Edition: December 2015 / February 2016
Editorials

COVER STORY

Indeterminate sentence

Registrar must please disclose why, and until when,
the Saccawu fund needs the protection of a curator.

Enough is enough. After 13 years under curatorship, the national provident fund of the Cosatu-aligned SA Commercial, Catering & Allied Workers Union (Saccawu) should qualify for mention in the Guinness book of records.

Begun in September 2002, the curatorship continues unabated. This is despite curator Tony Mostert having signalled, back in 2011, that he wanted it to end and that he was prepared to resign. But he simultaneously stipulated conditions, importantly amongst them being the finalisation of certain litigation that he’d instituted. His latest available communication to fund members – dated 24 August 2011 – identified three matters as pending:

  • “recent” High Court judgment where it was found that former Saccawu fund trustees had acted contrary to fund rules. This, he said, was taken on appeal and heard by the Supreme Court of Appeal on 24 August 2011;
  • A trial involving Standard Bank, Wip Capital and Saccawu Administration Company, over some R500m, that had “commenced” on 2 September 2011 (before the date of his communication); and
  • A further trial, due to commence on 5 October 2011, by Saccawu Investment Holdings (in liquidation) against the union for payment of R16,5m.

On the first, the consequences for the fund and the curatorship aren’t clear. Neither is the outcome of the appeal, nor whether the appeal was eventually heard. Despite searches for the SCA judgment, it couldn’t be found. In any event, this matter should be now have been finalised. On the second, the curator lost ages ago in his R500m claim. There was a costs award against the fund, the costs possibly totalling well over R15m (TT March-May ’14). So that’s finalised.

On the third, the situation is more curious. Although the curator’s memo of August 2011 referred to an amount of R16,5m, media reports in late-March/ early April this year referred to R30m. They stated that Mostert had agreed to let the union pay off its debt in monthly instalments of R500 000 with a bulk payment of R5m due at end-September. Should the trade union default on a single payment, Mail & Guardian quoted Mostert as having said, “it is instant liquidation”.

Immediately after the end-September deadline, TT asked Financial Services Board deputy registrar for retirement funds Rosemary Hunter:


Saccawu workers can get angry

  • Has the fund been paid by the union in accordance with the schedule and, if not, what consequences are likely to ensue?
  • For the union to have paid the fund at R500 000 for five months, from April to August 2015, equates to R2,5m. With an additional payment of R5m at end-September, the total equates to R7,5m. How does this R7,5m reconcile with the R30m purportedly owed by the union to the fund?

Further, unlike the reports of curators in several other funds, the FSB website contains no reports of the Saccawu fund’s curator. Since such reports should surely be in the public domain, could she kindly release a copy of at least the latest report? At time of writing, no response had yet been received. (However, see next article headed ‘Stop Press’.)

All that appears about the Saccawu fund on the FSB website, which has a special section for curators’ reports, is a June 2012 media release. In it the FSB welcomes the ruling by the North Gauteng High Court for the fund’s continued curatorship “pending the finalisation of litigation involving the fund”. The welcome was a little strange in that the curator had successfully opposed the FSB’s own application for the curatorship to be lifted.

So on we go, trying to piece together bits of information from inside and outside the public domain. That the fund has over 100 000 members, of whom about two-thirds are also Saccawu members, heightens the need for serious scrutiny.

For context, the costs of this curatorship should be measured against its benefits. To begin with the former, after nine years the curator’s fees had reached R10,1m. Legal fees, substantially to Mostert’s own law firm, had come to a further R11,9m (TT Sept-Nov ’11).

Now look at some particular periods. The fund’s financial statements for the year to end-December 2013 reveal curator’s fees of R4,04m and legal fees of R10,96m. Statements for the year to end-December 2012 show curator’s fees of R2,01m (2011: 1,22m) and legal fees of R6,44m (2011: R5,50m).

Note that these accumulations preceded the costs award against the fund in the Standard Bank litigation. Note too that Mostert was subsequently cautioned, in an unrelated matter, by the South Gauteng High Court for appointing his own law firm to act in his curatorships.

“Although this in itself is not prejudicial or necessarily results in conflict,” believed Judge Heaton Nicholls, “there is no escaping the inference that this may create an incentive to litigate unnecessarily.” She found it “disturbing”.

On the benefits side, it’s possible only to identify some indicators. According to the FSB four years ago, R250m “was recovered from the realisation of various companies that had been acquired by Saccawu’s investment company with money from the fund” (TT Sept-Nov 2011).

True, there was the 2002 inspection by the FSB that caused it to place the fund under curatorship. The inspection found significant non-compliance with fund rules, unauthorised expenditures and personal abuse of fund monies by the then principal officer as well as various trustees.

Critical for fund members is the R250m noted by the FSB as recovered. This money is understood to lie in a trust.

