The problem with this perspective is cancel culture isn’t real, at least not in the way people believe it is. Instead, it’s turned into a catch-all for when people in power face consequences for their actions or receive any type of criticism, something that they’re not used to. I’m a black, Muslim woman, and because of social media, marginalized people like myself can express ourselves in a way that was not possible before. That means racist, sexist, and bigoted behavior or remarks don’t fly like they used to. This applies to not only wealthy people or industry leaders but anyone whose privilege has historically shielded them from public scrutiny. Because they can’t handle this cultural shift, they rely on phrases like “cancel culture” to delegitimize the criticism.
Earlier this week, Business Day reported that financial institutions may approach the Constitutional Court if the South African government forces pension funds to invest in bankrupt state-owned enterprises. This is in response to a proposal in the ANC election manifesto that the government will investigate the introduction of prescribed assets on financial institutions. Will the government really try to finance bankrupt state-owned enterprises in this way, and if it does, what are the chances that the Constitutional Court will declare such a scheme unconstitutional?
Let me start with a confession. I will probably not make an in-depth study of the election manifestos of the major political parties – including the governing ANC – before I decide who to vote for in the May election. I will probably only skim through these documents to look for a few clues on where each party is heading.
This is not only because I believe these documents tell us very little about what these parties would actually do if they get elected into national or provincial government, but also because they are as dull as the eyes of Donald Trump before he tells yet another lie.
These documents tend to be littered with well-worn clichés (Nelson Mandela quotes anyone?), hollow revolutionary-sounding slogans, noxious management speak, and empty promises that could not possibly be kept. Not that I have ever read it, but I suspect even Maretha Maartens’ ‘n Jaar Van Gebed (A Year of Prayer) would be a more stimulating and convincing read than the election manifestos of the political parties contesting the 2019 election.
But after reading the alarmist Business Day report, I did have a quick look at the ANC manifesto to see what it actually says about a policy to force pension funds to invest in bankrupt state-owned enterprises. It turns out, the manifesto says very little about this. The relevant section reads:
We will … investigate the introduction of prescribed assets on financial institutions’ funds to mobilise funds within a regulatory framework for socially productive investments (including housing, infrastructure for social and economic development and township and village economy) and job creation while considering the risk profiles of the affected entities.
This is not my area of expertise, but as I understand it this means the ANC is promising that if it is re-elected the government will investigate the possibility of passing legislation that would require financial institutions that invest the pension money of most salaried workers to invest part of that funds in “prescribed assets”.
One assumes these “prescribed assets” would be government-controlled assets. If adopted, it would mean that a part of the pension of most salaried employees would have to be invested in assets the state has nominated – instead of in, say, shares on the stock exchange.
The apartheid era regime implemented a similar policy, prescribing that fund managers had to invest 53% of a retirement fund’s assets in parastatal and government bonds, leaving only 47% to be invested in “growth assets” such as equities.
Does this mean that 53% of salaried workers’ pensions will be pissed down the toilet to prop up failing state-owned enterprises, and to finance the looting of these enterprises by the politically connected? The short answer is that we simply do not know because no decision has been taken about this, and the proposal is entirely lacking in detail. It is this uncertainty that is alarming many people who worry that the state is coming for their pensions.
Alarmists – fearing that this is a foolish idea cooked up by the ethically dodgy Zuma/Magashule/Molefe/Gigaba faction of the ANC – argue that this will mean a percentage of most salaried workers pension will be “invested” in failing state-owned enterprises and will therefore be poured into a bottomless pit – never to be seen again. This would amount to a kind of indirect tax on the pension savings of a large parts of the middle class and the employed working class.
Glass half-full people (as well as the Ramaphorians) will argue that the dodgy people are being worked out of government, that the “new dawn” government will make sound economic decisions, that any implementation of such a scheme will safeguard the pensions of salaried workers, and that the government will therefore never pour the pension money of salaried workers into failing state-owned enterprises.
Let us assume – for the sake of argument – that the worst happens, that the looters win the argument within the ANC, and that the government forces retirement funds to “invest” 50% of all retirement money in failing and corrupt state-owned enterprises. This would mean that those of us who are lucky enough to earn a salary that enables us to contribute to a defined-contribution pension fund (meaning, we are not super rich, but are salaried working class or middle-class people with pension benefits) would over time or even suddenly lose 50% of our retirement savings.
If the worst happens – and I am not making any prediction either way on this – the question arises whether a constitutional challenge to such a move would be successful. The short answer is that it might not be that easy to succeed with a constitutional challenge (especially if those who design the scheme are not catastrophically incompetent and/or dumb), and that those who are afraid that the ANC government might “steal” part of their pension would be better off protesting in the streets and/or voting for another political party in the May 2019 election.
