Edition: March / May 2017
The man who knows too much?
Numsa gets rid of key retirement-funds official.
The National Union of Metalworkers has fired Sam Tsiane, its long-serving benefits coordinator. With his dismissal, he can no longer be a trustee of the various pension and provident funds in the metals industry where Numsa is a sponsor.
Tsiane confirms only that he is challenging his dismissal through the Commission for Conciliation, Mediation & Arbitration. Mediation already having failed, the procedure now moves to arbitration. Because rules of the CCMA provide for confidentiality of hearings and records, at least until there’s been a final determination, the issues at stake in the dispute aren’t revealed. In time, they doubtless will be.
They’ll be of great public interest. For his part, over many years Tsiane has enjoyed a high profile in the retirement-fund industry. A regular and often outspoken delegate at industry conferences, he has been recognised as one of the most experienced trade unionists on matters of pension and provident funds.
So far as Numsa is concerned, its behaviour will be scrutinised. Probably SA’s largest trade union, with over 300 000 members, two years ago it was expelled from Cosatu for opposing the federation’s continued alliance with the ANC. More recently, Numsa applied for to the Financial Services Board to set up an umbrella retirement fund of its own.
Also, Numsa has three arms in the union itself, its investment company and the retirement funds that it sponsors. There are supposed to be constraints on the interactions between them, specifically on the legal requirement that fund trustees operate solely in the best interests of the fund irrespective of who nominated them. How the requirement is applied in practice could be contentious because it clearly doesn’t appeal to Numsa.
At its national conference last December, referring to retirement funds, it was open in its campaign “to use money, which comes from the workers, in the interests of workers and the working class”.
That’s rather broader than the exclusive interests of retirement funds and their members. Whereas these interests are decided by trustees, unclear is who’s to decide the interests of the working class. Or how conflicts between them can be avoided.
The dismissal of Tsiane, once he can speak out, could poke a few bees.
Adjudicator is agitated
Once again – having previously done it in a matter involving the Municipal Employees Pension Fund and its administrator, Akani (TT March-May ’15) – Pension Funds Adjudicator Muvhango Lukhaimane has awarded punitive damages against a retirement fund. This time the object of her wrath is the RMS umbrella provident fund, administered by RFS Administrators, which has been ordered to pay complainant A Pillay his R543 000 benefit that had been unlawfully withheld.
In addition, she ordered that this amount be increased by 5% in punitive damages because the benefit had not been paid timeously. Once again, when a punitive award is made against a fund, the payment can only be made by reducing the benefits of other fund members; not the trustees in their personal capacities or the fund’s administrator.
Thus, in effect, wholly-innocent fund members are punished. It’s inherently unfair that they, rather than those responsible, are made to pay. But does the Adjudicator have alternatives? There’s an inequity that requires redress.
And, in another recent determination this time involving the Bokamaso retirement fund, administrator Akani again features. Lukhaimane found that Bokamaso and Akani had failed to comply with the Pension Funds Act and the rules of the fund on more than one occasion. Accordingly, she wants the Registrar of Pension Funds to conduct an inspection into Bokamaso’s compliance with its rules and the Act.
“It is further recommended that the Registrar initiate a thorough investigation into the conduct and licensing conditions of the second respondent (Akani)”, said Lukhaimane.
There are harsh words for tracing agents and and pension funds in the latest annual report from the Office of the Pension Funds Adjudicator.
In the Q&A with ABSIP president Sibongiseni Mbatha elsewhere in this TT edition, reference is made to the 2015 survey by 27four of black-owned asset-management firms. Since then, the 2016 survey has been made available and shows a significant change in their assets under management having increased from R309bn to R408bn as at end-June last year.
Top ten firms by AUM
But the jump can be misleading because it also reflects an increase in the number of firms, from 33 to 41, that participated in the survey. The average remains below R10bn per firm.
A large part of the jump can be attributed to new inclusions. Aluwani, spun out of Momentum, brought a large asset base. Regiments participated for the first time. Both feature in the top 10 which command the lion’s share of black firms’ aum (see table).
Again the biggest is Taquanta, primarily owned by the investments company of Sandile Zungu. The website of Taquanta Investment Holdings shows that its board comprises a majority of black non-executive directors but the executive directors are all white. These are the TIH chief executive as well as the chief executives of its two businesses, asset management and securities. The TIH chief operating officer is also white.
The point is made for comparison between firms that the 27four survey considers “black-owned” against firms that have been omitted because, by implication, they are considered “white-owned”. This might be despite the latters’ compliance with B-B BEE requirements, including significant black representation at board and executive level, and involvement in such other transformation initiatives as recruitment and skills transfer within their organisations and financial-literacy programmes in the broader community.
The criticism is thus that the criteria used by 27four, for all the light that its survey does shine on the extent of transformation and diversity, is overly restrictive and arbitrary. Firms invited to participate in the survey had to have at least 50% black ownership with accompanying voting rights; 50% black representation at board level, and 50% black individuals in senior fund-management positions (“black” defined as per the dti codes of good practice).
It could well be that the black-owned firms aren’t getting the allocations from private-sector retirement funds – as opposed to the Public Investment Corporation, Eskom, Transnet and others – which they believe they deserve on merit. The respective sources of their assets under management from the public and private sectors aren’t separated.
But there is an intimation from the PIC, although it doesn’t identify the firms it favours or the sizes of their individual allocations. Its latest annual report discloses little more detail than that over the past seven years the PIC has allocated R57bn across 14 black asset management firms. These firms had created employment opportunities for 876 individuals with different skills sets.
In its year to end-March 2016, the number of 14 firms has apparently shrunk to five. The PIC had allocated R11,5bn “to existing external managers, all of which were black-owned”. Of the R11,5bn, four “established BBBEE managers” got R9,5bn while “a developmental BBBEE manager” got R2bn.
By contrast, in 2015 the Eskom Pension & Provident Fund had allocated R22bn to black-owned managers, representing some 55% (2014: 47%) of funds managed by all domestic external investment managers. To the EPPF, “black owned” means firms having a minimum of 50% black shareholding and 50% black management. It reports that some of the black managers were amongst the top performers.
Having previously proposed broader representation by consumers and employees on company boards (TT Oct-Dec ’16), UK prime minister Theresa May has modified her stance. She’s told the Confederation of British Industry that government would publish a green paper that will set out reforms to shareholder accountability, executive pay and employee representation.
“This is not about creating German-style binary boards which separate the running of the company from the inputs of shareholders, employees, customers or suppliers,” she said. “Our unitary board system has served us well and will continue to do so.”
Her latest view seems to backtrack on her earlier pledge that “we’re going to have not just consumers on company boards but workers as well”. Still, whatever the UK produces will resonate in SA with the next incarnation of the King governance code.