It apparently originated from a R75m loan, prior to curatorship, by the fund to Saccawu Investment Holdings for the acquisition of three industrial companies. The loan to SIH was against fund rules and the R250m was realised when the companies were sold by the SIH liquidator. Not a bad profit.

At date of curatorship in 2002, the value of the December 2013, it had mushroomed to slightly over R5,8m. This would be due partly to the performance of investments, externally managed, and partly to a significant increase in fund membership, suggesting that there’d been an active recruitment drive.

An April 2004 report by Mostert and then principal officer Pat Ngqola indicated that the fund’s membership had increased from approximately 53 000 at the time of curatorship to 70 000: “It is anticipated that the fund will continue to grow and reach 80 000 (members) by 2005, if not sooner. The growth of the fund is a clear indication that confidence in the fund has been restored.”

Since then, it’s grown much more. In the five years to 2014 that Mafa Dlamini was its principal officer, he reckons that the number of members increased from around 70 000 to 110 000. Notwithstanding his efforts, Dlamini was then fired from his position by the curator (see below).

JUSTICE UNSEEN

Statement by TT editorial director Allan Greenblo, Oct 30: The other day I was kicked out of court. Well, it wasn’t literally by the seat of my pants and it wasn’t exactly a court in the commonly-understood sense. It was an arbitration hearing at the Commission for Conciliation, Mediation & Arbitration (CCMA).

Does the principle of ‘open justice’, enshrined in our Constitution, apply to CCMA arbitration hearings? Possibly, you don’t know. Certainly, I don’t know. And it’s now evident that the CCMA doesn’t know either.

What I’d done was walk into a hearing – the matter had to do with the curator of the SA Commercial, Catering & Allied Workers Union national provident fund and its dismissed principal officer – in the same way that I’d walked on previous occasions into dozens of High Court proceedings. That’s what the media and the public do routinely.

But not this time. I was told by the commissioner to identify myself. Handing her my business card, I explained that I was representing a publication that reports on matters pertinent to retirement funds.

Counsel for the curator took umbrage. The commissioner went into a tizz. They accused me of not having observed “relevant protocols”. When I asked what these were, the commissioner directed that I leave the room and wait in the corridor. She then also left the room, perhaps to consult with somebody.

About a half-hour later, she returned. Apparently not in the best of moods, she told me to return too. I could not stay, she said, until I had filled in a form at the CCMA legal department applying for permission to attend. Once I had completed the form, she said, the parties should have an opportunity to object. She was aware, she said, of problematic timelines in that the permission process probably wouldn’t be concluded before the hearing had been concluded.

So down several Johannesburg blocks I traipsed, from 127 Fox Street to 28 Harrison Street, where I was courteously received by a lady in the CCMA legal department. There was no such thing as an application form, she told me, and therefore no way in which I could apply for permission. Further, she elaborated, the CCMA had no policy on the attendance of media or the public at arbitration hearings.

Back at my desk, I lodged a complaint with the CCMA against the commissioner. First, she had given me an instruction that was incapable of fulfilment. Second, she had effectively prevented my attendance at the hearing.

A fortnight later, this response was received: “Kindly be advised that the CCMA is in the process of making a formal ruling on media access to CCMA hearings.”

I can understand that CCMA conciliation and mediation proceedings should be confidential, but arbitration is different. The rules of conduct for CCMA hearings, gazetted by the Department of Labour in March, do provide for confidentiality on conciliation and mediation. On arbitration, however, the rules are silent.

My argument is that a reason for the CCMA having been established to hear arbitration matters is for the parties to avert the greater expense of litigation before the Labour Court, a specialist division of the High Court. Accordingly, the media and public should have a right of access to CCMA arbitrations – including attendance and sight of filed documents – in the same way as in the Labour/High Court.

Moreover, parties to CMMA arbitrations have rights of review and appeal. This requires the keeping of records. They automatically become public, except in the unusual circumstance of a judge specifically ordering otherwise, once the matter is referred to a higher court. Keeping them secret at the trial stage is therefore inconsistent, and access to hearings equally inconsistent, as between the High Court and the CCMA.

At time of writing, it’s believed that a High Court judgment on ‘open justice’ at CCMA arbitrations is imminent. It concerns the dismissal by the SA Revenue Service of a senior executive. One party wants the hearing to be closed and one wants it open.

The membership increase, coupled to the health of assets under management that today are probably in excess of R6bn, suggest that confidence has been restored even further. Which makes it hard to understand why the fund has not yet been released from curatorship.

Dlamini . . . line of fire

Over three years ago the FSB announced that it was “looking towards the future of the fund and in particular the normalisation of (its) governance”. That must be taken to mean the replacement of the curator by a board of trustees and the appointment of a principal officer. Being a defined-benefit umbrella fund, the board would need to comprise representatives of participating employers and fund members in equal measure with the board entitled to appoint the principal officer.

Why then is “normalisation” taking so long? Participating employers and fund members, predominantly Saccawu trade unionists, are owed an explanation. It must come from the FSB.

