Transnet Second Defined Benefit Fund's Final Joint Proposal for Implementing Committee's Resolutions: by Board of Trustees and Transnet

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Public Enterprises

24 November 2011
Chairperson: Mr P Maluleke (ANC)
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Meeting Summary

The Transnet Second Defined Benefit Fund presented its joint final proposal on the Committee’s three resolutions (adopted in Parliament in November 2010) for the Fund. The Fund could “by and large implement two of the three resolutions made by the Committee”. For the first resolution, the Fund proposed to pay another three months of ex gratia pension payments as bonuses to bring the total bonuses paid to pensioners to five months worth of pension payments by March 2012. The intention of the Fund was therefore to fully implement the first of the Committee’s resolutions at a total cost of R850 million to the Fund. The Committee’s second resolution – that annual increases be linked to 75% of Consumer Price Index (CPI) – was not currently affordable for the Fund. While it might be possible to implement increases linked to 75% in the future, the Fund could currently only afford annual increases linked to between 63% and 68% of CPI. The Committee’s third resolution, that the pensioners receive a 3.2% base uplift on their pension payments, was also currently unaffordable.

Members asked if it was possible for the Fund to aim for pension payment increases linked to 75% of CPI, subject to affordability but if not, it was asked if it would be possible for the Fund to build in a guarantee for the increases to be linked to at least between 63% and 68% of CPI. It was asked from where the R850 million cost of implementing the five months pension ex gratia payments to the pensioners was coming. Some Members were unhappy that the proposal presented by the Fund and Transnet had not been what the Committee had wanted as it fell short of the resolutions taken by the Committee and adopted in Parliament. Other Members however were pleased that the Fund and Transnet had made progress on plans to implement the Committee’s resolutions. It was suggested that, even though progress had been made and the proposals presented in the meeting were an improvement on those presented the previous week, this was not the end of the road on the matter and that the Fund should continue to report back to the Committee in the future. Ways of implementing the Committee’s resolutions in the future, and subject to the Fund’s affordability, should be considered. Some Members were still concerned that Transnet had “passed the buck” to the Fund itself insofar as it had not provided any funding for the implementation of the Committee’s resolutions.

One visiting Member was particularly concerned about a lack of communication with the pensioners. Other Committee Members were pleased that the Fund had increased the number of pensioner-elected members sitting on its Board.

Most Members felt as if the Committee, Transnet and the Fund were close to reaching a solution on the implementation of the Committee’s resolutions. The Minister of the Department of Public Enterprises would submit a report to the Speaker of Parliament in the next few days who would then refer this report back to the Committee to deliberate on the matter.

Meeting report

Presentation on the Transnet Second Defined Benefit Fund (TSDBF)
Mr Peter Moyo, Chairman of the TSDBF, presented a “final” joint proposal to the Committee on its recommendations on the TSDBF. The previous week, the TSDBF had presented a proposal on how to implement the Committee’s resolutions but the Committee had not been pleased with the proposal. The Committee had instructed Transnet and the TSDBF to return to Parliament within ten days (on 25 November 2011) with its joint plan on how the Recommendations could be implemented.

The Committee’s recommendations, adopted by Parliament in November 2010, had recommended that Transnet and National Treasury make a cash injection of R1.963 billion into the Fund as a funding solution for TSDBF to provide for:
▪ An ex gratia payment of 5 months’ pension;
▪ A 75% of CPI annual increase going forward (on the 3.21% uplifted base);
▪ A base uplift of 3.21%

The TSDBF’s final proposal took into account the Fund’s financial position, the current life expectancy of pensioners, expectation of fund returns in the future and preferences expressed by pensioners of the Fund.

The
TSDBF proposed to pay another three months of ex gratia pension payments as bonuses to bring the total bonuses paid to pensioners to five months’ worth of pension payments by February 2012 (since November 2010). The intention of the Fund was therefore to fully implement the first of the Committee’s resolutions at a total cost of R850 million.

