Defend Truth


What is the Financial Services Board hiding? Has the FSB been captured?: Part ll

Dale T McKinley is a long-time political activist, researcher-writer and lecturer and has been involved in social movement, community and political struggles in South and Southern Africa for over three decades. He presently works as a research and education officer at the International Labour, Research & Information Group – ILRIG.

For far too long the FSB has been getting away with its often shadowy and cosy relations with the very industry it is constitutionally required to control and regulate in the interests of the public. The fact of the matter is that the public knows precious little about what the FSB has been up to. Has the FSB not learnt the most fundamental lesson from the ongoing state capture saga? You can only hide things for so long. By DALE T McKINLEY.

Read Part 1 of this series here

The story of former deputy registrar of pension funds and Financial Services Board (FSB) whistle-blower Rosemary Hunter, the FSB’s pension funds cancellations project and the billions in unpaid pension and provident fund benefits, has taken a new turn.

Readers will recall that Hunter is appealing to the Constitutional Court against the dismissal of her application by the North Gauteng High Court in November 2016 (noting that her subsequent application in June 2017 to the Supreme Court of Appeals for leave to appeal was also dismissed). That initial application was for, among other things orders compelling the FSB to: disclose completed reports into aspects of the conduct of the pension funds cancellations project; investigate the conduct of its executive officer, Dube Tshidi, in trying to cover up the substantial problems in the way the cancellations project had been conducted; and, investigate the conduct of the FSB board in relation to Hunter’s whistle-blowing reports.

The cancellations project was initiated by Tshidi (who is also the registrar of pension funds) in 2007 and resulted in the cancellations of the registrations of some 4600 pension and provident funds by September 2013. All of this took place without Tshidi or any other FSB official bothering to check whether the interests of fund members and beneficiaries had been protected. In other words, whether the funds may have had liabilities for unpaid benefits and the assets to provide for them.

Despite this, the FSB managed to persuade the High Court that it was doing enough to investigate whether the manner in which the cancellations project had been conducted had resulted in material, financial prejudice to anyone. That its investigation was being conducted by a single attorney, Jonathan Mort, who does not possess the kind of formal forensic qualifications/skills required to take the necessary deep dive into the records of the administrators of these funds, clearly did not bother acting judge Hendrik Jacobs.

Neither was Jacobs concerned about the fact that some of the key findings of Mort’s first and second inspection reports – both of which the FSB had supplied as part of their affidavits to the High Court – were in direct contradiction to each other.

On the one hand, Mort had found that there was no evidence that any member or beneficiary of the few funds he had managed to “inspect” by November 2016 had suffered material financial prejudice as a result of the way the cancellations project had been conducted. On the other hand, Mort had also found that substantial assets were discovered in several of the funds and, by Mort’s own admission, needed to have the cancellations of their registrations set aside by a court.

Incredibly, the judge completely ignored the fact that in his second inspection report, Mort had said that “… the biggest risk in respect of the deregistration process was around unclaimed benefits, in respect of which a separate inspection is being undertaken, the results of which will be reflected in the third report”. Not only was this third inspection report not voluntarily disclosed to the court, but the judge did not order it to be disclosed.

Fast forward a few months. In its affidavit filed in opposition to Hunter’s application for leave to appeal to the Constitutional Court, the FSB says that Mort’s third report had been completed in December 2016, records “certain areas of concernand notes that fund administrators are making efforts to find those to whom unpaid benefits are due. Nothing is said about what exactly these “certain areas of concern” are and how, if at all, they are going to be addressed. No surprise then that the report was not attached to the affidavit

Despite referring in its affidavit to Mort’s “supplement” to his second inspection report, the FSB has decided not to make it available. Similarly, the FSB has chosen to keep secret Mort’s report on his investigation into the suspense accounts in Liberty’s books to which it had allocated assets of deregistered funds. Further, in a supporting affidavit filed by Mort it is revealed that his mandate has been extended to an investigation of the treatment of unpaid benefits for which all of the deregistered funds on Liberty’s books were liable when their registrations were cancelled. Clearly then, the conduct of Liberty in relation to the cancellations project is one of the main “certain areas of concern”.

