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.
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:
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.
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
Watermelons were originally cultivated in Africa.