Mr John Benwell, a pensioner-elected Trustee of the TSDBF, said that the pensioners he had spoken to felt very strongly that they were only interested in seeing improvements on what they were currently receiving, which was the “2% adjustment” and the annual bonus of 10%. The idea of the CPI-linked increases, bearing in mind that approximately 50% of the pensioners earned only R1500 per month or less, was not favoured. Pensioners around the country who had been consulted, felt very strongly that they wanted to retain the existing bonus structure so that they would receive a more substantial amount of money once a year. Obviously pensioners would support any other things that were done to uplift the 2% in line with inflation but they felt strongly that this should not have any bearing on the Fund’s existing principles of providing annual bonuses with a guaranteed 2% annual increase.

Discussion
The Chairperson said it had been important to hear from Mr Benwell as he was someone who represented the interests of the pensioners. The interests of the pensioners should be paramount in the process but should be considered within the affordability and sustainability of the Fund.

Mr Bayanda Mzoneli, Head: Parliamentary Service Unit, Ministry of Public Enterprises, explained that the Report of the Committee’s recommendations had been adopted by the National Assembly in November 2010. The Speaker of the NA wrote to the Minister of Public Enterprises communicating the Report’s recommendations. The Minister had since taken responsibility for considering the Report and taking it up with Transnet. The latest information coming out of that interaction with Transnet, was that the Minister of the DPE yesterday received a letter from the Chairperson of the Transnet Board communicating Transnet’s decision on the matter. On the basis of that letter, the Minister would communicate his response to the Report with the Speaker of the NA either today or on Monday 29 November 2011. This was where the process currently stood. The Speaker would then refer the Minister’s report back to the Committee.

Dr G Koornhof (ANC) reiterated that the focus should be on the plight of the pensioners of the Fund. It was a pity that the process had taken so long but he was glad that a point had been reached whereby the plight of the pensioners could be addressed. The focus for the pensioners, especially those who were ageing, was for them to receive cash in their pockets. After the input from the Minister’s office had been received, the end of the process was imminent and the pensioners could finally have clarity and closure on the matter.

Dr Koornhof asked if it was possible for the Fund to strive for increases linked to 75% of CPI, subject to affordability. If not, would it be possible for the Fund to build in a guarantee of increases linked to at least between 63% and 68% of CPI?

Mr Moyo replied that 2% increases were still guaranteed and the Fund would target increases of 75% of CPI. It could currently only afford increases linked to between 63% and 68% of CPI.

Dr Koornhof asked if the Fund could make a commitment to the Committee that the five months ex gratia pension payments would be paid no later than March 2012.

Mr Moyo replied that two of the five months ex gratia payments had already been paid. The third one was approved yesterday and would be paid on 1 December. The remaining two would be paid by March 2012.

Dr Koornhof asked if it was possible, considering that the Fund had said the 3.2% base uplift was not possible, for the Fund to tell the pensioners that the Fund would continue with the ad hoc bonuses to ensure that at the end of each year, the pensioners received ad hoc bonuses.

Mr Moyo replied that it was important for everyone to understand that the Fund could not afford the CPI linked increases and the bonuses. It had to be one or the other. If the Fund found that it had extra reserves once the proposals, if approved, were implemented, then it would seriously consider also paying bonuses to deal with the “generational issues”.

Ms G Borman (ANC) thanked the presenters for their presentation – it seemed as if an effort had been made to grapple with the Committee’s concerns emanating from last week’s meeting. She was concerned that she had heard many “mights” and “ifs” in the presentation and asked, as Dr Koornhof had, for more concrete commitments from the Fund.

Mr Moyo replied that the Fund “was committed”.

Ms Borman asked for clarity on State Old Age Pension fund.

Mr Moyo replied that he could not make a guarantee on the State Old Age Pension fund as he did not run this.