The FSB’s conscious decision to hide the third inspection report and other crucial information is in direct contradiction to what FSB Chair, Abel Sithole told Parliament’s Standing Committee on Finance on 13 April 2016. According to a report by the Parliamentary Monitoring Group, Sithole told the committee that all reports on investigations into the conduct of the cancellations project would be made public and that the FSB had nothing to hide.

That pledge, just like so much of what has been publicly uttered by politicians, public sector officialdom and the Zupta crew over the last many years, has turned out to be fake.

In an attempt to gain public access to what should have been in the public realm from the beginning, the Right2Know Campaign (R2K) submitted a Promotion of Access to Information Act (PAIA) request to the FSB for a copy of Mort’s third inspection report in mid-September. If it was really serious about transparency and fulfilling its role as the financial services guardian of the public interest, the FSB would have immediately – or at least within the 30-day window – provided R2K with a copy of the report.

No such luck. Instead, it invoked its right under PAIA to give itself another 30 days to respond, citing the need for “consultation among divisions of the FSB”. One immediately is left to wonder exactly why, after saying publicly it had nothing to hide and sitting on the report for months, the FSB mandarins would need another month to chat further among themselves? Evidently they needed to make sure that they were all on the same page when the refusal then came through recently after 60 days of internal chatter.

Citing Section 44 of PAIA, the FSB refused the access request “… on the basis that the report contains opinions, advice and recommendations by an inspector appointed by the FSB and which report was prepared for the purpose of assisting the FSB to take regulatory actions under legislations administered by the FSB”.

What a load of claptrap. Any competent lawyer familiar with Hunter’s case and PAIA would doubtless conclude that the FSB is clutching at straws. Ergo, that the FSB is required in terms of section 11 (the general right of access to records of public bodies) read with section 46 (the provision for mandatory disclosure in public interest) of PAIA to furnish the report if it discloses substantial non-compliance with the law and the public interest in the disclosure of the report “clearly outweighs” the harm contemplated in the various defences provided for in the act. In other words, section 44 does not provide a legal basis for refusing access to the record in such circumstances.

Whether the conditions for mandatory disclosure exist require a rational analysis of the facts at hand. What are these? If Mort’s third inspection report contained no disclosure of substantial non-compliance with the law resulting in prejudice to the funds referred to in it and/or their members and beneficiaries, then the FSB would have attached the report to its answering affidavit. This is exactly what the FSB did with Mort’s first inspection report in the June 2016 proceedings in the High Court. And again, the FSB had no problem voluntarily handing over Mort’s second inspection report to the High Court in November 2016.

Of course, release of the third report could entail the disclosure of information damaging to the commercial interests of one or more of the fund administrators (such as Liberty which was the administrator of some 80% of the cancelled funds) – which seems likely, given Mort’s extended mandate. But this would be no more damaging that the disclosures of the information Liberty will have to make when it applies to court for orders setting aside the cancellations of approximately 100 funds on its books, as it is reportedly preparing to do soon.

Moreover, it cannot be seriously argued that the damage to the commercial interests of the fund administrators involved in the FSB’s pension funds cancellations project will outweigh the public interest in the disclosure of the report. Clearly, the public interest would be served by the disclosures of all reports on the FSB’s cancellations project so that we all know if the FSB and fund administrators have been properly fulfilling their duties. This is even more so the case particularly, but not only, because the FSB has recently re-commenced the cancellations project.

Section 195 of the Constitution, which applies to the FSB as it does to the government, all organs of state and all public enterprises, requires it to act transparently and accountably in all that it does. Evidently, the FSB and more particularly its Board, have forgotten this most fundamental component of its job description. As a result, the FSB is kicking for touch, hoping to avoid being compelled to disclose the third inspection report before Hunter’s upcoming Constitutional Court hearing on 13 February 2018. A rational conclusion would be that the report must contain information that will be particularly damaging to its case.

