Issue: December 2007/February 2008
Editorials

LOCAL GOVERNMENT

An unholy mess

Merely from what’s been argued, Salga seems really to have botched things. To have provided the Registrar with misinformation is unforgivable. The mammoth Local Government Pension Fund, proposed for all municipal workers, gets off to a contentious start and inspires little confidence in its competence to run a fund whose assets will exceed R90 billion.

Mufamadi... stuff of nightmares

Have confidence at your peril in the giant pension fund that the South African Local Government Association (Salga) wants to set up for municipal employees. The way Salga comes out of an appeal hearing by a host of trade unions and municipal funds, seeking to set aside a decision last August by the Pension Funds Registrar provisionally to register the proposed Local Government Pension Fund (LGPF), is too unfunny to be a comedy of errors.

Salga, a statutory body comprising 283 municipalities, is constitutionally mandated to “assist in the wholesale transformation of local government”. It reports to Parliament through Minister of Provincial & Local Government Sydney Mufamadi. When it reports to him on the way it’s trying to set up the LGPF, to take in all municipal workers and scrap existing municipal funds, he might have nightmares.

Not only did Salga falsely purport in a circular to municipalities that the LGPF had been registered with the Financial Services Board (FSB) and commit similar unfunnies (TT Dec ’06-Jan ’07), but the application before FSB Appeal Board reveals similarly curious behaviour. The hearing before the Board – whose decision is awaited on whether establishment of the LGPF should be refused – took a fraction of the two days scheduled.

The poor Registrar. As the respondent, he found himself stuck in the middle of a dispute where he’d acted with perfect correctness on the information provided by Salga; so much so that the appellants aren’t even asking for a costs award against him. Salga, on the other hand, is a different story: although invited to join the Registrar as co-respondent, it didn’t; although it could have had legal representation, it didn’t; and although asked to provide vital documents, it didn’t.

Why had there been no responses from Salga to requests from the Registrar for particular information? Why had Sabelo Wasa, Salga chief operations officer and LGPF principal officer, brought to the hearing only a copy of the fund’s rules? In a brief appearance, he explained he had never seen the letters of request. They had been addressed, it was pointed out, to the Salga chief executive officer. Asked the chair: “So in some sense the left hand doesn’t know what the right hand is doing?”

Not much was left for the Registrar’s counsel, Patric Mtshaulana, to argue once it was recognised that Salga lacked the authority to apply for LGPF registration. What’s more, noted Chris Loxton for the appellants, both sides appeared to accept that the Registrar “was not given the full picture” when the application for registration was made. Critically, he had not been told about an arbitration award (a bargaining council agreement) that Salga had lost and that bound it not to establish a new pension fund.

Salga did not have the authority, Loxton pointed out, because it was not an employer or a local government authority: “An employer body should have been established within the (South African local government) bargaining council by the employer and the employee bargaining parties getting together and reaching agreement. Salga attempted to do it unilaterally.”

The role of Salga is supposed to be confined to such functions as interfacing with national and provincial governments. The National Council of Provinces and the Financial & Fiscal Commission have stated: “Salga is not given the power to act as if it is or were de facto or de jure a municipal employer and step into the shoes of municipalities in relation to employment issues and (it) may not prescribe benefits, regimes or institutions to which the employers must contribute.”

Aside from misinformation fed to the Registrar, and Salga’s failure to answer pertinent questions posed by him in correspondence, he had believed Salga when it told him there was a desperate need to register the fund because it would cater for 30 000 members (presumably temporary employees) who could not be accommodated in existing funds. He wasn’t told who the members were although these records should be readily available, which defeats a requirement for a fund to be established in the public interest.

The Registrar can only demand regulatory compliance. He has no power to call for evidence that can prove the truth of what he’s told, noted Mtshaulana, so he must accept what he’s told: “If today the Board has evidence before it, questioning the authenticity and correctness of that information, all the Registrar can say is that he didn’t have that information.”

The Registrar, he added, “is not here fighting”. He had to ensure the good administration of the Pension Funds Act in the public interest, and would leave it for the Board to decide whether LGPF’s provisional registration should stand.

Where to from here?If the Board sets aside the registration, it’s suggested that stakeholders will have to agree collectively in the South African local government bargaining council to establish the fund. Once that’s done, it will be the correct body to apply for registration.

But if there isn’t an agreement, and government nevertheless wants the municipal funds and members to be merged into a single giant fund, it will have to be decreed by legislation.

  • At this hearing, the chairperson of the FSB Appeal Board was Solly Sithole of the Pretoria Bar. He was assisted by accountant Suresh Kana and actuary Heather McCleod. Chris Loxton SC and Paul Farlam (instructed by Des Rabe) appeared for the appellants and Patric Mtshaulana SC (instructed by Rooth & Wessels) for the Registrar.