Edition: August/October 2018
Editorials

SASOL PENSION FUND

Midnight oil

One of SA’s top companies, which underwrites its pension fund, will have to burn lots of it in response to the tough stance of the FSB/FSCA. All funds and all trustees should be on their toes in case they too are ever confronted with anything similar.

There are good and bad sides to whistleblowing. On the good side, protected disclosures can enable the exposure of irregularities (and worse) in organisations. They’re the starting point for clean-ups that are in the public interest. On the bad side, anonymity of the whistleblower might disguise a less altruistic motive; for example, to vent a personal agenda.

Either way, turmoil ensues. Targeted parties must respond, as they have done – and will continue to do -- in the case of the board and chief executive officer at the Public Investment Corporation. Now there comes the case of the board and principal officer at the R50bn Sasol Pension Fund.

But at the SPF the identity of the whistle-blower is no longer secret. He is Dumisa Hlawula, an articulate young man who is taking Sasol to the Labour Court for unlawful dismissal.

It was as a Sasol employee that he served on the SPF and it was as a whistle-blower that, subsequent to his putative retrenchment, he used protected disclosures to the then Financial Services Board (now the Financial Sector Conduct Authority) about the SPF.

It’s uncertain whether Hlawula first made his allegations, under cloak of anonymity, when he was still employed at Sasol. In the present scheme of things, that’s neither here nor there. The timing will probably assume relevance once his matter is heard by the Labour Court.

Meanwhile, it’s clear that Sasol had acted in response to his allegations and that the FSCA is in the process of doing so. That the SPF is a defined-benefit fund means that publicly-listed Sasol, as the employer, is on the line for deficiencies.

hlawula
Hlawula . . . whistle blown
 

The thrust Hlawula’s allegations relates to “fruitless and wasteful” expenditure incurred by Lidia Visser, the SPF’s recently-retired principal officer, for a visit to the US. Purportedly, the visit was to attend the “63rd Annual Western American Pension Conference for Sustainability”. However, it turns out that there was no such conference.

In 2016, when the trip took place, the SPF had a total budget of R300 000 for travel expenses. Visser’s trip cost R100 000, to be partially offset by Batseta of which Visser was a director. Batseta had been requested to contribute roughly a third of the cost on the basis that Batseta has an “outreach programme” that allows its approved representatives to “facilitate the formation of a dialogue platform” with the largest international asset owners.

If Batseta was hoodwinked into paying, it must obviously get the money back. Anne-Marie D’Alton, the Batseta chief executive, insists: “All due processes were properly followed.”

To its credit, Sasol exhaustively investigated the whistle-blow at different levels. What remains to be seen is whether their outcomes will satisfy the FSCA inquiry. In a letter last November to SPF chair Danie van Heerden, the FSCA stated that the trip had been approved by SPF general manager Andries Schaap. Not only was there no pension conference, but the trip to San Francisco (where Visser’s son lives) took place over a weekend.

Further, subsequent to the whistle-blowing within Sasol, the group’s ethics office had found that:

  • Visser’s travel request to attend the Western American conference appeared to be false and misleading as there was no evidence of such a conference on the internet;
  • She had failed to provide proof of her registration for the alleged conference;
  • She had sufficient time to change her trip information, if there were changes to the itinerary, as approval was granted only two days before she left;
  • The trip could not be considered as a business trip;
  • No arrangements had been made to meet the chairman of CalPers (one of the world’s largest pension funds, a most useful contact for Batseta);
  • Schaap had not taken reasonable steps to ensure that all international trips were indeed business trips.

Then the FSCA wants:

  • A copy of the SPF’s policy on the conduct, standards and behaviour expected of trustees, officers of the fund and their service providers. If there are no written policies, the board is required to inform the Registrar how the fund implements, monitors and maintains what it considers acceptable conduct in the fund and those providing services to it;
  • Clarification on to whom the principal officer reports;
  • Minutes of board meetings where the proposed trip and expenditure for it were discussed;
  • Reasons that the board thought the Western American conference was relevant to the fund and what prompted the SPF’s decision for its principal officer to attend the conference;
  • A copy of the fund’s internal procedure for the approval of business trips and the control systems to ensure that abuses of travel do not occur.

