Edition: November 2018/January 2019
Editorials

DEFINED BENEFITS

New face, safe direction

Financial travails of Eskom are in hand at its retirement fund.
Hoping for the best but prepared for the worst.

With some R142bn in assets under management, the Eskom Pension & Provident Fund is SA’s second largest after the Government Employees Pension Fund. It could be in for a spot of bother, not of its own making. It’s already anticipated and plans are formulated should even a worst-case scenario eventuate.

The worst case would be if Eskom, as the employer, is forced by its parlous finances not to pay member contributions in the immediate future. Slightly better cases would be an interruption in contributions or, varying with size, partial contributions.

The best case, of course, is that Eskom finds the money (see First Word). Should it fall short, the fund has a contribution surplus to cover exigencies. At end-June 2017 the surplus stood at 0,6% of pensionable salary, amounting to R101m.

The EPPF is a defined-benefit fund, meaning that a fixed benefit (based on final salary) is paid to members on retirement or withdrawal. Unlike a defined-contribution fund, members don’t carry the investment risk. At the EPPF, members contribute 7,3% of pensionable salary and the employer contributes 13,5% which is rather generous provided that the employer can pay it.

Nopasika Lila, who took over as EPPF principal officer and chief executive in April, isn’t too fussed. Handling her new role with aplomb, she derives confidence from experience in her previous eight years as EPPF chief financial officer and in the five-year strategy that she helped develop.

What if the employer can’t maintain its contributions? What if there’s a need, say, for retrenchment packages to be offered on a wide scale?

“These are real challenges,” Lila admits. “We’ve identified a number of potential trigger points and produced options to address them. We engage proactively and continuously with the employer. The overriding consideration is that we ensure growth and stability for the future.”

Whereas the GEPF operates under its own law, and has taxpayers as its backstop, the EPPF falls under the Pensions Funds Act and is supervised by the Financial Sector Conduct Authority. Fund members rely on the employers -- Eskom, its subsidiaries as well as the fund itself -- for their promise of benefits to be honoured.

By virtue of its size – both in terms of assets and because it has roughly 90 000 active members and pensioners – it wouldn’t be a candidate for consolidation into a larger unit that the FSCA seeks. Quite the reverse.

Its continuation as a self-administered standalone is bolstered by the upgrade of its systems that, Lila believes, gives it the opportunity to offer administration services to other funds: “The FSCA wants to reduce the number of funds, so we ask how we can use our size to take advantage from the scale of our administration business already in place.”
Nene
Lila...cool in the hot seat

In a sense, the EPPF is unique by having its administration and investment arms under one roof. There’s no outsourcing, except to the extent that it does use a selection of external fund managers for a proportion of the assets. “But everything is led by our chief investment officer,” Lila hastens to add, “right down to specialist teams that manage the multi-managers.”

She condenses her philosophy into promotion of “the three Es”. These are empowerment, education and evolution. Pension funds have vital roles to play in demographic and social challenges, she says, from adapting policies for increased longevity to investments benefiting future generations.

Insufficiently emphasised, she believes, is the need for development of social infrastructure in rural areas: “Many people work in the cities but, when they retire, they go back to where their families are.” Decent infrastructure and comfortable retirement are two sides of the same coin.

Lila is the more impressive for not tub-thumping her causes but for being so thoroughly polite and non-adversarial, presenting her arguments with a quiet authority inclined to understate the muscle of the EPPF to influence the decisions of the companies in which it invests: “It’s all about partnering with companies, reasoning with them from your point of departure at an early stage and not only at their shareholder meetings.”

She feels assured that companies are familiar with the EPPF’s direction, embedded in its strategies. This is the agreeable basis, as she puts it, to go forward from good relationships.

It also pretty much summarises the overall attitude of the lady to others, and of others to her, as a defining leadership attribute. Quiet authority is not to be confused with lack of determination.

MEET AND GREET

In taking over as chief executive and principal officer of the giant EPPF earlier this year, Nopasika Lila took over the reins from Sbu Luthuli. In the same way that Luthuli contributed to the pension-fund industry, where he was highly regarded, so too is Lila to become active on the board of the Batseta Council.

Having worked for several years with Luthuli – he departed the industry when his EPPF contract expired, coincidentally with but unrelated to the ‘Molefe judgment’ (TT May-July) – she’s eminently qualified by a track record of 17 years consistently in the financial sector.

She spent her formative years in Mtata and returned to Transkei for undergraduate studies. Then it was onto the University of Natal where she qualified as a chartered accountant. Her career path subsequently took her through Deloitte for her articles followed by stints at the Gobodo accountancy firm, Portnet (which had been her client at Gobodo), Portnet (“exciting because it was restructuring”) and Old Mutual (“where my life in the financial-services industry really began”).

Her main interests in Transkei were sport and music, but she seems to recall being drawn to a CA “because people there thought it was prestige” and her sister was already serving articles towards becoming a CA. There’s also “a passion” for something off-the-wall, especially for a CA.

It’s to visit Finland, a favourite holiday destination, where she drives on a frozen swamp that’s turned into a race track: “I completely enjoy the exhilarating feeling of spiked tyres on ice.”

Clearly up for unusual challenges is Nopasika.