South Africa’s retirement fund reforms

Broadening participation and reducing the burden on the state are key to South Africa's retirement reforms, says Argon Asset Management's Mothobi Seseli

August 12, 2015

Retirement fund industry reform has been a hard-pressed objective in South Africa. Mothobi Seseli, CEO of Argon Asset Management, discusses the objectives behind South Africa’s reforms, Argon Asset Management’s role in the process, and his hopes for the financial system in 10 years.

World Finance: Retirement fund industry reform has been a hard-pressed objective in South Africa. Here to share insight on the path to innovation: Mothobi Seseli.

First, let’s talk about the objectives behind this reform.

Mothobi Seseli: With any reform process, what you’re actually trying to achieve is to get the system to work better. The objectives behind the reform process within the South African retirement fund industry are numerous. I’ll mention just a few.

You want to broaden coverage and participation in the system. You want to lessen the burden on the state. You also want to make sure that as you try to build up retirement capital that you’re doing so as cost-effectively as possible.

There are of course a whole range of other objectives, but those primarily would be the key ones.

World Finance: So, tell me where would you place Argon Asset Management in this process?

Mothobi Seseli: Argon Asset Management is an asset management or investment management company. We provide investment management services to the retirement fund industry.

We have a role to play as a stakeholder in that industry, so we talk to our clients about the reform process. Because it is about change, and change is always difficult.

And if you think, in a South Africa sense, the rebuilding of our society is important. So as we democratise, as we try to get more inclusivity, you are going to see change across all of the industries that feed into the retirement fund industry.

So, we’re doing our bit with technical relevance on the money management side. And I think that we’re doing a good job of it.

We built a globally recognised, multi-award winning investment management organisation. And that is our contribution to the game, on two levels: the discourse with clients about the change, and the benefits of a wider and bigger system that is more inclusive; as well as what we do on the money management side.

World Finance: So Mothobi: you know, when you are advising clients, do you suggest that diversifying risk is indeed the way ahead for them?

Mothobi Seseli: Risk is very important. As an investment principle you need to be diversifying risk. But you can’t diversify all the risk away. If we’re going to meet member return expectations, some risk is required.

So yes: go on to take risk, but be mindful, and be clear about what type of risk you are assuming. And of course allied to that is your return expectations.

World Finance: So what role does the South African government play in this effort?

Mothobi Seseli: As you’ll appreciate from an earlier question, one of the key objectives behind the retirement reform process is to lessen dependence on the state. So the state is a key stakeholder in this. So the state has a role to play in driving policy, driving the engagement that is necessary to achieve what they want to see. So the South African government is giving that kind of direction and leadership.

World Finance: So how does South African retirement fund reform play into the larger story of the pension industry, both regionally, locally, and then internationally?

Mothobi Seseli: I think that when you have a system that works really well, I imagine that the features of a well functioning system will be high integrity, high engagement, with attendance to the things that I spoke about. We have greater participation, greater coverage, you’re preserving as you should, and it’s cost-efficient.

What you’ll have is possibly, much more confidence in the system. Much more trust in the system.

When it works that way, you hopefully will be able to encourage more people to come into the system. So you also hopefully will benefit on the savings rate increase likelihood. When that increases, obviously your risk and capacity also improves. So it’s got meaningful economic growth implications. And that’s not only in the South African sense: it’s regional and global.

World Finance: So where would you like the industry to be, about 10 years from now?

Mothobi Seseli: I think that what I’d like to see is an industry that is delivering the majority of its desired goals and outcomes to the majority of the members, the consumers that it’s designed to serve. That kind of system is a lot more sustainable for me.

It’ll be a lot more inclusive a system. As I said, high integrity and high engagement, I think, are critical. That would be my desired picture.

World Finance: Mothobi, thank you so much for joining me today.

Mothobi Seseli: Thank you.