So it carries on, including such intricate detail as:

  • Why Visser’s trip was scheduled over a weekend;
  • A copy of her report on the trip;
  • The reason that Stuart Morris, who then chaired the SPF board, did not disclose to the board either the report of the Sasol ethics office or his own further investigation before he had obtained legal advice as well as the board minutes where he was authorised to obtain legal advice.

Less than a fortnight after the FSB/FSCA letter, Visser and Schaap appeared before an internal Sasol disciplinary hearing. Chaired by Jaco Lubbe, an advocate at Independent Governance Specialists, they faced the main charge of “unsatisfactory work performance in that you failed to properly consider the travel itinerary of Mrs Visser’s trip...with regard to supporting documents provided as motivation for the trip”.

The alternative charge was that they’d acted contrary to the Sasol code of ethics “in that you failed to adequately justify and provide documents to support your travel itinerary for the trip....”

Evidence was led that, although the SPF did not pay for the trip and thus did not suffer any financial loss, Sasol did suffer potential loss because it had paid as part of the costs of seconding employees to the SPF. The trip had not produced optimised results because of the employees’ negligence. Sasol did not intend to recover any funds or bring charges of financial loss against the employees.

In mitigation it was submitted that Visser and Schaap had long and excellent service records. They were first-time offenders and there was no evidence to indicate dishonesty or self-enrichment, but rather administrative neglect. Both had cooperated fully with the various investigations and both had expressed remorse for their actions.

They were found guilty of unsatisfactory work performance and given final warnings.

For them, internally, the heat is off. But externally for Sasol, whose responses must be perused by the FCSA and whose defences on the retrenchment of Hlawula must be heard in the Labour Court, the same might not yet be said.

  • Invited to comment, SPF board chair Danie van Heerden replied: “The SPF board of trustees is comfortable that due process has been followed in this matter, that the questions/issues raised in the letter have been clarified and discussed with the FSCA and in particular that the expenditure in question has been validly incurred. The fund will comment further once the FSCA finalises the matter.

ANOTHER MATTER

Also in its communication with the SPF, the FSB raised the “related party transaction” of Rynhardt van Rooyen being appointed a consultant to the fund. At the time of his appointment in 2016, Van Rooyen was (currently is) a member of the SPF board where he represents pensioners.

His appointment as a consultant was made retrospective from February 2015 until completion of the project -- to assist the principal officer with revision of the board charter, investment policy statement and sub-committee mandates -- for a fee capped at R130 500. Fees were to be paid after board approval of the project’s respective items.

However, according to the FSB letter, in October 2016 a payment of R80 500 was made to Van Rooyen without timesheets and without board approval. It was made via payroll “which is not the proper procedure for paying fund consultants”. During February 2017, after an investigation, Van Rooyen paid back R20 000.

An official of the SPF had told its remuneration committee that the payment to Van Rooyen was interim. However, says the FSB letter, the SPF had not declared the related party transaction in either the 2016 or 2017 annual financial statements submitted to the Registrar and attention had not been drawn to it in the statements.

“Arising from the aforesaid disclosures”, says the FSB letter, “the Registrar considers it prudent to enquire about the matters reported to him, which in turn will assist in determining whether the principal officer and some or all the members of the board of the fund are fit and proper to hold office”.

The FSB then proceeds to request certain information including:

  • Why an external party was not appointed as a consultant;
  • The manner in which the board dealt with the conflict of interest arising when a board member had been appointed as a consultant;
  • How the consultant’s fees were determined;
  • A copy of the minutes where the board considered whether Van Rooyen was competent to act as a consultant and where it was resolved that he be appointed;
  • The reason for appointment being made retrospective;
  • A detailed breakdown of the R80 500 that had been paid;
  • The fund’s internal procedure for approving payments to consultants.

A response to the FSB was requested within 30 days from receipt of its letter.