Dr+Blade+Nzimande,+speech+delivered+at+the+IRF+conference

=INSTITUTE OF RETIREMENT FUNDS CONFERENCE=

DURBAN ICC

 * 21 AUGUST 2006**


 * Blade Nzimande**
 * Chairperson, Financial Sector Campaign Coalition**


 * Delegates and Guests, Comrades**

Thank you for the opportunity to address this Institute of Retirement Funds conference. I am pleased to be part of this conference as the Institute transforms itself into two new bodies, one representing trustees and the other representing the industry. This conference marks the end of the old era and the beginning of the new.

It also marks the 4th anniversary of the Financial Sector Summit which began the transformation process of which the changing role of the IRF is part. Four years ago yesterday, on the 20th of August 2002, many of you who are here today, were present at the signing of the Nedlac Financial Sector Summit Agreements Declaration. One of the watershed agreements we reached was to reform the retirement funds industry so it could play a meaningful role in our national development.


 * We reached this agreement in the knowledge that these changes in the retirement funds industry would be a vital part of the ongoing transformation of the financial sector.
 * We recognised that management of retirement funds is at the heart of financial sector transformation, affecting the lives of the workers and the poor directly through benefits and indirectly through investments made by retirement funds.
 * We understood that leaving it untransformed would be tantamount to neglecting a key aspect of our National Democratic Revolution.

The massive resources managed in this industry – almost a trillion rands according to the Financial Services Board - impact substantially on our developmental trajectory. Retirement fund contributions from 80% of the formally employed amount to over R65 billion a year – 14 % of total personal remuneration. South Africa ranks 4th in the world for retirement fund assets, after the UK, Switzerland and the Netherlands. In terms of private pension fund assets to GDP, South Africa is first in the world.

But we cannot boast about these global rankings when we know the benefits flow to so few of our citizens. The wealth gap in our country is widening. We need urgent intervention to ensure this trend is reversed.

I have been asked to speak to you to give a community perspective and I want to pose a question to the 750 delegates here today: what does it mean to face retirement in South Africa in 2006 and beyond?

Let me start: for the majority of South Africans, retirement means a life of poverty, eking out a living on a state old age pension of R800. That is R25 a day and in most working class families, that R25 feeds many mouths, including those of unemployed children and grandchildren. For many, however, even the old age stipend is a marked improvement as it gives them a meagre but nevertheless stable income.

If you think I am painting a gloomy or exaggerated picture, or one that does not reflect the reality of our retirement landscape, we must agree to differ.

The way the overwhelming majority of South Africans retire today is dictated by the inequitable and oppressive economic structures shaped by apartheid. They bring about mass impoverishment, with more than half the population living in deep poverty, while a few have a lifestyle of unequalled luxury and are guaranteed a comfortable retirement.

The immediate cause of poverty and inequality is extraordinarily high unemployment, which shuts people out of productive labour and indeed out of normal social and family development. Joblessness is now 40%, far higher than in comparable middle-income countries, and points to the way apartheid deeply deformed the economy.

Inequalities continue to follow the lines of race and gender. In 2003, less than 1% of African households reported an income of over R10 000 a month, compared to 20% of white households. Almost half of all Africans live in the former Bantustans, where 55% are unemployed, 70% earn under R1000 a month, only one in seven has a formal job. Even in formal employment, one in four workers earns under R1000 a month.

It is against this background of deep poverty and structural inequality that we must examine the challenges and changes in the retirement funds industry.

Unemployment and poverty are problems not only for the poor majority. They also affect the well-off by undermining economic development and growth. Countries that have succeeded in industrialising – Korea, Japan, Taiwan and now China – all started with programmes that ensured greater equity, massive investment in human capital, and little unemployment. These programmes included land reform, housing and education on an enormous scale. Only after these programmes began to bear fruit did rapid economic expansion begin.

Since signing the Summit agreements in 2002, we have focused much energy on transformation Charters - including the Financial Sector Charter, under which retirement fund transformation will be measured. But it is not to these Charters that we look for guidance in our thinking about retirement funds policy. We turn to two important documents: the Freedom Charter and the Reconstruction and Development Programme.

We have been reminded in several forums recently that our economic policies are supposed to achieve the admirable goals of the RDP.


 * The **Freedom Charter** says “The People Shall Share in the Country's Wealth! The national wealth of our country, the heritage of South Africans, shall be restored to the people.”
 * The **RDP** recognises the importance of pension funds to South Africa’s development. It says that if financial institutions do not voluntarily adopt “socially desirable and economically targeted investments”, laws should be passed stipulating the portion of pension and provident funds that must go into government-endorsed projects.

Guided by these wisdoms, we must find ways to ensure assets being managed on behalf of workers are invested in projects that achieve our national development goals of eradicating poverty and creating jobs. We face a number of complex challenges in achieving this aim.


