GRAVY: Editorials: Edition: June / August 2020

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GRAVY

To “rebuild and repurpose the economy”, Cyril Ramaphosa is back to this “radical economic transformation” thing. Covid-19 had

made it easy for him by taking these steps:

1. Use lockdown to smash the economy;

2. Extend loans to businesses smashed;

3. Keep on with lockdown restrictions from which the businesses cannot recover;

4. Once businesses cannot repay the loans, convert the loans to equity;

5. Then, with myriad businesses nationalised, we have a socialist nirvana;

6. Alternatively, revert to capitalism. Put the equity in the nationalised businesses out to tender for BEE consortia;

7. And hey presto, radical economic transformation is achieved.

Government is scrambling for money to pay social grants. Maybe the R50bn-plus in unpaid pension benefits is too small, relatively speaking, to have crossed its mind. But since most of it belongs to beneficiaries who’ll never be found, this time of disaster rekindles the argument that a bulk be put to appropriate use for the most needy.

Just a reminder….

So far as money still means anything, fired PIC chief executive Dan Matjila had been paid R15m a year.

By contrast, for the year to end-March his PIC successor – Abel Sithole – was paid R5,9m as principal executive officer of the Government Employees Pension Fund and R407 000 as non-executive acting commissioner of the Financial Sector Conduct Authority.

It therefore seems that Sithole’s annual remuneration will more than double. The point, however, is what benchmarks are used for determination of these levels. The variances across senior executives in the financial sector, private and public including retirement funds and the civil service, are vast.

Guys in National Treasury must turn green when the numbers are compared. After 25 years, the biggest single shareholder in the world’s biggest asset manager is selling its entire 22% stake. This stake of American bank PNC in BlackRock is valued at $17bn.

“As we entered this (Covid) crisis, it became clear that everything we thought we knew has proved incorrect,” explained PNC chief executive Bill Demchak. “We’re in this economy where everybody bases their models predicting the future on the past.”

Everybody? Yes, probably in SA too. Even owners of shopping malls and office blocks that, under Reg 28, can take up to 25% of a retirement fund’s assets.

Methinks rethinks is merely beginning.

And yet, two notable trends from abroad:

There’s been a flight to the largest asset managers – mainly BlackRock, Vanguard, State Street and Fidelity – that have used their scale to cut fees. In the US the largest 1% of investment groups now manage 61% of total industry assets;

In the UK, according to FT Adviser, asset managers are moving away from traditional classes when considering product launches. “Responsible investing, alternatives and multi-asset funds (which embrace passives) top the list,” it reports. There as here?

Cannot understand the worry over empty stadiums at sports events. When I played rugby, nobody came to watch then either.