Abstract: 
There has been substantial growth in the assets under management of South Africa’s contractual savings institutions over the past forty years, but their relative contribution to meeting public sector financing requirements has declined. The trend in respect of government pension funds has been even more marked. In the 1980s, their investments were entirely held in public sector securities, but this share is now about 25%. Even in recent years, when government’s annual funding requirement has been unusually large, the Public Investment Corporation’s (PIC’s) investment flows have been dominated by equity purchases. Assessed in relation to South Africa’s macro-financial circumstances, these trends suggest a substantial misallocation of capital. The inflation-adjusted cost to government of its debt has been unsustainably high, because domestic long-term savings have largely been invested elsewhere. Yet these equity and foreign asset investments have not yielded greater returns than domestic bonds. 

About the presenter: 
Andrew Donaldson is an economist and research associate of the Southern African Labour and Development Research Unit at the University of Cape Town. He is a former head of the Budget Office and the Public Finance divisions of the South African National Treasury and served as the inaugural head of the Government Technical Advisory Centre. He was responsible for the introduction of a medium-term expenditure framework in 1998 and led the subsequent reform of the budget process and restructuring of budget documentation. After retiring from the National Treasury in 2018 he served as an advisor to the Association for Savings and Investment of South Africa and has taught at the UCT School of Economics. His current work is focused on growth, employment policy and social security reform.