Ms Borman asked from where the R850 million required to implement the full five months ex gratia payments was coming. Was the money being pumped in by Transnet?

Mr Moyo replied that the R850 million would be paid by the Fund. There would be no cash injection at all from Transnet.

Dr S van Dyk (DA) commented that the proposals were not what the Committee had expected or wanted to hear but that he took note of the proposals presented. The fact that the three resolutions made by the Committee and adopted by Parliament one year ago were not being implemented as the Committee would have liked was a bit disrespectful to Parliament. This was despite the Ministers of Finance and Public Enterprises, responsible for the oversight of Transnet, giving assurance to Parliament on 24 August 2011 that Transnet would be responsible for all funding needed to implement the Committee resolutions, subject to the amendment of the rules. It was very unfortunate that Transnet had not assisted the Fund Board of Trustees in amending the rules. By not amending the rules, Transnet avoided having to pay the funding needed to implement the resolutions. This also showed disrespect to the Minister’s commitment to Parliament. It seemed as if the “tail was wagging the dog”. Who had failed in this process? It was appreciated that some progress had been made in the proposal to implement the resolutions. The problem could not lie with the Board of Trustees as they could not put the Fund at risk without amending the rules and without a guarantee from Transnet to provide funding. How much of the funding would come from Transnet and how much would come from the funding level of the
TSDBF? It seemed as if Transnet was trying to “pass the buck” to the Fund. According to Section 12(2) of the Transnet Pension Fund Act, Transnet guaranteed the financial obligations of the TSDBF, and the government guaranteed the obligations of Transnet to the TSDBF. There must be a reason that the Committee was not aware of that its original resolutions were not being implemented.

Mr Moyo apologised if the TSDBF and Transnet had come across as disrespecting Parliament. To his mind this was not what had happened. People had worked very hard, including over the weekend, to present a solution to the Committee today. If the Trustees of the Fund had amended the rules it would have put the Fund in a deficit which the Trustees could not do. Mr Moyo added that there had not been any failure but that if there had been, it would have been on everyone’s part. Perhaps it should have been stated up front that “we want to do all these things and so how best could we deal with them and try and find a solution”. It could not be said that the proposals solved all of the pensioners’ problems, but it could be said that it was the best solution under the current circumstances of the Fund. The Fund was committed to doing better for the pensioners. The Board of Directors of Transnet could not create a liability in their books for which an obligation did not exist. This would go against the Public Finance Management Act. Only if the Fund became insolvent then Transnet would have an obligation to pay the Fund.

Dr van Dyk said that, at the end of the day, the Committee wanted to see real progress and “real money” in the hands of the pensioners, some of whom received only R219 per month. It was appreciated that a better solution on the ex gratia payments had been found and that the Fund intended to pay all of the five months ex gratia payments to the pensioners. It seemed as if there would be a choice in the future for pensioners to receive either the ex gratia bonus or increases of 75% linked to CPI. The 3.2% base uplift had disappeared from the proposal. The Committee heard from Mr Benwell that pensioners would prefer a thirteenth cheque at the end of the year. After the Board of Trustees considered the proposals on the table today at its meeting on 30 November 2011 they should convey its outcome to Transnet.


Dr van Dyk said that once the Committee received the report back from the Speaker of Parliament, it would sit down and review the proposals and decide which of its recommendations had been implemented and which had not. This meeting was not the end of the road.

Mr Moyo said the suggestion that the Fund meet with the Committee every three months was a good one.

Mr P van Dalen (DA) said he wanted to do what the pensioners wanted and did not want the pensioners to have to make decisions “with a gun to their heads” while being told that if they did not take the bonus, then nothing could happen. He suggested that the recommendations stood as they were and that Transnet and the TSDBF return to the Committee each year to report on its progress on its “phased in” approach to implementing all of the Committee’s resolutions. The Committee’s decision would be heavily influenced by what the pensioners wanted and thought was reasonable. The Fund should pay the five months ex gratia in the meantime and then, going forward, the pensioners should be asked what it was that they wanted.

