Edition: September / November 2015


When clarity is elusive

There appear to be conflicting strains in the ruling party on whether
the rights of pension funds, as shareholders in JSE-listed companies,
be ignored or stimulated.

Excuse ordinary mortals for being confused over ANC policy on pension funds. Reading articles at page one and page 10 of Business Times during an otherwise-relaxed Sunday in June, they’d have been struck between the eyes by a basic contradiction. The front-page lead quotes Ngoako Ramatlhodi, the Minister of Mineral Resources, explaining why he’ll fight mining companies on how black economic empowerment should be measured in terms of the Mining Charter. At issue is whether, once a mining company has concluded a BEE transaction, the miner will retain its empowerment points under the charter’s BEE ownership scorecard -- irrespective of whether beneficiaries of the transaction subsequently sell their shares.

Ramatlhodi says that miners shouldn’t retain their BEE status. Miners say they should. The dispute over application or otherwise of the “once empowered, always empowered” principle applies similarly to institutional signatories of the Financial Sector Charter.

If Ramatlhodi is right, then one BEE transaction would have to follow another. On each occasion, existing shareholders will be further and further diluted. Because these shareholders significantly include pension funds, with multitudes of black members, they should be up in arms against the financial loss that Ramatlhodi’s stance will cause them. Empowerment of the few is the corollary to disempowerment of the many.

Ramatlhodi . . . ready to fight

Implicitly, Ramatlhodi ignores the shareholdings of pension funds. Explicitly, in an opinion piece at page 10 of the newspaper, ANC Gauteng chairman Paul Mashatile highlights them.

Fundamental to Mashatile’s argument is the vital role that pension funds can play in promoting empowerment. He sees them as the essential catalyst, through their voting power as shareholders, to transform the boards of JSE-listed companies in the national interest.

Mashatile’s proposal can go horribly wrong if it leads to inexperienced cadres pushing factional lobbies. By the same token, it can go beautifully right if it’s recognised that trustees’ sole fiduciary duty is to their funds and directors’ to their companies. The commonality of trustees and directors is the pursuit of prosperity for their diverse stakeholders and hence for society.

Ramatlhodi has planned to fight the miners in court. Mashatile has planned to hear the representatives of pension funds in an open forum.

Only one approach deserves support. It unnecessary to spell out which approach this should be.