IRF DAILY
28 April 2011
________________________________________________________________________
IN THE NEWS TODAY
LOCAL NEWS
Pension funds: New rules change investment allocations
Hedge funds may form a significantly larger part of pension assets
The Treasury has decided to allow institutional and retail investors to invest up to 10% of their
assets in hedge funds.
Previously, hedge-fund investments had to slot into a meagre 2.5% allocation for a collection of
"alternative" investments, including private equity. If this doesn't sound like something that will affect
your retirement, read on.
The changes to regulation 28 of the Pension Funds Act, which comes into effect on July 1 this year, will
almost certainly boost the local hedge-fund industry, but it also means everyone saving for retirement will
need to keep a close eye on the total percentage of assets allocated to hedge funds.
Anthony Katakuzinos, retail COO at Stanlib, said the changes would create challenges for participants in a
variety of products. "Regulation 28 reaches down to member level, not scheme level. This means it can
affect scheme members, who will have to work out with their advisers whether their personal portfolios
are in line with legislation, especially when it comes to a linked pension scheme where members can
select a variety of unit trusts.
"It's not just down to asset allocation, either - the regulation goes to instrument level. So, it's a combined
rating. It's a challenge for administrators like linked investment service providers - how they will provide
this information to advisers and investors to help them make informed decisions. This is a very big change
for administrators and will be an additional complication for advisers in managing investors' funds. It will
also require more investors to consult with advisers."
Katakuzinos said there was a still lot of work to be done to offer options to investors. "We are still waiting
for the regulators to come up with suitable rules and structures to allow retail clients better access to
hedge funds. There is a danger: hedge funds are pretty opaque. Some are low risk and well managed,
while some are more complex and risky. Regulators will be cautious about what to allow into the retail
market on a bigger scale."
Rowan Burger, head of investment strategy at Liberty Retail SA, said regulation 28 aimed to ensure that
savings invested in retirement funds were invested in a prudent manner, safeguarding these funds' assets
while taking on an acceptable level of risk. "This is achieved by ensuring that retirement funds' assets are
diversified by setting the asset classes and limits into which the assets may be placed. Government wants
to ensure that the tax subsidies granted to retirement funds deliver adequate pensions to remove
dependency on the state in old age."
He explained that regulation 28 governs all tax-incentivised retirement savings. "This includes retirement
annuity funds, pension and provident funds, and preservation funds. It does not apply to endowments and
unit trusts." Burger added that trustees would need better education in "exotic" asset classes and the
impact of their increased use.
Katakuzinos said this gave institutional fund managers more options for large pension funds. "In the retail
space, until legislation sorts out what hedge funds will be available to the retail market, not much will
change
for
retail
investors."
Full
Report:
http://www.timeslive.co.za/sundaytimes/article1034711.ece/Pension-funds--New-rules-change-investmentallocations
The Times Live
23 April 2011
By BRENDAN PEACOCK
New reg 28 and your investments
New retirement annuity (RA) policies have to comply with the revised regulation
All retirement fund policies issued after April 1 this year must comply with regulation 28. Policies bought
before April 1 will be allowed to continue as they were before regulation 28 was revised.
Christo Terblanche, the head of product development at Allan Gray, says that Allan Gray and, he expects,
other large product providers will continue to offer the range of funds that are available to retirement
fund members now. However, your investments into these funds will have to comply with the new
regulation 28.
Providers that cannot monitor compliance with regulation 28’s investment limits may, however, be forced
to restrict their underlying fund offerings to those that comply with the revised regulation 28 – such as
asset allocation funds that comply with regulation 28’s guidelines.
Mark Kitching, the general manager at Aims, says that Aims will limit its offering to retirement fund clients
to collective investments that comply with regulation 28 and to more conservative funds in the fixedinterest sub-categories. This may limit your ability to structure more aggressive portfolios or select
specialist funds, he says.
Underlying investments for RAs or other retirement funds may have to change to comply with
regulation 28
Existing regulation 28-compliant funds will adapt to the revised investment limits.