Mr Moyo replied that the Fund would not be “putting a gun to the pensioners’ heads” but would test out the options with the pensioners. The Board of Trustees had wanted to be sure that it understood the wishes of the pensioners and so had agreed a few months ago to increase the number of pensioner-elected Trustees on the Board of the Fund. It was important that the pensioner members of the Fund were well represented. In addressing the comment on the “phased in” approach, Mr Moyo suggested that the Committee accept the package presented to it by himself and Transnet today. He pleaded for the Committee to accept the proposal as the Fund was in a position to “press the button” next Wednesday 30 November 2011.

Mr A Albert (FF) said it seemed as if there was not any proper communication with the pensioners and that they did not know what was going on. There were so many rumours out there and people were getting upset and dying off because they were old and frail and could not handle the stress anymore. This was a disgrace. Pensioners just did not get any communication. Mr Benwell received hundreds of calls every day. This problem needed to be seriously attended to. This Committee and Parliament took a decision and the delegates knew what that decision had been. Yet they had presented the Committee with a counter proposal that was below par. There had been movement, but it was not enough. As Mr van Dyk had indicated, both Transnet and government must guarantee the payments made to the pensioners. Both had been part of the process of the Committee and the decision that was made for the provision of payment. Both parties had indicated that the recommendations were affordable. Yet today it had been said that they were not affordable. How could the situation and the calculations have changed? Who made that mistake? It was now a year later and the pensioners were still suffering. It was a disgrace. Mr Albert had met with numerous pensioners who were living in dire conditions. Even though the Fund had come up with some solutions within its constraints, why was Transnet not properly looking after the people who had worked for it? Why were these former employees not a priority for Transnet? The same question could be asked of National Treasury. Why could Treasury not also help? It was absolute nonsense that the Fund had to play around with numbers and that there was no solution to the Committee’s resolutions. How would this be fixed in the medium term? The Fund and Transnet could communicate to the pensioners that an interim solution had been found to alleviate their immediate plight but should also be able to say to the pensioners that it would implement all of the Committee’s resolutions by the middle of next year. The rule changes must be effected as the Fund’s pensioners had not been part of a referendum where they had decided on a bonus, a monthly payment or a combination of the two. It was important that the pensioners made this decision as this Fund was their Fund and not the Fund of the delegates. The pensioners were the ones who had paid for the Fund over the years and it was time that Transnet and the TSDBF became more democratic.

Mr Moyo replied that Transnet did indeed play a role in looking after their present and former employees. However, it should be remembered Transnet’s role in the Fund was that of an employer. If Transnet began doing “other things” for the TSDBF then Transnet should not be surprised if its other employees came to it saying that it should do the same for them as it had done for others.

Mr Mzoneli wished to place on record that the Minister of Public Enterprises had not, at any stage, made a commitment to make payments into the Fund. The Minister had made a commitment to Transnet finding a solution. The Minister of Public Enterprises had met with the Minister of Finance to discuss this issue and the Minister of Finance had indicated that National Treasury was not going to be part of the funding solution for the recommendations. As a result the Minister of Public Enterprises wrote to Transnet to say that they should find a funding solution on their own. The Minister of Public Enterprises received a letter from the Chairperson of Transnet yesterday indicating what would happen which was what the Board of the Trustees of the TSDBF had presented today.

Ms C September (ANC) reiterated that it might be time to ask one of the legal people of Parliament to come to the meeting and advise the Committee on its obligations. For the record, the African National Congress could not necessarily associate itself with all of the things that Mr Albert had said.

