Pension payout delays: Government Employees Pension Fund; Steinhoff pension challenges: FEDUSA, NEHAWU, PSA, SAFTU input

Meeting report

The Chairperson commenced the meeting by taking apologies, and said that a former member, Ms Zelda Jongbloed, had passed away. A moment of silence was observed in her honour.

Briefing by Government Pensions Administration Agency (GPAA)

Mr Krishen Sukdev, CEO, GPPA, said the Agency had been established in terms of the Public Services Act (PSA) with effect from 1 April 2010. Its mandate was to provide pensions administration and other relevant services to the Government Employees Pension Fund (GEPF) and the National Treasury.

The Public Service Commission’s (PSC’s) report had identified areas of concern. The GPAA had met and agreed with the PSC to deal with the findings, and had since designed various initiatives. It had also met with the Director General of the DPSA to deal with employer department related findings.

The overall concerns and findings were related to:

• Technology challenges in respect of the GPAA’s new systems;
• Delays in pension pay-outs;
• Client care inefficiencies;
• Lack of education and outreach within the departments and members.

The modernisation objective for the years 2016 to 2019 were to decrease the payment turnaround time from 60 days to less than 30 days, to enhance the client experience through innovation, to automate the benefit payment process end to end, to create a paperless environment and to implement self-service.

The GPAA, in collaboration with departments, should create a database of unclaimed pension benefits by dependents or beneficiaries and employ a tracing agent to find the beneficiaries and process their claims. Further, departments should submit details of pension members or beneficiaries who had not claimed their pensions to the GPAA to assist the work of the tracing agent.

The GEPF and GPAA had embarked on a number of communication and education programmes to empower members and beneficiaries. Print media, television, radio and billboards were channels that had been used. In addition, the fund had held roundtable discussions with organised labour and media on matters surrounding getting to know and understand the fund, its benefits, administration and investments.

Discussion

Ms Z Dlamini-Dubazana (ANC) said that the Committee was not a finance portfolio Committee. This Committee tried to ensure that the interests of employees were protected, so this Department had to return and address the core issue, which was its mandate. How far was the Department with military services? In 2010, the Committee had realised that the GPAA did not have a sufficient mandate and the Committee had added to it, but to this day it still had not delivered.

Ms W Newhoudt-Druchen (ANC) asked whether the videos had subtitles, because there were many people whose hearing deteriorated. People complained about waiting time at call centres. How many regional offices were there, and how often did mobile units go out? How were beneficiaries alerted about the mobile offices? How successful was its relationship with Sector Education and Training Authorities (SETAs)? Does the Department give absolutely no financial advice, even if people needed it, because not everyone was an expert? How was it going to assist people in rural areas to receive information, because emails were increasingly being used? On the Steinhoff debacle, who was going to cover the losses, and how many pensions or benefits were still unclaimed?

Mr S Motau (DA) asked whether the Department’s members got statements on where they stood with their money.

Ms D Van der Walt (DA) asked whether the delays were due to the fact that the Minister gave the final signature or not. What was the cost of having the advertisements in different languages?

The Chairperson asked why the departments submitted incorrect information, because members’ profiles should constantly be updated.

Mr Jay Morar, General Manager: employee Benefits, GPAA, said the issue of incorrect information was due to the Personnel Administration System (PERSAL), which was not updated. Further, some departments did not have sufficient support to provide the correct information. There were also gaps in the department because the administration staff changed levels frequently.

There were 13000 unclaimed benefits to the value of R603000.

The Department would look into having subtitles in advertisements. The cost of using different languages was worth it, because not everyone was predominately English or Afrikaans-speaking, and it was not too costly.

There were nine regional offices and six satellite offices.

The cost of tracing was approximately R3 000, and its impact was not substantial, so the Department would reduce the use of tracing agents.

A benefit statement was used to communicate with beneficiaries on their financial standing.

The Temporary Employees Pension Fund (TEPF) was a small pension fund, with about 20 members. The Department planned to amalgamate it with the GEPF as soon as possible.

The reason why the Department did not give financial advice was because it was not accredited to do so.

The Minister did not sign off on applications.

FEDUSA on the Steinhoff debacle

Mr George Dennis, General Secretary: Federation of Unions of South Africa (FEDUSA) said FEDUSA was concerned about the role of the financial regulators, and the need to protect the financial interests of the public. The investigation was still ongoing and to date no one had been arrested, despite pension funds in South Africa having seen the destruction of billions of rands in value.

The Independent Regulatory Board for Auditors (IRBA) was the statutory body that controlled the accountancy profession involved with public accountancy in South Africa. Its focus was to protect the financial interests of the public, ensuring that only qualified individuals were admitted to the auditing profession.

While the recent ruling in the Dutch court, which had ordered Steinhoff to amend its 2016 accounts, had confirmed some elements which FEDUSA would review, the Steinhoff case was a multifaceted one which would require significant investigation. Nevertheless, the initial review of the audit files had identified some lines of further investigation which were being pursued further.