Money market funds may also have to adapt. At a recent National Treasury presentation on regulation 28,
it was pointed out that, as they near retirement, many RA members cash out of their underlying
investments and move into a money market fund.
In terms of the Collective Investment Schemes Control Act, a money market fund can have up to 30
percent of the fund exposed to money market instruments from a single bank. However, regulation 28
restricts retirement funds to an exposure of 25 percent of the fund to a single issuer of investment
instruments.
Adri Messerschmidt, a senior policy adviser at the Association for Savings & Investment SA, says it is likely
that money market funds will be separated into those that comply with regulation 28 and those that do
not, and only compliant funds will be offered to retirement funds and their members.
Changes to policies will trigger the need for you to comply
The revised regulation 28 states that any investments that you have made before April 1 in terms of the
previous regulation 28 can remain compliant with the earlier version of the regulation. This means that
fund members whose investment choices allow them to breach the investment limits at member level will
be allowed to keep their investments as they are.
If you have a debit order into a fund with an investment choice that does not comply with the revised
regulation 28, you may continue to make those ongoing investments.
However, should you increase your contributions above the historic annual increase, switch underlying
funds or make an ad hoc top up to your contributions after April 1, this will be regarded as a substantive
change to your investment contract, and it will trigger the need for your investments to comply with
revised regulation.
Roland Grabe, the chief investment officer at Old Mutual’s Symmetry Multi-Manager, says you may want to
consider “ring-fencing” your existing holdings to ensure that no changes are made to them.
If you are forced to bring your investments in line with regulation 28, it may not always be at a suitable
time. For example, as offshore equities are currently generally regarded as offering better value than local
ones, now is not a good time for members to reduce over-the-limit exposure to 25 percent of their savings,
Marius Fenwick, the chief operating officer of Mazars Financial Services, says.
If your policy becomes non-compliant
Market movements could result in your policy becoming non-compliant. In terms of the revised regulation
28, your fund will be expected to report this breach to the Financial Services Board, and you will be
expected to bring your investments back in line within 12 months.
Product providers may want the right to keep your investment in line
Your fund will be responsible for ensuring that any retirement fund policy bought after April 1 this year
complies with the revised regulation 28, and your fund will probably expect you to give it the right to
rebalance your investments if they breach the levels allowed by regulation 28.
Product providers will have to ensure that, once your underlying investments are in breach of regulation
28, any further investment you make – for example, your next monthly contribution – is not invested in a
way
that
it
exacerbates
the
breach.
Full
Report:
http://www.iol.co.za/business/personal-
finance/retirement/annuities/new-reg-28-and-your-investments1.1060380?cache=0%3Fcache%3D0%3Ftag%3D2010%3Fimage%3D15%3Fimage%3D3
Personal Finance
24 April 2011
By Laura du Preez
Length of membership is what counts
Making withdrawals from your retirement fund will have a significant effect on the final amount of money
you are paid out. And remember that your years of fund membership, not employment, play an important
role in how much you will receive.
The Acting Pension Funds Adjudicator (PFA) recently dismissed a complaint by a man who said that his
withdrawal benefit did not seem adequate given his 13 years of service.
Tsietsi Mokuma was employed by Vyfgang Boerdery, a participating employer in the Sizanani Provident
Fund, which is administered by Absa Consultants & Actuaries.
He complained to the PFA in June 2007 that his withdrawal benefit from the fund was only R540, despite
the
fact
that
he
had
worked
for
the
company
for
13
years.
Full
Report:
http://www.iol.co.za/business/personal-finance/retirement/annuities/length-of-membership-is-whatcounts-1.1060370
Personal Finance
24 April 2011
By Neesa Moodley-Isaacs
Funds face investment limits struggle
The Financial Services Board (FSB) is considering granting retirement funds exemptions from the revised
regulation 28 under the Pension Funds Act, because funds are finding it hard to implement some of the
regulation’s new requirements.
In particular, funds that offer members a choice of underlying investments are finding it difficult to
comply with the revised regulation’s investment limits and reporting requirements.