Litigation lingers

Mafa Dlamini, principal officer of the Saccawu fund from 2009 until 2014, wants his job back. He claims to have been unfairly dismissed. The matter is the subject of arbitration proceedings before the Commission for Conciliation, Mediation& Arbitration (see box).

An internal disciplinary inquiry, earlier this year, found against him. Then there was an attempt at conciliation. However, according to Dlamini, the non-attendance of curator Tony Mostert at the hearings (he’d sent a candidate attorney) rendered the conciliation a non-starter. Thus now the arbitration.

Being heard by a commissioner, the unavailability of Mostert on scheduled dates caused proceedings to be postponed until October. Then there were hearings over four days, sometimes attended by Mostert. Because of his unavailability for the rest this year, their continuation has been postponed until next year.

The curator, presumably to appear or to have appeared as a witness, is represented by an advocate and an attorney. Dlamini is represented by an attorney only. Until the commissioner makes an award on costs, those of the former will have to be borne by the fund and those of the latter by the dismissed employee personally.

Until the matter is concluded, it cannot be guessed what costs award might be made. Neither, given the uncertainty about public access, can filed records be perused for publication. Nor whether there can be media reporting on any information that comes to hand.

What also remain secret are the charges and the defences; even the identities of the witnesses. Secrecy probably extends additionally to the record of the disciplinary inquiry. Only once the commissioner has made a ruling, and there’s been a review or appeal process (if any), will non-parties be able to take a view on the substance of the dispute.

Meanwhile, costs mount.

The Financial Institutions (Protection of Funds) Act places the curator under the control of the Registrar. Explicitly given the right if not the responsibility to intervene, implicitly FSB executive officer Dube Tshidi has either not exercised this right or has approved the continuing litigation.

It’s reasonable at this stage to call for the Registrar’s accountability on his oversight function. More than this, good cause should be shown for the delay in appointment of a principal officer and an end to the curatorship.

JUSTICE UNSEEN

As this TT edition was reaching its deadline for editorial production, something unusual happened. A report of Saccawu fund curator Tony Mostert, dated 31 October 2015, was published on the Financial Services Board website. In all the years of the fund’s curatorship, it’s the first.

Apparently, according to Mostert, there are cogent reasons for the curatorship to continue. The reasons are for the FSB to accept or reject because essentially they imply that the R6bn fund remains incapable of putting together a competent board i.e. honest trustees selected by participating employers and elected by members who meet with FSB approval.

Either this or the curatorship would have to continue, with its attendant costs that the curator considers to be in the interests of the fund. A governance structure that’s “normalised”, to use FSB parlance, should be better positioned to make the calls and be accountable to the FSB for them.

Not yet, says Mostert. In support, he extensively cites a judgment in the North Gauteng High Court which had directed that the curatorship continue. It held: “No undertaking was given or envisaged that (Saccawu) would in future desist from attempts to influence the trustees appointed by it to secure investment of fund assets in a fashion that might expose the fund to unusual risks, arising from the intention to aid (Saccawu) rather than to advance the interests of the fund’s members. On the contrary, it is clear that Saccawu is of the opinion that it is entitled to control the fund and to use the fund’s assets to benefit itself.”

That was in 2012. Since then, Mostert contends, the need ultimately to “wind down” the activities of the curatorship towards successful self-governance must be balanced against the interests of all stakeholders (presumably participating employers, Saccawu unionists and members who don’t belong to Saccawu). The frustration of the curatorship with particular regard to the litigation (against Saccawu Investment Holdings), he says, demonstrates that the interests of fund members are considered by the union as secondary to those of the union.

“The reintroduction of the union into a governing position should not be permitted,” he urges. “The rules of the fund should be amended to protect the members from the union exercising its (sic) influence over the fund.” So amend them then. But why? Aren’t trustees, irrespective of who nominates or elects them, obliged by law to act in the interests of the fund alone?

Apart from the arbitration involving dismissed principal officer Mafa Dlamini, there’s still pending litigation against SIH (delayed for more than five years by Saccawu’s “spoiling tactics”); against Absa (a counter-claim for refund of instalments paid), and against Merit Asset Managers (to do with an “interlocutory issue”).

There’re additionally “various incidents of fraud” that continue to be uncovered. Other irregularities, he says, are also under investigation.

Mostert makes numerous recommendations for bringing the fund out of curatorship. Fundamental amongst them is succession planning to ensure a smooth transition and the pending litigation being concluded. He further wants to “report on any role that (Saccawu) should or should not have in the management and control of the fund”.

On a brighter note, Saccawu won’t be liquidated. Thanks to the approach by an unnamed outside party, a settlement agreement was reached with Mostert after the union had been unable to conduct business due to its bank account having been attached.

From the attached account, R4m was released to the fund. This was followed by monthly instalments of R500 000 (the report doesn’t say from when) with a R5m lump-sum payment in October.

It’s all been paid, leaving one mountain fewer still to climb.