Mr A Mokoena (ANC) said that the Members could be proud that they had not turned a blind eye to the plight of the pensioners. The African National Congress understood the history of this matter and understood that it was the “people of the past” that had created this problem. All the political parties on the Committee had done good work on this issue. He was “cautiously appreciative” of Mr Moyo’s joint solution by the Fund and Transnet which is what the Committee had asked for. Mr van Dyk had appropriately quoted the law but that law did not say that government would guarantee any amount of funding. Rather that law referred to the guarantee of the 2% increases which were abysmal. The Committee’s aspirations had been for that number to be increased but the Fund had said that the base uplift of 3.2% was not sustainable. The Committee should not force the Trustees of the Fund to take actions that would render it insolvent. If that happened then the Members might be accused of infringing the Companies Act. The proposals presented today should be treated in good spirit as work in progress. Ms September had very proactively proposed that all state-owned companies engage with the Committee once every three months, instead of once a year. The Committee could then hear every three months what progress had been made. The Committee should be careful not to micro-manage the TSDBF.

Mr M Sonto (ANC) said that the Committee was facilitating a process in which a sustainable solution should be found. The pace was indeed too slow but we were getting there. It was not necessary to “paint a picture” that nothing was being done. In its last meeting, the Committee had asked the TSDBF and Transnet to work on a joint proposal on its recommendations. This is what the two parties had done. What therefore led others to say that nothing had been done? It was quite upsetting that the Committee had asked people to do work, and when these people returned to present their work, Members asked why nothing had been done. Members needed to be clear on the issues before they “fired political policies”. Treasury had said from the beginning that it did not want to associate itself with the process and the Committee could therefore not drag Treasury into it. Members should not make out as if they were the “messiahs” of the situation. The Committee members should work out what was best for the plight of the pensioners and not come to the meeting to “play out party politics”.

Dr Koornhof said that the Committee had come a very long way and had interacted with all of the stakeholders. He felt extremely uncomfortable that a presentation was being treated as if it had not been delivered. The Committee must be very careful not to party-politicise this issue which would take everyone backwards. At the end of the day, the Committee was fighting for what was best for the TSDBF’s own pensioners. Some parties fought for a better past, but Dr Koornhof could not be part of that. The Committee was fighting for the benefit of the pensioners. The world was not static, but was in fact very volatile and everyone needed to change with it which was why everyone needed to agree to commonly find solutions. A lot of hard work had been put into this process and it should not be derailed by emotional statements that nothing had been done. This would take everyone back and would not serve the interests of the pensioners.

The Chairperson stated that the Committee had wanted a solution that was sustainable and affordable which was what had been presented to it today. What was important for now was that some of the proposals could be implemented immediately.

Mr Albert stated that he had noted the progress that the Fund had made compared to previous meetings and was not ignorant of this. If he sounded emotional, this was a reflection of the state of the pensioners out there. Members of this Committee had approached him in May 2011 saying that they would keep him updated on the progress of the TSDBF issue yet he had not heard anything from the Members since that date. Part of his frustration stemmed from this and the fact that an agreement between some of the members of this Committee and his Party had been broken. An accusation had been made that he was taking people back to the past but he was not – he was taking people back to a decision that this Committee had made and not fulfilled. While he understood that the Fund had constraints and that progress had been made, he was not going to stand in the Fund’s way to implement what it needed to provide at least some interim relief for the pensioners. As the Fund had indicated in its presentation, everyone needed to move towards a point where the Committee’s resolutions were fully implemented at the end of the day. He was glad that the TSDBF would ask the pensioners whether they would prefer a lump-sum payment or monthly increases.

Mr Albert said it seemed as if the TSDBF was using the existing ad-hoc payments every year to fund the five months ex gratia. He had thought the five months ex gratia payment would be an extra payment over and above the ad-hoc bonuses but it seemed as if these were being “slided into the system” in order for the Fund to save more money. Could the presenter please provide some clarity on this?