Fund members will have to keep an eye on communications from their funds or fund administrators as
the new requirements are implemented and the issues are addressed over the coming months.
Jurgen Boyd, the deputy executive officer in charge of retirement funds at the FSB, says the FSB is
considering granting funds an exemption from the requirement that they must report any fund and
member-level breaches of the new investment guidelines to the FSB on a daily basis once the revised
regulation becomes effective on July 1.
The FSB is considering requiring that funds report quarterly any breaches both at fund and member level,
together with the corrective action they have taken during the past quarter, he says. This will not exempt
funds from complying with the regulations during any part of the quarter, because the exemption relates
only to the reporting requirement, Boyd says.
Many funds are also expected to apply for an extension to the July 1 deadline for the revised regulation’s
requirement that they monitor and report on compliance with the investment guidelines at fund member
level. The systems of many fund providers or administrators will have to be modified to monitor this
compliance. The extensions granted will depend on the funds’ motivations in their applications for an
exemption, Boyd says.
Adri Messerschmidt, a senior policy adviser at the Association for Savings & Investment SA (Asisa), says
she is aware that many linked-investment services providers (Lisps) that offer retirement annuity (RA)
funds are unable to look through the underlying investments that they offer fund members to check the
assets in which their RA funds are invested and to ensure that members comply with the revised
regulation 28. For this reason, Messerschmidt says, she is aware that a number of Lisps plan to ask the
FSB for an exemption from applying regulation 28 at fund member level.
Full Report:
http://www.iol.co.za/business/personal-finance/retirement/annuities/funds-face-investment-limitsstruggle-1.1060382
Personal Finance
24 April 2011
By Laura du Preez
No response = loss of benefits
No response = loss of benefits
If correspondence from your retirement fund asks you to respond by a certain date, you may lose out on
your benefits if you fail to do so by the deadline. A fund member found this out the hard way when the
Pension Funds Adjudicator (PFA) dismissed his complaint recently.
Titus Matlou complained to the PFA in November 2007 that the National Fund for Municipal Workers had
reduced his risk benefits.
When the National Fund for Municipal Workers was established in 1987, it was agreed that the local
municipality and the fund member would each make monthly contributions of two percent of the
member’s salary, making total contributions of four percent that would be used to fund both risk benefits
and retirement savings.
In May 2007, the fund sent a letter to all its members, including Matlou, an employee of the Capricorn
District Municipality in Limpopo, informing them that the trustees had decided to amend the risk benefits.
At the time, Matlou had a death benefit of three times his annual salary and a disability benefit of three
times his annual salary.
The National Fund for Municipal Workers told De la Rey that the letter informed fund members that they
had to choose one of three options.
These options were:
* Default option. A death benefit equal to a year’s salary, a disability benefit equal to a year’s salary, a
funeral benefit of R5 000 for the fund member and his or her spouse, and a funeral benefit of R3 000 for
each of the fund member’s children.
Risk contributions for the default option were two percent of a member’s salary, which would be covered
by the employer’s contribution. The entire two percent of the member’s contribution would go towards
retirement savings.
* First individual choice. A death benefit equal to two years’ salary, a disability benefit equal to two years’
salary and the same funeral benefits as the default option. Only members who were entitled to similar risk
benefits were allowed to choose this option.
Full Report: http://www.iol.co.za/business/personal-
finance/retirement/no-response-loss-of-benefits1.1060371?cache=0%3Fpage%3D5%3Fcache%3D0%3Fpage%3D5%3Fimage%3D9%3Fimage%3D18%3Fp
age%3D9%3Fpage%3D2%3FpageNumber%3D1%3Ftag%3D2010%3Fpage%3D2%2F7.6063%3Fot%3Din
msa.A
Personal Finance
24 April 2011
By Neesa Moodley-Isaacs
Will I still get an RA rebate?
IF YOU save for retirement in more than one way, how do the tax deductions work? An expert advises.
A Fin24 user asks:
I would like to know if I get a tax rebate on my retirement annuity investment.
I already contribute to my company's provident fund, but it is less than 15% of my salary.
