Issue: February/March 2006
Take up the cudgels
Hardly into its nappies, the newly restructured Institute of Retirement Funds (IRF) faces an early test. It’s to accept the invitation from Minister of Trade & Industry Mandisi Mpahlwa on whether – and, if so, how – black members of retirement funds are to be recognised for ownership purposes by the codes’ scorecard on black economic empowerment.
Freed of the dreaded and domineering service providers, the IRF now represents trustees only. It’s what the Cosatu trades-union federation and the Financial Services Board (FSB) wanted. Theoretically, at least at this stage, there’s no better body to make a coherent submission on behalf of fund members whom the series of "empowerment" transactions progressively disempowers. Practically, the 60-day deadline to mid-February gives the IRF precious little time to get the trustees’ ducks in a row.
In its previous incarnation, the IRF was pretty useless at arguing the case for retirement funds to the codes’ drafters. In its present incarnation, the IRF is ideal. This is precisely the sort of issue it’s supposedly structured to address.
Time is scarce. But the way new IRF sets about the task will indicate its efficacy in gathering consensus for trustees to speak with a representative voice. Failing this, it will be for allcomers to promote their particular brands of self-interest.
Better, it will be for Nedlac to do something useful. To the extent that its organised labour and business lobbies have separately taken the bit of retirement-funds recognition between the teeth, business less than labour has not exactly done so in public view.
The former might be cowed by perceptions of political correctness, or inhibited by prominent members who emerge as status quo beneficiaries. The latter has political credibility to challenge government, which it frequently does, as well as a responsibility to speak for the millions of union and fund members who are not status quo beneficiaries.
The greater the consensus in the submissions, the stronger their impact is likely to be. So far, rather late in the day, it’s unclear which arguments – or whose – have swayed the codes’ happy drafters. The overriding intervention of Mpahlwa indicates they aren’t a law unto themselves.
Let’s see whether a reasonable degree of consensus can be reached once people put their minds to it. Nedlac exists because, from time to time, its disparate elements do overcome their conflicts.
The new IRF, comprising employer-nominated and member-elected trustees, should be glued by the responsibility of all trustees to act in the best interests of all fund members. And it’s joined in sub-committees by the new Institute of the Retirement Industry (IRI), mainly comprising service providers, for making representations to government. There’s no obvious reason for the IRI to resist the IRF on a matter that will advance the interests of black retirement-fund members.
Why is this issue of BEE recognition so critical? Because it’s not a question of who’ll be getting their snouts in the trough, but whether South Africa will become a more elitist or a more egalitarian society.
Work-based retirement funds are virtually the only way that large
numbers of black workers were able to save. Government and labour have worked
closely to try to improve workers’ control through the trustee system. Now we
are told that all this counts for nothing. Worker ownership through their
pension funds ranks as "excluded equity interest".
There are two big issues that the (National Treasury discussion
document on retirement-fund reform) is trying to put into the public domain. One
has to do with the participation of the owners of the funds, the savings, which
implies increased shareholder participation or shareholder activity. When I talk
"shareholders" in this case, I am talking about the owners of the
savings. They hold a share in the assets...that we are talking about."
From a purely clinical perspective, taking South African
business as being worth R5,2 trillion – assuming that (JSE) listed businesses
comprise 55 percent by value – then R1,3 trillion will have to move into black
ownership over the next 10 years if the (BEE) target is to be met. The financing
of this will cost South African business an effective 2,5 percent to 4 percent
annually, or R130 billion, equivalent to the dividend yield of South African