If we assume the correct procedures were followed in passing the empowering legislation, a constitutional challenge to any version of a prescribed assets scheme would probably have to rely on section 25 of the Bill of Rights. This is so because “property” has been given a relatively broad meaning by the Constitutional Court and legislation that may lead to a reduction in pension benefits may be argued to constitute an arbitrary deprivation of property in conflict with section 25(1) of the Constitution. This section states that:
No one may be deprived of property except in terms of law of general application, and no law may permit arbitrary deprivation of property.
I cannot see that any scheme – no matter how extreme – would constitute an infringement of section 25(2) of the Constitution which prohibits “expropriation” (as opposed to “deprivation”) of property. Even in the worst-case scenario sketched above, a law that imposes a prescribed assets regime robbing salaried employees (but not the super-rich who will make other arrangements) of 50% of their retirement pensions would probably not constitute “expropriation” in terms of section 25(2) of the Constitution, and would therefore not require the state (for the moment) to pay just and equitable compensation for this 50% “tax” as currently required by section 25(2).
The difference between “deprivation” of property and “expropriation” of property was put beyond doubt by the Constitutional Court judgement of Agri South Africa v Minister for Minerals and Energy. The court held that:
to prove expropriation, a claimant must establish that the state has acquired the substance or core content of what it was deprived of… There can be no expropriation in circumstances where deprivation does not result in property being acquired by the state.
If the state imposed a prescribed assets regime that forces fund managers to invest in failing state-owned enterprises, the state will not acquire the property of pension fund holders and the scheme would not constitute expropriation in accordance with section 25(2).
On paper, the money will remain that of the pension fund holder – although it may all disappear if the “investment” in state-owned enterprise goes bad. Although this will not constitute “expropriation”, it may well constitute “deprivation” of property as “deprivation” refers to an interference with property rights that does not lead to the state acquiring the property. As the Constitutional Court explained:
Whereas deprivation always takes place when property or rights therein are either taken away or significantly interfered with, the same is not necessarily true of expropriation. Deprivation relates to sacrifices that holders of private property rights may have to make without compensation, whereas expropriation entails state acquisition of that property in the public interest and must always be accompanied by compensation.
As the Constitutional Court noted in Reflect-All 1025 CC and Others v MEC for Public Transport, Roads and Works, Gauteng Provincial Government and Another the idea behind section 25(1) “is not to protect private property from all state interference but to safeguard it from illegitimate and unfair state interference”.
What is therefore prohibited by section 25(1) is the arbitrary deprivation of property. A law that allows for the deprivation of property would be arbitrary if it is either procedurally unfair, or if “insufficient reason is proffered for the deprivation in question; in other words, it is substantively arbitrary”. In Reflect-All the Constitutional Court summarised the “test” for “arbitrary deprivation” of property as follows:
Central to the arbitrariness enquiry is the relationship between the law in question, the ends it seeks to achieve and the impact restrictions have on the use and enjoyment of property. In some instances, a deprivation will escape arbitrariness if a rational connection between the means adopted and the ends sought to be achieved is present. In other instances, however, the means adopted will have to be proportional to the ends in order to justify the deprivation in question. Marginal deprivations of property will ordinarily not be arbitrary if they are rationally connected to a legitimate purpose. More severe deprivations will ordinarily have to be shown to be proportionate.
It must be clear from the above “test” that it will not be so easy to predict (on the basis of the reasoning in the Reflect-All case) whether a law that imposed a prescribed assets regime would constitute an “arbitrary” deprivation of property in conflict with section 25(1) of the Constitution. The answer to this might depend on the specifics of the scheme and how severe the burden is that it imposes on salaried employees who contribute to pension funds.
If the executive was crafty enough, and if it was well-versed with the Constitutional Court jurisprudence (neither of which one can assume to be the case), it might well devise a scheme that would have the effect of diminishing the actual pension benefits of salaried employees, without falling foul of section 25(1). (As I am not a fortune teller, nor a politician who will benefit from whipping up panic among salaried workers who contribute to a pension fund, I make no prediction on whether the executive – assuming the ANC wins the election – will introduce any form of the suggested scheme.)
In short, while it is impossible to know whether this proposal will ever be implemented and if it is implemented whether the version implemented would destroy pension value or not, it is possible to argue that a relatively crafty executive would probably be able to devise a scheme that passes constitutional muster.
Ironically, this means that those who wish to challenge any law that may impose a prescribed assets regime, would have to hope that the government acts in bad faith and overplays its hand, as this would enhance the possibility that a court will declare such a scheme in conflict with section 25(1) of the Constitution and hence unconstitutional.
PS: An earlier version of this article wrongly claimed a prescribed assests policy was only introduced in the dying days of apartheid. This error has been corrected.BACK TO TOP