If I have an RA, will the investment be tax deductible?
Tiny Carroll, an estate planning specialist at Glacier by Sanlam, responds:
In terms of current legislation - this year's budget announcements, however, indicated that these may
change from March 1 2012 - a contribution to a retirement annuity fund is deductible within the following
limits:
The greater of
(a)
15% of non-retirement funding taxable income, or
(b)
R3 500 minus deductible current pension fund contributions, or
(c)
R1 750.
A member of a provident fund is not allowed any tax relief in respect of contributions he/she
makes to the fund. The employer is allowed a deduction, usually of up to 20% of the employee's
income. The portion of the employee's income on which the employer bases its contribution is
regarded as retirement funding; as such, it cannot be taken into account when calculating the 15%
leg of the formula.
Because the employee makes no deductible contribution to the provident fund, the deductible
contribution under the "(b)-leg" of the formula will be nil.
On the assumption that you have no other non-retirement funding income - such as interest
income above the exempt amount or non-pensionable bonuses - the "(b)-leg" of the formula will
provide the best result. This means that you will be allowed a deduction of up to R3 500 for the RA
contribution.
Fin24
26 April 2011
By Helena Wasserman
INTERNATIONAL NEWS
Japan pensions to boost alternative investment.
JAPAN - Japanese pension funds plan to increase investments in alternative assets and pare their holdings
of domestic bonds and stocks this fiscal year to diversify portfolios and bolster returns, a survey showed.
Thirty-two percent of 119 Japanese pension funds aim to increase investment in assets such as hedge
funds in the year ending March 2012, according to a survey by JPMorgan Chase & Co.'s Tokyo-based asset
management unit. They also plan to keep investing in emerging-market stocks and bonds, it showed.
Japanese pensions, which have traditionally invested mainly in bonds, are seeking other assets to
maintain steady returns and fund retiree benefits in a country where more than one in five people are
over 65. The 10-year Japanese government bond yield is hovering around 1.2%, while the Nikkei 225
Stock Average is about a quarter of its 1989 peak.
"We're expecting further diversification to continue going forward among pension funds' investment
strategies," Hidenori Suzuki, head of the strategic advisory group at JPMorgan Asset Management (Japan),
said at a briefing in Tokyo today to announce the survey's findings. "The trend to lower domestic bond
holdings is rather new."
About 14% of respondents said they intend to trim investment in domestic bonds, while 21% said they
expect to reduce allocations to local equities, the survey showed. A total of 12% of the funds said they plan
to increase allocations to emerging-market bonds and stocks.
Almost 89% of 79 respondents said the March 11 record earthquake and ensuing tsunami that led to a
nuclear disaster does not have a "major" impact that will force them to change their investment plans, the
survey showed. Still, about 11% said there are concerns that investments may not be carried out as
planned or may change depending on the situation, it showed.
JPMorgan surveyed 119 Japanese pension funds with combined assets of about 10 trillion yen ($122bn) in
its preliminary report. It plans to release a full report in May.
Global Pensions
26 April 2011
U.S. states face growing pension gaps
* States' pension gap up 25 percent to $1.26 trillion
* Pension funding lowest in Illinois, highest in New York
WASHINGTON, April 26 (Reuters) - U.S. states are short $1.26 trillion in paying for public employee
pensions and other retirement benefits, a gap that grew 26 percent in one year and will take many more
years to wipe out, according to a report released on Tuesday.
A total of 31 states had pensions that were underfunded in fiscal 2009, the latest year for which data is
available, up from 22 states a year earlier, the Pew Center on the States reported.
The financial crisis in 2008 crushed many pension funds' investments, just as historic budget woes forced
governments to cut contributions to those funds. The combination "made a serious problem even worse,"
said Susan Urahn, the Pew Center's managing director.
In fiscal 2009, which for most states began in July 2008, states were short $660 billion for future pension
payments and $604 billion for other retiree benefits, namely healthcare.
