Patel eyes pensions trillions for state fund

Linda Ensor reports in Business Day that “Economic Development Minister Ebrahim Patel is to explore ways of investing some of the R1,5-trillion of public and private retirement funds in development projects”.

This is not a very good idea because it involves private money. If a gang of thieves enters your house in the dead of the night and steals the money from under your mattress it is theft – so why should it be any different if government takes your money which you have stashed for safekeeping, instead of under your mattress, but with a pension fund? The reason private sector investors are not investing in government development projects is because they deliver poor returns.

The unintended consequences of this action are entirely predictable - individuals will stop investing in retirement vehicles, thereby reducing the level of savings in the economy, resulting in less money for genuine investments that drive economic growth. A lose, lose situation for everyone.

Source: Linda Ensor Patel eyes pensions billions for state fund Business Day, March 05, 2010

For text: http://www.businessday.co.za/articles/Content.aspx?id=95398

FMF Policy Bulletin / 09 March 2010