At the time of the audits for 2014 and 2015, the local Steinhoff entity was the listed holding company, with its primary listing on the JSE. In 2016, the primary listing had moved to the Netherlands, therefore the audit files for 2016 pertained to Steinhoff Africa’s local subsidiaries.

The Hawks had opened a case, but in reality they were probably waiting for the PricewaterhouseCoopers (PwC) forensic audit to be completed before they took action.

SAFTU on Steinhoff debacle

Mr Moleko Phakedi, Deputy General Secretary, SAFTU, said an estimated R194 billion had been lost, and this was more than the estimated losses from all the Gupta-related scandals, and the livelihoods of millions of South Africans had been threatened.

If allegations in the media were true, then Steinhoff had used earnings manipulations, uncontrolled acquisitions, tax fraud and fraudulent investment operations. More evidence supported SAFTU’s view that the corruption and fraud epidemic involved more players throughout the country, both in the public and private spheres, where it was an inherent feature of a monopolised capitalist system.

Observing the Naspers case, it allegedly involved trying to buy support for government changes on digital migration and encryption.

In all these cases, it remained suspicious why independent internal and external auditors had failed to detect and warn about these questionable activities. Had it not been for investigative journalism exposing these issues, the regulatory bodies would have continued to blame its inertia on the complexities of identifying fraud and corruption. In spite of the compelling evidence, there had not been any arrests, and when facing disciplinary action, chief executive officers (CEOs) either resigned or got separation packages. These and other similar situations emphasised SAFTU’s analysis that this was the worst symptom of a structurally corrupt capitalist system.

To move forward, no stone should be left unturned in the investigation process, including regulatory bodies, audit companies, investment portfolio managers and stock exchanges.

PSA on Steinhoff debacle

Mr Ivan Fredericks, General Manager, Public Service Association (PSA) said the PSA was a trade union that represented over 237 000 of its members who were employed in the public service. Almost all members of the PSA were members of the GEPF.

The Public Investment Corporation (PIC) had been established as a juristic person under the provisions of the PIC Act, 1984. 90% of the assets managed by the PIC were assets which had been contributed by members and their employers, and existed for the benefit of those members. They were not state assets.

The depreciation of the share price of Steinhoff amounted to about R22 billion, and this had had an immediate negative impact on the long-term funding level of the GEPF. The government was the guarantor of the pensions of public servants, as it was a defined benefit scheme, and this meant any significant loss that placed the fund in a position not to meet its liabilities would result in the government having to make good such a shortfall. This would affect taxpayers.

During the Steinhoff saga, the focus had been almost exclusively on the loss in share value, and nobody had focused on the dividends.

The GEPF specifically, through their over-reliance on the PIC, demonstrated the hallmarks of an absent landlord. This absence extended to the apparent zero action in support of the laws of the country in combating corruption. The GEPF had never raised a suspicion of corruption, notwithstanding all the malfeasance that surrounded it. Various parties were taking legal action against Steinhoff to protect their remaining investment, but the biggest loser appeared to be doing nothing.

Members’ confidence in the ability of the GEPF and the PIC to manage funds was at an all-time low. The Steinhoff debacle had been followed by the VBS debacle, and many others followed. Public servants had resigned to maintain control over their pension money, and in the process had disadvantaged themselves.

The PSA was of the view that public servant beneficiaries of the GEPF should also benefit from the investment growth of funds under the management of the PIC. Should funds create extra wealth on behalf of beneficiaries, such surpluses should be used to improve future benefits payable to members, and current formulas for calculating benefits could be adjusted upwardly.

Discussion

Ms Dlamini-Dubazana said that since the labour unions had found loopholes in the regulatory bodies, it would be far better if they could submit their proposals to the Treasury. There should be no confusion about spending taxpayers’ money, because there would not be a government pay-out.

Ms Van der Walt asked what the rule was to inform members of where their money was invested, and what happened if corruption got so bad that dividends were affected.

Ms Newhoudt-Druchen requested the GEPF to explain why members were constantly given the impression that the loss was small, because workers had been working for many years and looked forward to a comfortable pension.

Ms Linda Matheza, Head: Investments and Actuarial Services, GEPF, responded that information of where the money was invested was the on the website, which was disclosed to the public.

On minimising losses, the Fund tried to put the matter in perspective and comfort the members, although it recognised that the loss was there. Further information would be provided in writing.

Ms Van der Walt asked whether the members were informed well enough, because not everyone read from the site.

Mr Fredericks responded that the money managed by the GEPF belonged to employees and former employees, and should be protected by a pension fund. A pension fund should create wealth for pensioners. The benefits of the pensioners should also be improved in future.

Mr Phakedi said that this was not an ordinary loss. Instead of changing the rules, those who broke the current rules should be confronted. That should be the starting point, because pensioners had suffered significantly.

The Chairperson emphasised that Parliament should do something, and that consequences should follow.

The meeting was adjourned.