Growing unfunded pension liabilities on top of still daunting state budget gaps are a top concern of Wall
Street rating agencies and investors in the $2.9 trillion municipal bond market. Most states are legally
bound to pay retirees benefits, and they must make up for any investment loss from their already depleted
treasuries or by borrowing.
Full Report: http://www.reuters.com/article/2011/04/26/usa-states-
pensions-idUSN2522420920110426
Reuters
26 April 2011
By Lisa Lambert
Do not panic if you haven’t saved enough for retirement
If you haven’t save enough for retirement, take steps to tackle it
The adage “better late than never” applies to retirement saving. It is unfortunate that so many people
neglected saving for retirement until when they are about to retire. Some of the people in this category are
either spending all of their monthly income or have relied heavily on the real estate or stock market
bubbles and lost. Still others failed to diversify and divert all their hard earned money into their own
business venture that ultimately went nowhere.
While ignoring the problem or surrendering to its expected outcome is human, it is also absolutely wrong
since that is not the solution. There are options. Difficult times mean difficult choices. Retirement whether
forced or voluntary with no money certainly falls into the “difficult times” category and steps must be
taken to tackle it.
Don’t get panic; it is never too late to plan for retirement
If you are now 50 or 60, while it is true that you are late in starting to plan for retirement, it is not too late
yet. So, don’t get panic like some people who withdraw the little money they have in savings and spend
the money on holidays, cars and expensive parties, thinking they would never save enough for retirement.
Thus, they decided it didn’t matter if they saved anything.
Some of them have meager savings, and don’t see how they will ever have any more. So they plan to work
until they drop dead or until their health stop them form doing so, and then live whatever lifestyle they
afford.
Don’t be like them, and stop panicking. You still can save and head for comfortable golden years.
Join pensions scheme to enjoy the employer match
In case you are yet to join the contributory pension scheme made compulsory for all workers by the
Pension Reform Act 2004, the time to open your own retirement savings account as required by the Act is
now. This will enable you to enjoy your employer match.
Employers encourage employees to save for retirement by offering to match their contributions to the
employer’s retirement plan. This match is often expressed as a percentage of what the employee deposits.
For example, your employer will match 7.5 percent of your contributions as provided for in the Pension
Act. This match amounts to free money to you, money that you won’t get as salary if you don’t contribute
to the plan. Once this is in place, then consider making additional voluntary contributions to boos your
savings.
Decide how much you need per month in retirement
Get down to your major expenses which will be housing and medical care. Add in your daily living
expenses like food, transportation and household bills. These are your necessities which you want to have,
no matter what.
Then you have your so-called “optional expenses” that could add or minus quality to or from your
retirement life - travel/vacation, hobbies, dining & wining, entertainment.
An easy way to nail down all your expenses is to go through your checkbook and see how much you
currently spend in each category: housing, medical, household bills, transportation, food, clothing,
vacation and so on.
If you don’t have proper records, keep close track of every expense for two or three months. Then you can
decide how much of each of these amounts is relevant in your retirement.
Increase your savings
A late starter can increase savings in three ways:
a. Reduce your expenses: Don’t go into the habit of spending your retirement savings on excuses of
emergencies, unexpected shortfalls or tight cash. Preserve and don’t touch your savings or else
you won’t have a chance of increasing your savings.
Start a cash reserve fund, by setting aside enough money to cover three months worth of expenses for
emergencies. To do this, cut down expenses at your current income. The best way is to have a plan to keep
income out of your hands and out of your checking account.
Automatic withdrawals from your paycheck into savings accounts and retirement accounts like are safeproof ways you won’t get to touch your money.
b. Increase your income: Say you switch job and your new employer has a good pension plan. You
can negotiate for the same take-home pay with an increase in income going to your retirement.
To get more income, you may have to sacrifice a bit like may be consider to move to other parts of the
country or even overseas to work. Opportunities for bigger income may be in these places and therefore a
chance for you to amass enough savings to return home to live the life you want.
Full Report:
http://www.independentngonline.com/DailyIndependent/Article.aspx?id=32761
Daily Independent
26 April 2011
By Sola Alabadan
Are youpreparedforretirement?