For far too long the FSB has been getting away with its often shadowy and cosy relations with the very industry it is constitutionally required to control and regulate in the interests of the public. The fact of the matter is that the public knows precious little about what the FSB has been up to despite the fact that its role is central to the financial life of every citizen. It is (and has for a long time been) time that the Minister of Finance, Parliament’s Standing Committee on Finance and the Hawks fulfilled their duties to force the FSB to comply with its constitutional duties.

Has the FSB not learnt the most fundamental lesson from the ongoing state capture saga? You can only hide things for so long! DM


In the interests of public transparency, the names, emails and basic professional background/positions of the entire FSB Board are published below; after all it is a public body. Members of the public are encouraged to contact them – more especially the Chair, Abel Sithole – and ask them what they are hiding. I will leave it up to the reader to decide the degree to which numerous members of the FSB Board appear to have serious conflicts of interest.

Abel Sithole

[email protected]

Member of the board of the FSB since 2002. Now its Chairperson and a member of its Human Resources, Remuneration and Legislative sub-committees.

He is employed by the Government Employees Pension Fund as its principal executive officer.

Hilary Wilton

[email protected]

Member of the board since 2002. Now its Deputy Chairperson, chairperson of its Risk Management and Remuneration sub-committees and member of its Audit and Human Resources sub-committees.

She is employed by Barloworld Limited as its Group Executive: Legal and Insurance.

Zarina Bassa

[email protected]

Member of the board since 2004, chairperson of its Human Resources sub-committee and member of its Remuneration and Risk Management sub-committees.

She is a qualified auditor and previously chaired the Public Accountants and Auditors Board. She is now the executive chair of Songhai Capital, chief executive of Zarina Bassa Investments and an independent non-executive director of Investec, Woolworths and Vodacom (each of which is a registered financial services provider (FSP)), Oceana Group, Sun International, and Yebu Yethu Ltd.

Francois Groepe

[email protected]

Member of the board since 2012.

He is employed by the Reserve Bank of which is he one of three deputy governors.

Jabu Mogadime

[email protected]

Member of the board since 2004, chairperson of its Audit and Licensing sub-committees and a member of its Human Resources and Risk sub-committees.

She is the co-founder and Executive Director of Uranus Investment Holdings. She is also a member of the boards of the National Metrology Institute of SA, a public entity

Ismail Momoniat

[email protected]

Member of the board since 2010.

He is employed by the National Treasury as its Deputy Director-General: Tax and Financial Sector Policy.

Dudu Msomi

[email protected]

Member of the board since 2010 and member of its Audit, Licensing and Legislative sub-commmittees.

She is the Chief Executive of Busara Leadership Partners

Hamilton Ratshefola

[email protected]

Member of the board since 2010, chairperson of its Legislative sub-committee and member of its Risk Management and Licensing sub-committees.

He is employed by IBM South Africa as its Country General Manager.

Philip Sutherland

[email protected]

Member of the board since 2002, chairperson of its Litigation sub-committee and member of its Audit and Legislative sub-committees.

He is employed by the University of Stellenbosch as Professor of Mercantile Law.

Diane Turpin

[email protected]

Member of the board since 2010 and member of its Risk Management, Litigation and Legislative sub-committees.

She is an independent professional working in the financial services field. Among other things, she is:

A member of the board of Nedgroup Collective Investments, a registered FSP;

Chairperson of Old Mutual Wealth, another registered FSP; and

Chairperson of umbrella funds established by Nedgroup Investments and Old Mutual, all of which are subject to regulation and supervision by the FSB.

Dr Dale T McKinley is an independent writer, researcher, lecturer and long-time political/social activist. He is a leader in the Right2Know Campaign which is part of the Unpaid Benefits Campaign. His latest book is South Africa’s corporatised liberation: a critical analysis of the ANC in power (Jacana Media, 2017)


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