Edition: September / November 2015
Call to pension funds
The ANC in Gauteng has adopted a policy on ‘radical economic
transformation’ (TT June-Aug). Paul Mashatile* explains it in the
context of shareholder activism.
Thetoric will not take SA forward. Instead, we require pragmatic interventions specifically
aimed at deracialising our economy and
brightening its prospects for sustainable growth.
These objectives cannot be achieved unless the triple
challenges of unemployment, inequality and poverty
are forcefully addressed to promote our society’s
Mashatile . . . engaging stakeholders
For optimal success, neither policy intervention
nor implementation can be left to government alone.
Active participation and partnership with the private
sector are essential. Key stakeholders are institutional
investors which represent the savings, and hence the
long-term economic interests, of South Africans as a
These institutions, including pension funds in which millions of people put their money and
trust, are ideally positioned to help accelerate the
economic transformation urgently needed. As the largest shareholders in corporate SA, they are also the
mobilisers and fiduciaries of people’s savings. Their
interests and the national interest are inseparable.
What’s required of them? At one level, it’s to be
shareholder activists; to use their voting clout for
more representative boardroom demographics, for
a demonstrable say on executives’ and workers’ pay,
and for guidance on employee practices that can open
opportunities for inclusion of the lesser-privileged
into the mainstream economy. In short, it’s to be the guardians of corporate social responsibility where lip
service and short-termism have no role.
At another level, it’s to accelerate service delivery.
There must be an environment in which institutions
are allowed, indeed encouraged, to invest directly
in economic and social infrastructure. Beneficial
consequences will obviously include a significant spur
to overall growth for the prosperity of companies
shared with their investors, long-term investment returns that are stable and competitive, and a sustainable trajectory of job creation.
In essence, institutional investors can and should
play a critical role in the advancement of economic
transformation. We must get away from the apartheid
legacies that, even 21 years after democracy, continue
to keep the majority of black people restricted to the
periphery of mainstream economic participation.
We should not blame apartheid for all our
challenges of today. We too have made post-1994
policy errors. The lack of investment in energy
infrastructure, to deal with growing demand from the
economy, is an obvious example.
Yet we have emerged from a deeply divided past
into a vibrant democratic state and we have made
progress. Our gdp has more than doubled in the
past 20 years; many more people have access to basic
services; households with electricity connections
have increased to 85%; in 2002 there were 56% of households with access to piped water, whereas today
the figure is 91%.
At the same time, however, SA has become one
of the world’s most unequal societies. The rich (in
a minority) are getting richer and the poor (in an
overwhelming majority) are getting poorer. We cannot
allow the continuation of a trend that is morally wrong
and potentially explosive.
One route to reversal can be driven by workers and
employees themselves. Their capital, through the
pension funds where they’re invested, can powerfully
move SA towards a more just and equitable future.
Shareholders, the providers of capital, own the means
by which profits are produced.
The Association for Savings & Investment SA
(ASISA) puts overall SA savings (voluntary and
compulsory) at some R7 trillion. About R4 trillion
is in retirement funds, the biggest single category of
shareholders in the JSE’s top 100 companies.
Although the issue of pension-fund capital being
used to drive transformation might be perceived
by some as inconsistent with trustees’ fiduciary responsibility, I believe otherwise. In my view, trustees
are obliged to concern themselves with the long-term
sustainability of their investments. Such concern is
linked directly to our political objectives of reduced unemployment, poverty and inequality as part and
parcel of better lives for all.
None of this is unprecedented, from the Sullivan
Code in the 1970s – sparking a shareholder
activism campaign that led to the disinvestment of
multinationals from SA in the 1980s – to the UNsponsored
Principles for Responsible Investment
launched in 2006, leading to adoption of the Code
for Responsible Investment in SA and reflected in
pension-fund governance requirements introduced by
the Financial Services Board.
It might well be asked how much better off the
world would have been were shareholders more
alert to goings-on the global banks prior to the 2008
financial crisis or, closer to home, if African Bank were
reined in before it was too late.
The ANC in Gauteng has called for radical economic transformation anchored on shareholder
activism through pension funds. We know what we’re
up against. Most debates on transformation of our
economy – from nationalisation of key sectors to
representation on company boards – the voice that
ought to be most influential is often absent. This is
the voice of the biggest shareholders, the fiduciaries of
As a provincial body, our policy stands. It will
be progressed in proposals to ANC national bodies,
but not before it has been subjected to stakeholder engagement. Appropriate forums are being set up and
important conversations are about to begin.
We shall be attentive listeners, appreciative of
contributions intended to enhance the inclusiveness of