How would you like to spend your retirement years? Will your nest egg be able to provide the kind
of lifestyle that you have become accustomed to and how much will it cost?
Sadly, many people end up impoverished in their later lives or are totally dependent on their children or
other family members. Yet other retirees are redefining retirement as an exciting time to explore new
interests. No longer the end of work life, it has become a new beginning, often the start of a new career,
world travel, going back to school, starting a new business venture, spending more time with family, or
engaging in high-impact philanthropic ventures that change lives.
Here are some issues to consider as you plan for your retirement.
How much money will you need?
Thanks to the Pensions Reform Act, 2004, most of us are aware of the importance of pensions and
retirement planning. Pensions, while they are an important part of retirement income, will very rarely
cover all your retirement needs if you wish to maintain a certain standard of living during your retirement
years. Your retirement income should be supplemented with income from other personal savings and
investments.
Everyone's retirement goals are unique and a function of their own age, stage, and financial situation. As
life spans get longer, it is not unusual nowadays to spend over 20 years in retirement, so you need to be
sure that your financial resources can last as long as you do. If you were to retire at 60 and then lived for
at least another 20 years, how much income would you need for each year of your retirement, and how
much do you have to save now to generate that kind of income to afford the lifestyle you desire?
Your current income is a good starting point for calculating your retirement savings needs. Experts
estimate that most people will need between 65 percent and 80 percent of current income to maintain
their current lifestyle when they retire. Online retirement calculators are available at several websites
including those of the Pension Fund Administrators. These are useful tools to help you to estimate how
much you will need in retirement.
Start early
In your 20s and 30s, retirement seems a lifetime away, but it's never too early to start planning for it right
from your first job. Those who start saving for retirement in their 20s have a better chance of building a
large nest egg and achieving sustained financial success.
Educate yourself
Financial security and knowledge are closely linked. It is important to have a broad understanding of the
basic investment principles; how you save is just as important as how much you save. Educate yourself on
the different savings options available and what might work for you.
How much risk can you afford to take?
Your investment portfolio should be tailored to reflect your age, the amount of money you have and will
need, and your risk tolerance. Inflation and market volatility have forced investors to face the reality of
their financial position. With the spectre of inflation always lurking, and the possibility of spending more
than two decades in retirement, your investment earnings will have to keep pace in order for you to have
any chance of maintaining your current standard of living.
The type of investments you make play an important role in how much you would have saved at
retirement. A diversified portfolio of cash, bonds, stocks and real estate will help to protect you from
investment risk. You don't want all your retirement funds invested in high-risk investments; in spite of the
higher yields this might generate, you need to balance risk and return in order to achieve your goals. The
asset allocation will largely depend on your risk tolerance and how long you have until your retirement.
Full Report: http://234next.com/csp/cms/sites/Next/Money/Business/5691105-146/story.csp
Personal Finance
24 April 2011
By Nimi Akinkugbe
OUT OF INTEREST NEWS
Weaker rand will bring anything but relief for SA
In an article (Business Report, April 20), Michael Power, an advocate of rand devaluation, is quoted as
saying that; “relief may soon be at hand”. He is referring to the possibility that the US Federal Reserve will
withdraw excess liquidity, which will lead to a strengthening of the dollar and a drop in the rand.
If the rand should drop, “relief” would be a strange description of what would happen: instant acceleration
of inflation, especially food and fuel; inflation of every imported item or item with imported components;
temporary benefit for exporters until inflation-led wage demands and other input costs make them
uncompetitive again; increased cost of servicing foreign debt; increased cost to import capital equipment;
a new round of inflation on inflation; increases in interest rates that will stall growth and then as usual,
fresh demands to devalue.
Economists should ask themselves why it would be any different next time and look at countries like
Germany, with motivated governments, who thrive on strong currencies because they have learnt to
become more efficient instead of whining and looking for the easy way out.
Sydney Kaye
Cape Town
Pick n Pay’s loyalty card offers no reward
In recent editions you have afforded Pick n Pay marketing director Bronwen Rohland generous columns
to plug the company’s new loyalty card.
