PAUL HOFFMAN: Re-allocating unclaimed benefits for the upliftment of ‘Neets’

by | Sep 19, 2023 | General | 0 comments

Buried deep in the wordiness of a little-known discussion paper prepared by the National Treasury is a passage that is worth pondering.

It is the text of recommendation 11 of the September 2022 “Framework for Unclaimed Financial Assets in SA”: “It is imperative that valid claims against unclaimed assets be paid out in perpetuity. But unclaimed assets are generating returns and cumulatively growing, while at the same time the period that has passed means many owners and beneficiaries will never be identified and found.

“Consistent with current National Treasury legislative proposals, it is therefore proposed to actuarially estimate a sustainable unclaimed assets pool that can satisfy expected claims, and that the surplus funds be invested into initiatives that will have a positive systemic impact, for example social, environmental and developmental initiatives.

“In support of transparency and accountability, it is proposed that the allocated amounts be invested on behalf of the fund in accordance with governance processes reflected in Recommendation 3, through regulated vehicles like CIS or alternative investment funds (both are provided for under the draft Conduct of Financial Institutions Bill, published September 2020 for a second round of public comment).

“The intention is further for the board of the Central Fund to oversee the investment and application of the investments or allocations. In the case of unclaimed benefits, where the assets can generally be linked to specific geographic regions and communities in which contributing fund members lived and worked, it is proposed that the actuarially allocated amounts may be invested through social impact funds, mandated to support infrastructure development, with specific deliverables like schools and clinics.

“Amounts allocated to these social impact funds should be done on a fair and equal basis (for example based on the relative sizes of the funds), although consideration should be given for supporting emerging black asset managers. Asset managers should be subject to strict mandate, governance and performance requirements, to ensure that funds are efficiently and effectively utilised.

“It is proposed that unclaimed assets originating from other sources, like bank deposits and insurance policies, be invested through one or more designated infrastructure/development funds, like the [Development Bank of Southern Africa]/Infrastructure SA fund. In all instances, the amounts should be managed on a drawdown basis, that is while amounts may be committed to social benefit funds, these amounts would only be withdrawn from the Central Fund when the infrastructure project requires it.”

The unclaimed benefits now total about R88bn, and are growing apace due to prudent investment management and the difficulties in getting claimants to come forward with their claims either because they are long dead or because they do not know of their entitlement to benefits. Yet while the discussion paper is celebrating its first birthday this month, little progress has been made on the implementation of its recommendations. including that made above.

In the meantime the SA state is running short of funds and budget cuts are on the cards. The rate of unemployment of young people officially described as “Neets” (not in education, employment or training) is reaching alarmingly high proportions. The presidential initiative to help them via the employment of those fondly known as “Cyril’s people” will close in March next year for want of funding to the tune of only R5bn.

There is accordingly an element of urgency in giving consideration to the implementation of the suggestions and recommendations made in the discussion paper, in particular recommendation 11, which reads: “Use a portion of the unclaimed assets for projects with social environmental and development benefits”. The Treasury has helpfully raised three questions in relation to this recommendation:

  • Should the list of proposed purposes for which unclaimed assets might be used be expanded? If yes, what other purposes should be included?
  • Do you have any comments on the proposed redistribution of the unclaimed funds?
  • Will your responses to the questions above be different if unclaimed assets are transferred to the National Revenue Fund? If yes, please indicate the differences.

There will doubtless be many comments on the notion that emerging black asset managers are sufficiently disadvantaged to qualify for the affirmative action measures contemplated. Given the levels of inefficiency, incompetence and corruption in the corridors of government, it would be prudent to establish a civil society controlled fund, such as the Solidarity Fund, to administer the unclaimed pension and provident fund benefits that are allocated to it.

It will be necessary to pass legislation to give effect to any scheme devised to reallocate unclaimed funds. This legislation will have to protect the interests of those who may emerge with late claims. The public participation process that precedes the adoption of any new laws aimed at financing projects to uplift Neets could be a lively one if the three issues raised by Treasury are properly and urgently — addressed.

Hoffman, SC, is a director of Accountability Now.

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