Transnet: "dragging" over pension fund issues

[Steve Appleton]

From Business Day, 16 November 2011

Transnet ‘drags feet’ over pension fund
Parastatal has still not carried out a resolution to inject R1,96bn into one of its pension funds in order to improve the benefits for its impoverished members

LINDA ENSOR
Published: 2011/11/16 06:41:20 AM

CAPE TOWN — Transnet was "dragging its feet" about implementing a National Assembly resolution, adopted in November last year, for the parastatal to inject R1,96bn into one of its pension funds in order to improve the benefits for its impoverished members, MPs said yesterday. Members of Parliament’s public enterprises committee were not impressed by the delay and instructed the board of Transnet and the trustees of the Transnet second defined pension fund to report on November 25 on progress made regarding a solution.

Both Finance Minister Pravin Gordhan and Public Enterprises Minister Malusi Gigaba have endorsed Parliament’s recommendation that Transnet inject R1,96bn into the fund. This would be in addition to using the fund’s existing R2,7bn surplus, bringing the total cost of the proposals to R4,7bn. But Transnet acting chief financial officer, Anoj Singh, said the parastatal would have to borrow the R1,96bn, worsening the debt it had incurred to introduce its R111bn capital expansion programme and adding to the cost of borrowing.

Peter Moyo, chairman of the board of trustees of the second defined pension fund and a Transnet director, said that though Transnet was the guarantor of the pension fund, it was obliged in terms of the pension fund rules to finance only the fund’s deficit.

On the other hand, it would be a breach of their fiduciary duties if trustees were to deliberately drive the fund into a deficit by implementing the recommendations of Parliament in order to facilitate the cash injection by Transnet.

As an alternative, Mr Moyo suggested that only some of Parliament’s proposals could be implemented. For instance, Parliament proposed that pensioners receive back-pay equivalent to five months of pension — regardless of how much was in the kitty — but Mr Moyo said the fund could afford only three months.

It could afford an annual increase of only 68% of the consumer price index, rather than the 75% recommended by Parliament, and it was unable to pay the R3,2bn to uplift the base pensions. This would ensure that the pension fund remained in a surplus, freeing Transnet of the obligation to inject R1,96bn.

But committee members were not satisfied with this and urged the parastatal and the trustees to find a way to implement the recommendations to alleviate the hardship suffered by pensioners.