that is short of cash to raise cash? ponders Whitfield.

Whether that is the intention or not, it is sure to become a widely-held belief he says.

RELATED: Govt set to review Regulation 28 - 'not necessarily bad for retirement funds'

Who dictates the mandate? Who says where the money goes? Does this go into supporting airlines, bankrupt power utilities, deficient unemployment insurance funds... Pick a parastatal and this fund could fund it...

Bruce Whitfield, The Money Show host

It's useful to look at the examples of countries that have gotten this system right says Saville.

But is the South African government likely or able to do so?

We have a state that hasn't in recent times showered itself in glory with evidence that there is the ability to run a disciplined fiscus. Is that the enterprise that should also be putting together this 12% savings and investment scheme?

Prof. Adrian Saville, Investment Specialist - Genera Capital

Listen to this important conversation on The Money Show:




18 August 2021 7:12 PM
Tags:
Corruption
Investment
The Money Show
Bruce Whitfield
SA government
Department of Social Development
fiscus
social welfare
retirement savings
savings culture
basic income grant
Professor Adrian Saville
Genera Capital

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