South Africa labours – excuse the pun – under possibly the most extreme unemployment crisis in the world. Deindustrialisation has hollowed out once-important centres of production, leaving an industrial and social wasteland in its wake.
At the heart of this catastrophe is a chronic lack of investment in the productive economy. Yet there is an extraordinary contradiction. While South Africa is starved of productive investment, the Public Investment Corporation (PIC) manages more than R3-trillion, overwhelmingly workers’ pension money.
Instead of being mobilised to overcome the investment crisis, much of this enormous pool of capital is managed according to the priorities of a financialised economy: investments on the stock market, placed offshore, entrusted to asset managers and channelled into private deals, including controversial investments such as that involving the privately operated Lanseria International Airport.
The current turmoil at the PIC therefore raises a much bigger question than whether particular executives or transactions were corrupt.
Why is one of Africa’s greatest concentrations of workers’ capital being managed primarily to accumulate more financial wealth, primarily benefiting asset managers when the economy desperately needs investment in jobs and productive capacity?
For decades, the Alternative and Information Development Centre (AIDC) has tried to persuade public-sector unions to confront this question, largely without success. A crucial reason is the deeply entrenched idea that the Government Employees Pension Fund (GEPF) must operate like the pension fund of a private corporation. But the GEPF is not a private corporation.
The neoliberal transformation of public pensions
Before the neoliberal era, state-guaranteed pension systems commonly operated substantially on a pay-as-you-go basis. Contributions from today’s workers financed benefits for today’s pensioners, with reserves providing a buffer against changing circumstances.
This makes sense for an enduring state pension system. Governments do not go bankrupt, close down, dismiss their entire workforce and simultaneously have to settle every pension liability extending decades into the future.
The rise of neoliberalism changed the prevailing philosophy. Public pension funds increasingly came to be judged according to the logic of private pension funds: accumulate financial assets today sufficient to cover projected liabilities far into the future.
South Africa’s GEPF embodies this approach.
Its latest statutory actuarial valuation found it to be 119% funded before contingency reserves. It had R2.34-trillion in net assets against R1.97-trillion in accrued liabilities.
What does “fully funded” actually mean?
In essence, actuaries ask whether the fund’s accumulated assets could be sufficient to meet the projected pension obligations of all its existing members over their lifetimes.
That is a profoundly conservative standard for a pension scheme backed by a sovereign state, with a continuing workforce making contributions year after year.
A pay-as-you-go system operates from a different perspective, namely, what resources are actually required to pay promised benefits securely as they fall due, while maintaining a prudent reserve against future risks.
The distinction has enormous implications.
The surplus nobody talks about
The GEPF is not struggling to pay pensions.
Quite the opposite.
AIDC calculations based on GEPF annual reports show that contributions plus investment income have consistently exceeded benefits paid. Since 2011/12, the fund has generated an average annual cash surplus of roughly R50-billion after paying benefits.
In 2024 the surplus was about R60-billion. In 2025 it was about R37-billion.
And what happens to these surpluses? They are reinvested to accumulate still more financial assets.
This has become a self-perpetuating cycle of accumulating assets to generate income that produces surpluses that are used to purchase more assets that generate still more income.
But the purpose of a public pension system is not to accumulate capital for the sake of accumulation. It is to guarantee workers decent and secure pensions.
From full funding to pay-as-you-go
This is why unions should be more responsive and progressive in relation to how the GEPF funds are used. What is required is a gradual transition of the GEPF from its excessively funded model towards a pay-as-you-go system with a substantial prudential reserve.
This does not mean emptying the GEPF. Nor does it mean gambling with workers’ pensions. It means determining democratically and actuarially what level of reserves is genuinely necessary to guarantee defined benefits. It means, additionally, recognising that assets accumulated substantially beyond that requirement represent a social resource.
Even moving gradually towards such a system could make available considerably more than the annual R50-billion cash surplus. This creates the option of fundamentally altering South Africa’s development possibilities.
Imagine tens of billions of rand every year directed into a mass social and public housing programme.
Such a programme could:
Build hundreds of thousands of energy-efficient homes near workplaces and public transport while generating demand for domestically produced steel, cement, glass, timber, appliances and renewable-energy equipment.
Be used as long-term concessional finance to rebuild commuter rail and create integrated municipal public transport systems, while requiring trains, buses and components increasingly to be manufactured locally.
Finance the enormous programme required to repair municipal water systems, replace leaking pipes, rehabilitate wastewater treatment works and build climate-resilient water infrastructure.
These are not expenditures that make workers poorer. They create assets, jobs and rebuild productive capacity. And they generate social returns that conventional asset-management models largely ignore.
Workers already finance the state
The great irony is that none of this would involve some unprecedented use of workers’ pension money.
The GEPF already held about R631-billion in government bonds by March 2025, alongside more than R100-billion in parastatal bonds. Workers already finance the state.
But they do so according to the priorities and pricing of financial markets.
The government borrows at market-related rates; the GEPF receives interest; the Treasury then invokes escalating debt-service costs to justify austerity, suppress public-sector wages and squeeze the hospitals, schools and municipalities in which GEPF members themselves work. Workers notionally benefit as creditors with one hand, while, in reality, being punished as workers and citizens with the other.
Who should workers’ capital serve?
The current PIC controversies bring us back to the central political question. Post-apartheid transformation partly involved using PIC resources to build a black capitalist class. Overcoming apartheid’s racial concentration of wealth was essential. But producing black equivalents of the Ruperts and Oppenheimers is not the same as transforming the economy in the interests of its working-class majority.
Nor should criticism of politically connected black capital rehabilitate established corporate South Africa. Banking scandals, construction collusion and multinational profit shifting remind us that predatory accumulation has a much longer history. The problem is that workers have surrendered effective control of their enormous financial power to the priorities of capital.
That is what Cosatu, Saftu, Fedusa and the public-sector unions must challenge. The PIC scandals should certainly produce demands for transparency, accountability and prosecution wherever corruption is established. But it should produce something much more ambitious, namely a struggle over what workers’ trillions are for.
South Africa does not lack resources. It has trillions accumulated in a state-guaranteed pension system while unemployment devastates communities, industry contracts and housing, transport and water infrastructure decay.
The ultimate security for tomorrow’s pensioners cannot be an ever-growing mountain of financial assets used to finance the development a new business elite amid a collapsing economy and mounting unemployment. The security of future pensioners lies in a productive economy, functioning public infrastructure and millions more people in decent employment.
The pensions of GEPF members are already guaranteed. What remains to be done is putting their accumulated financial power to work rebuilding a country able to honour their retirement. DM
Comments
Scroll down to load comments...