Mr van Dyk said he wanted to set the record straight about why he had suggested that the TSDBF had disregarded Parliament. He had said this because, in the task team sittings last year, Transnet representatives, as well as their actuaries, had been present and it was Transnet who had costed out the R1.9 billion needed to implement the proposed recommendations at that stage which Transnet agreed it would provide. It had been on this basis that the Committee had decided on the resolutions that were adopted in the National Assembly. It was now being said that the money would have to come from the funding level (the amount by which the Fund’s assets exceed its liabilities) would have to cover the cost of implementing the resolutions. Mr van Dyk appreciated the fact that the five months ex gratia pension payments would be finalised by the end of March 2012. The resolution for the 3.2% base uplift had been left out of the TSDBF’s proposed package which was why he had said that this meeting was not the end of the road. If it was in the power of Transnet in the future to return back to this resolution then this should be done. The Committee appreciated the progress that had been made and that everyone had come a long way.

Mr van Dalen said that, if the TSDBF implemented only the increases linked to 75% of CPI, then this would put it in a deficit position of R500 million. The presenter had however said that if the Fund implemented the 75% of CPI increases then the Fund would not be in a deficit and Transnet would not be paying. He did not understand this but maybe he was missing something?

Mr Sonto said he that the Committee should accept the proposals presented by Mr Moyo. Where possible, the Committee would ask questions. He was glad that Mr van Dyk had said what he had. In Parliament, the Committee spoke as a Committee and not as political parties.

Mr Mokoena asked what the quantum of the TSDBF’s overheads was. What did the TSDBF’s directors fees, its rent expense, et cetera come to? He asked these questions because it was relevant to the Fund’s cash flows and the imperative of saving as much money as possible so that the pensioners could benefit.

Ms September thanked the TSDBF and Transnet for working with the Committee and taking the Committee into its confidence. She wished everyone a happy Christmas and New Year.

Ms Borman said that everyone had come a very long way since the process began in March 2010. She was encouraged to hear from a member of the pensioners and the fact that the Fund had engaged with its members had been critical. Koos Coetzee, the pensioner who had been very passionate about this issue and who had died in the meantime, had worked very hard on this and some tribute should be paid to him for what he did. At the end of the day the most important thing was to give the pensioners an improvement on what they had.

Dr Koornhof said that the saying “politics is not for sissies” was true. The Committee had worked across political party lines on this issue for more than eighteen months and, across party political lines, the Committee was a single unit. It only had one aim which was what was in the best interests of the pensioners. This was what the Committee had fought for and it was what it had engaged the TSDBF on. The world was not static and the issue was part of a process. It was fantastic to see so many role players working together to find a solution. The best the Committee could do right now was to note the TSDBF’s presentation as the Minister of DPE would give his report to the Speaker of Parliament in the next few days, based on what he had received from the Board of Transnet. The Speaker would then refer the report back the Committee which would then deliberate on. One Member had made a valuable input saying that the communication with the pensioners was weak. Dr Koornhof congratulated the Fund for having made steps to improve on this by including more pensioner-elected members on its Board of Trustees. This would improve communications with the pensioners. If the Fund had other means of alleviating Mr Benwell’s everyday crisis then this would also be appreciated.

The Chairperson thanked all Members for their contribution on the pensioners’ matter and especially the task team for their assistance and guidance. He thanked Transnet and the TSDBF for their work and hoped that everyone would continue engaging with the pensioners on matters going forward. The Chairperson emphasised that the Committee tried as much as possible to find each other before it engaged with stakeholders. It usually managed to do just this. Almost all of the Committee members were very passionate about the plight of the pensioners and there was also a lot of anger on the matter but it had been agreed that the best way to deal with the matter was for sound reasoning to prevail. The Committee had asked Transnet and the TSDBF to return to it today and had known that it would not be presented with solution that was one hundred percent what it had asked for. However, a point had been reached where everyone could now move forward. This had not been an easy matter and it involved peoples’ lives. It was not one that could be used for people to score political points with. The Committee would wait for the letter from the Speaker of Parliament and then proceed on that basis.

The Committee discussed a few minor changes to the programme for their oversight tour to take place the following week.

The meeting was adjourned.

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