 * Retirement funds policy reform process**

The most fundamental challenge is creating an appropriate legislative and regulatory environment. We too record our disappointment that this conference cannot consider a revised draft of the Retirement Funds Reform paper. We call on National Treasury to speed up the reform process and support Cosatu demand to have the paper published before their Congress next month.

At this conference we were hoping to debate proposals for the national savings fund. We support government’s proposals for comprehensive reform to improve the efficiency, equity and fairness of the system but reiterate our warning that in introducing the NSF, we must guard against requiring already impoverished people to save for retirement in ways they cannot afford and which they could perceive as unjust. Millions of our people cannot afford basic necessities such as food, water, electricity, transport, telecommunications, education and adequate health care, let alone to save for retirement. The supposed beneficiaries - poor women heads of urban and rural households and informal sector employees - should be surveyed to establish how a savings scheme could improve their lives. We hope your conference deliberations shed light on the feasibility of the scheme in the present economic climate of high unemployment, widespread poverty and massive HIV/AIDS infection rates.

We were also hoping to engage seriously about the contentious issue of prescribed assets. Community proposals have been shot down in the past by government and business. But we now have the benefit of being able to judge whether alternatives relying on voluntary investments have achieved the desired results. We believe they have fallen far short of commitments and the issue must be revisited in the reform process.

Another challenge is equipping worker trustees to make decisions which do not mimic those of fund managers and financial advisors, but that directly promote the interests of the working class communities. Trustees must be able to weigh the benefits of an extra R10 pension a month against the prospect of having to stretch the meagre increase to feed the next generation of unemployed dependents.

It is unacceptable that workers’ retirement funds are invested in ways that result in job losses and deepen poverty in our communities. Trustees must drive transformation.

As we have seen in recent disclosures on bulking, companies like Alexander Forbes, will not hesitate to line their own pockets at the expense of workers. We echo sentiments that there must be prosecution of the rich who steal from the poor.


 * Financial Sector Charter**

The establishment of the Financial Sector Charter Council is an important step in creating the conditions for transforming the industry. The Community constituency is committed to making the Charter work, but give notice that our patience is not endless. Agreements must be finalised urgently on investment targets and the standards and measures by which industry performance will be judged. In line with government’s own development goals, access to finance for affordable housing and infrastructure development are our priorities, not allocating tens of billions for financing Black Economic Empowerment (BEE) transactions that result in narrow empowerment of an already wealthy elite.

The view of socialists and communists is that all empowerment must be genuinely broad-based and geared to eradicating poverty and creating jobs. No dilution of this goal can be tolerated. And we are not alone. Many South Africans, including significant sections of business and government, share our concern that the current BEE process has been perverted to focus on deracialising the bourgeoisie. This would mean a future of class conflict and confrontation, regardless of the colour of the new elite. Surely, this is not what we fought for?

We are bombarded daily with media reports glorifying black business people and investors for becoming millionaires or billionaires in the first decade of democracy. Meanwhile, the wealth gap is widening. I am not going to quote Shakespeare or the Scriptures here, but I do want to remind us of the simple maxim: you reap what you sow.

Critics in some quarters have suggested recently that in slamming crude BEE, we are focusing on the wrong enemy and leaving entrenched white capital in control of not only our economy, but our destiny. Not at all. We are very clear on this – our enemy is ultimately a class enemy that keeps a few rich and the majority in abject poverty. We are saying: If we take care of class empowerment, race empowerment will take care of itself.


 * Unclaimed benefits**

In wrapping up, let me touch on the vexed question of unclaimed benefits, an issue that affects most communities. The billions of rands still lying unclaimed in funds, while intended beneficiaries live in dire poverty, is a national disgrace.

Private companies are tracing thousands of beneficiaries and paying out millions in unclaimed benefits. Why then can’t the industry do the same? Why can’t the industry partner with networks of organised Labour and Community groups to trace beneficiaries? This should be a challenge for the NEW IRF and one that it tackles as an urgent priority.

Unclaimed benefits would not be such a problem if people were better educated about their rights. We should hear no more stories about tracers finding benefit cheques proudly displayed in frames on the wall because pensioners did not know they should be deposited in a bank account. Financial literacy programmes must enable people to make better choices. They must not be used by service providers to promote products and services, or confused with marketing. Financial literacy that meets national standards should be available in all our communities, and must be funded by industry.

In conclusion, on this 4th anniversary of the FS Summit, we are crucially aware that transformation agreements are nothing but pieces of paper if effective partnership in implementation is lacking. The social partners have shaped the new trustees and industry bodies and are anxious to see them succeed. We will support them in the huge tasks that lie ahead.

Let me come back to my earlier question: what is it like for most South Africans to retire in 2006? It is already 12 years since we won political democracy. If we continue to delay economic democracy, we will all end up paying a heavy price. This industry has a critical role to play in ensuring we don’t.

I wish you well in your deliberations.

2029 words