I write to you as a private citizen, who has served the union movement since 1979 and was the founding General Secretary of Cosatu in 1985, serving three successive terms in that capacity.

Alongside millions of fellow citizens, I am deeply disturbed by the detailed revelations of “state capture” that are now public record. Trust in government has plummeted. Its policies and institutions are in disarray. This is aggravated by actions that are perceived as irregular and unethical in relation to attempts to raid the contributions that millions of workers have made to the Government Employees Pension Fund (GEPF).

My anxiety has been deepened by the sinister implications of today’s Cabinet Reshuffle. The appointment of David Mahlobo as the Minister of Energy reinforces the perception that government is intent on pushing the flawed Nuclear Deal ahead, in spite of public opposition; this is a project that has nothing to do with South Africa’s energy security, is more expensive than renewable energy and embraces an old technology. And the PIC is going to be the coffer that funds a project that will bankrupt our country over many generations and rob millions of their retirement savings.

In 1980, when the apartheid government tried to illegally seize workers’ pension funds, hundreds of thousands took the street to protest changes in law that sought to freeze their access to their funds until they turned 65. The outrage and subsequent negotiations resulted in the establishment of the Provident Fund industry. It was driven by the unions and effectively gave workers’ rights to co-govern these funds, pay lump sum payments to retiring workers and extend funeral and health and other benefits to met their needs.

In the light of an epidemic of corruption sweeping our country, workers have a right to demand the renegotiation of the terms of the law and operations governing the GEPF and the PIC should their savings be used to fund risky investments.

The Government Employees Pension Fund (GEPF or Fund) established in 1996 has over 1.2-million active members, 400,000 pensioners and beneficiaries, and assets worth more than R1.857-trillion. This is the deferred wages of millions of workers. The Board of Trustees governs the Fund and is accountable for administrative and investment performance. It also determines the investment policy in consultation with the Minister of Finance. What are the union trustees doing on this Board?  How have they carried out their fiduciary duties?

The Public Investment Corporation (PIC) was registered in 2004, changing it from a commission to a corporation with fund management as its core function. As such, it is a licensed entity and subject to all Financial Services Board (FSB) strictures and is incorporated as a publicly owned entity, reporting to the Minister of Finance.

The main investment objective of the PIC is to “achieve strong long-term capital returns above clients’ benchmarks, supported by robust risk management while contributing to the broader social and economic development of South Africa and the rest of Africa”. The PIC website further states that “(beyond) these parliamentary acts, the PIC is accountable to the millions of South Africans on whose behalf we invest”.

What we are now seeing is a total abrogation of this commitment. Workers’ pension funds are being used to bail our state-owned corporations whose financial crises have been the result of bad governance, corrupt behaviour and the “extraction machines” of oligarchic families who have captured them. This was never the intended purpose of the PIC or the GEPF.

The Board of Trustees of the GEPF has the power in terms of the law, the rules and their mandate with the PIC to terminate the mandate with the PIC if the Fund and the PIC cannot resolve breaches of the mandate between the Fund and the PIC to their mutual satisfaction.

There is no legal requirement that the government pension fund must use the PIC to invest its pensions. In terms of legislation as opposed to practice, there is no legislative provision in the GEPF that forces it to use the PIC. In theory, the GEPF – if it needed to – could actually get either another asset manager or group of asset managers to manage its funds. 

The assets that the PIC manages on behalf of the GEPF actually belongs to the GEPF. It’s not government, it’s not the PIC, it’s actually the assets that the GEPF owns on behalf of its members or the pensioners.

The GEPF, as the owner of the bulk of the assets (88%), has a major responsibility and interest in the governance processes within the PIC because if the PIC is not governed properly, and managed badly, the assets of the GEPF are not managed properly. There is scope to engage and influence should the GEPF want to exercise that potential.

The time has come for the union federations and their members to demand action. As a former member of National Parliament, I ask you as the guardians of our Constitution, to ensure that you exercise your oversight over the institutions and public resources that ensure the rights of citizens are paramount. In this respect, I call for:

1. The review of the mandate of the GEPF  in relation to the PIC
2. In terms of the GEPF law and the Fund’s rules, an actuarial valuation has to be carried out at least every three years. This should be commissioned immediately to ensure that funds under management have not been compromised. Workers have a right to know what the return on investment has been over the years and how it compares to what was generated in the market place.
3. In terms of the Public Finance Management Act, the Auditor-General may investigate any public entity or audit the financial statements of any public entity if it is considered to be in the public interest or upon the receipt of a complaint. This should be done immediately.
4. Parliament’s Standing Committee on Finance should call for a public hearing on the investment decisions and criteria especially in its Isibaya Fund investments on a six-monthly basis. It is important for the PIC and GEPF to be completely transparent. While GEPF does disclose its investments (which make up 88% of the PIC’s assets), the value of PIC investments is not regularly disclosed. The PIC should consider providing detailed presentations on a regular basis to achieve and maintain good governance.
5. In terms of GEPF’s rules, any member or pensioner has “the right to communicate directly with the Fund in regard to any matter which affects him or her personally”. If there is concern on the part of members or pensioners about potential changes to the investment mandates, members can approach the Fund directly. Unions must ensure that members of the pension funds are empowered to demand detailed information on investments.
6. GEPF union trustees must demand transparency and competent, skilled and fit and proper candidates are appointed to the board, investment, audit and risk committees. Furthermore, GEPF has the rights to question the minister’s appointments when such appointments do not match the required experience, skills and integrity tests.
7. Whereas there has been a convention to have the Deputy Minister of Finance to chair the board of the PIC, there is neither a legal basis nor any basis in terms of the qualifications requirement to be a member of the board. This convention does not mean that each Deputy Minister of Finance will necessarily have either the skills or governance experience to comply with the requirements. The current Deputy Minister has a compromised history, potentially unfit to be a board member, never mind being appointed to chair the PIC.
8. More importantly, and legally, whereas in the past, GEPF did nominate Deputy Minister Finance to the board of the PIC, to the best of my knowledge, the current Deputy Minister was never been nominated by the GEPF. As such, his appointment to the board of the PIC is illegal, and procedurally flawed. Likewise, a number of other board members, both old and new, have not the requisite skills and experience, may not even pass the fit and proper test.
9. In terms of the new Companies Act, the Audit Committee of the board needs to be appointed by the shareholders and not by the board. To the best of my knowledge this is not the case at the PIC currently.
10. The investment mandate of the PIC, given by the GEPF, needs public scrutiny. It is here that dodgy investments such as lending to Eskom, SAA, the possibility of funding a flawed nuclear deal as well as investing in private investments for politically connected individuals take place.

It is said that: “Power corrupts, and absolute power corrupts absolutely.”  Fear will allow a corrupt elite to hijack our democracy, strangle our freedom and destroy the hope that we valiantly fought for. The time has come for us to draw a line in the sand. Fifty-five-million South Africans have had enough.

Find courage.

We must demand better from our leaders.

We must re-imagine, redesign and re-organise a society in which none shall be left behind. DM