Rohland claims that holders of these cards will receive numerous rewards. They probably will receive
numerous small rewards, which all boils down to retail smoke and mirrors adding to the cost of the goods
purchased in the first place.
It has already cost Pick n Pay R140 million to launch this scheme, but Rohland is careful and makes no
mention of where this money came from.
Apparently, the loyalty card holders will receive a measly 1 percent reward (kickback) on their purchases.
If this 1 percent is not already factored into the price of the goods, then why not make it a 99 percent
reward?
I’ll tell you why. The price of the goods would have to increase by 99 percent and it would then become
obvious that the customers are not being rewarded at all, but are being penalised by this overly
sophisticated and wasteful retail sleight of hand.
That other retailers use loyalty cards in order to lure the easily led customers into their stores is no excuse
for slavishly copying them. These schemes may not be unlawful, but they are unethical and the new
Consumer Protection Act should declare them to be not in the consumers’ interest.
These loyalty schemes only encourage overspending and overconsumption; the antithesis of good
responsible shopping.
Doubtless Rohland will want to refute everything I say but, in doing so, will she explain to all the Pick n
Pay customers where the R140m came from in the first place and, where the 1 percent kickback will come
from too.
Full Report: http://www.iol.co.za/business/opinion/letters/weaker-rand-will-bring-anything-
but-relief-for-sa-1.1061437
Business Report
26 April 2011
Why economics is poorly understood
PARTICULARLY WHEN IT COLLIDES WITH EVENTS AND POLITICS.
Values and economics are awkward dance partners. For starters, they have unmasked disdain for each
other. Today more than ever, the two bruising each other on the largest stages is the common
denominator among stories dominating the news. While SA’s global limelight days in the 90s were all
about values, an accommodation with economic realities is still elusive. Media, politicians and voters
habitually focus on either economic principles or values-based considerations. Progress happens when
the two can be mutually accommodated.
An important exception which proves the rule is how China’s long run of rapid growth largely reflects a
dramatic shift from fairness based policies to focus almost exclusively on growth. Such a severe
downgrading of fairness-focused policies is as rare as 30 years of nearly 10% annual growth.
If today’s headline news stories were sporting events we could faithfully gauge the performances and
strategies without being bogged down in a deep mush of values. Try doing that when reading about the
challenges gripping lawmakers in Europe, North America or Asia.
European financial papers have understandably obsessed over how to save the euro while managing the
excessive indebtedness of many of the so-called periphery nations. A values based perspective blinds us
to a credible option for avoiding the increasingly possible demise of the euro. The financially strong
countries, such as Germany, Austria and the Netherlands could exit the euro in favour of a more
Deutschemark-like euro II. This would be a much more manageable and cheaper option while avoiding
the risks of a banking sector meltdown in overly indebted countries. Of course this offends our sense of
fairness. Why should the responsible countries have to incur the trouble and expense of inventing a new
currency?
The US’s huge fiscal deficit and greed-induced subprime crisis have in effect created a monetary deficit
referred to as quantitative easing. This has cheapened the dollar and led to currency wars. The supreme
challenge to US lawmakers is to now substantially reduce the long-term structural deficit while helping to
inspire sufficient growth to meaningfully reduce unemployment. Running huge trade and fiscal deficits
alongside a loose monetary policy of near zero interest rates offends many peoples’ sensibilities. Surely
China’s
high
savings
policies
must
be
more
morally
admirable.
No?
Full
Report:
http://www.moneyweb.co.za/mw/view/mw/en/page492379?oid=536018&sn=2009+Detail&pid=287226
Moneyweb
26 April 2011
By Shawn Hagedorn
Compiled By
Ruwaida Kassim
Institute of Retirement Funds, SA
Tel: 011 781 4320
WEB: www.irf.org.za
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Our mission is to scan the most
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The information contained in this newsletter does not constitute an offer or solicitation to sell any
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The information contained herein has been gathered by the Institute of Retirement Funds SA from sources
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The
Institute of Retirement Funds SA is not responsible for and provides no guarantee with respect to any
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