Issue: December 2012 / February 2013


Pensions on strike

Marikana opened conundrums for striking workers’ death and disability benefits. Not to mention the potential savings withdrawals of dismissed employees that could have topped R1,5bn in one fund alone.

Amidst the provocative headlines that permeated reportage of the illegal strikes, as they ripped through the platinum and gold mining areas of the former Bophuthatswana, imagine a flurry to the effect that employers were refusing to pay the death and disability benefits of dismissed mineworkers.

It was a close call. In the horrible event of future Marikanas, pension funds should be prepared. All manner of negotiation is permitted by labour law. But pensions law is constrained. Funds are governed by their own rules, to be applied as they stand and not adjusted from one circumstance to another.

The labour principle is no work, no pay. The pensions principle is for the employer to pay monthly contributions into funds its members or face stiff penalties. When illegal strikes continue for weeks on end, and workers are dismissed but their jobs kept open, are employers to continue paying their monthly contributions?

And when death and disability benefits fall away with non-employment, what are the responsibilities of the employer and the fund to dismissed employees who’re killed or disabled during an illegal strike?

Take Amplats, afflicted by illegal strikes from mid-August to early November. For some 13 000 members of its various funds, death and disability benefits continued (through fund self-insurance) although contributions for them ceased at end-September. Self-insurance means that the fund carries the risk for death and disability benefits, but uncertain is whether cover includes deaths and disabilities caused in riots.

Were the dismissed workers not reinstated, the funds would have had to pay the administrators for 13 000 exits at roughly R250 to R450 per exit depending on the type of fund. The total withdrawal would have been about R1,5bn or some R115 400 per member.

Which raises another issue. It’s whether strikers lose their fund membership on dismissal and pocket the cash, to start their membership afresh on reinstatement, or whether they stay in the fund as if they were on authorised unpaid leave.

Rocks on the road

Having been accused of acting too slowly for trade unions on Trilinear, an open question is whether the Financial Services Board acted too quickly in putting the Rockland management company and investment fund into provisional curatorship (TT Sept-Nov ’12). It depends on whether the provisional order is made final.

Should there be an application for final curatorship, there’s a fair chance that at least some of Rocklands’ trade union-related clients will contest it. A preferable alternative might be for Rocklands founder Wentzel Oaker to be removed from all boards, and for the investors to appoint trustees or directors on whom they can rely for protection of their assets. This would avoid the costs of curatorship and prevent the possibility of value destruction by fire sales.

Main concerns in the FSB inspection report are that:

  • The Rocklands Targeted Development Infrastructure Fund was an unregistered collective investment scheme. (However, if it was a private equity fund then different rules would apply and the lack of liquidity explained.)
  • There were huge discrepancies between the price at which Oaker had bought the land, sold it into the fund and projected future values. (However, valuation of undeveloped land is an inexact science. There were independent professional valuations, but there’s a high level of subjectivity. In this instance, one was on prospects for future rights.)
  • Oaker was hopelessly conflicted through his various interests. (He was a shareholder in the top holding company, companies in which the fund had invested, a nominee of the fund’s corporate trustee and a representative of its asset manager.)
  • Almost R160m of fund assets could not be accounted for. (Subsequent to the FSB inspection, it’s understood that the full amount less certain costs has been accounted for.)

Investors in the Rocklands fund are the Engineering Industrial Pension Fund (R200m), Metal Industries Provident Fund (R100m), Mine Employees Pension Fund (R35m), Sentinel Mining Industry Retirement Fund (R65m), Telkom Retirement Fund (R60m), and the national provident fund of the Paper, Print, Wood & Allied Workers Union (R59m). Those canvassed by TT claim to have satisfied themselves with due diligences before making their investments

Oakley will have to look after himself, and answer pointed questions that come his way. The funds should be capable of looking after themselves, unless the FSB believes otherwise.

Pay up? 

Also likely soon to come before the courts are appeals against the series of determinations handed down by Adjudicator Muvhango Lukhaimane. She’d ruled that four umbrella funds with combined value of around R800m, maladministered by Dynamique Consultants & Actuaries, would have to pay back to members the 2,5% of their fund values that had been deducted for rebuilds of the respective databases.

Complaints were upheld that, having paid their normal administration fees, the additional deduction was unlawful. For the four funds, the reimbursement to members would be around R20m.

This is a peculiar situation. Whatever the legal arguments, there’s a practical paradox in the members being reimbursed from their own funds. They shouldn’t hold their breath for quick recoveries from Dynamique kingpin Tony Kamionsky; or from Aon which had the misfortune to attempt a sort-out of the Dynamique mess, as it might be expected to resist litigation.

Win a few . . .

National Treasury has backed down from its proposed amendment to the Financial Services Board Act that there can be no recourse against the FSB and its officials whose actions, in bad faith or negligence, cause financial loss to people they’re supposed to protect from it. The proposal, in the draft Financial Services Laws General Amendment Bill, might well have failed a constitutional test (TTJune-Aug ’12).

Instead, the contentious clause has been changed to immunise the FSB and its officials for anything they do or omit to do in good faith. Call it half a victory.

What shouldn’t be contentious in the bill are the provisions for trustees to “attain such levels of skills and training as may be prescribed by the registrar” within six months of appointment, and to “retain the prescribed levels...throughout that board member’s appointment”.

But two points niggle. First is whether the FSB will take all prescribed training unto itself and, if so, how it’s to be funded. Second, since a formalised educational qualification appears to be envisaged, the trade unions might see it as a barrier to serve as trustees.