SAFTU statement on BLSA’s suspension of KPMG
September 22, 2017
Address to the conference on ‘Decent Standard of Living’ by Zwelinzima Vavi,
September 26, 2017

Hands off workers, pension funds!

The South African Federation views with alarm the latest reports that the Treasury is pushing the Public Investment Corporation (PIC), Africa’s biggest money manager, to come up with as much as R100 billion to fund struggling state companies.
88.2% of the R1.857 trillion which the PIC manages is in the Government Employees Pensions Fund (GEPS), which exists to ensure retired workers get a decent retirement income; and a further 6.7% is of the PIC’s money is the Unemployment Insurance Fund (UIF), which provides short-term relief for retrenched workers.
Thus 94.9% of the PIC’s funds is workers’ money! And it should be used in the workers’ interests!
The GEPS is a defined benefit pension fund, which legally must pay out the full pensions and benefits that government employees and dependents are entitled to. It invests in shares, bonds and other funds and its mandate is to invest to achievel ensure the highest possible return.
While the funds should be invested in socially desirable enterprises which benefit society as a whole, they must also be invested in a wide spread of companies which are most likely to be profitable and provide the best return to the PIC and ultimately to the workers.
Yet now, if media reports are correct, the Treasury wants the PIC to buy the government’s entire R12 billion stake in Telkom, 39% of its value, to pay for a bailout of the ‘technically insolvent’, in other words bankrupt, South African Airways.
PIC Chief Executive Officer Daniel Matjila has reportedly rejected this, but would agree to buy just R2 billion worth of Telkom shares, as buying R12 billion would leave the PIC ‘over-exposed’ to just one entity – Telkom.
To use workers’ money for a R12 billion bailout of SAA would be bad enough but the reports are that after bailing out for SAA, the government will be looking for more cash for similar bail-outs for Eskom, PetroSA and Denel.
These are the state-owned enterprises which have been at the centre of allegations of corruption and mismanagement by the network of looters around the Gupta family. This was one of the reasons cited by rating agencies when they cut South Africa to junk status in April. They are exactly the sort of dodgy investments which the PIC’s mandate to invest responsibly ought to exclude.
SAFTU is further concerned that the PIC’s Chairman is Sfiso Buthelezi, who is also deputy finance minister, and who has been accused of being a beneficiary of companies that illegally secured contracts worth at least R150 million from the Passenger Rail Agency of South Africa (Prasa) and some of its suppliers while he was its board chairperson.
If the PIC keeps paying out GEPF funds to bail out loss-making SOEs, which cannot raise loans on the market because the government was down-graded by the ratings agencies, the GEPF itself will eventually become unsustainable. But if this happens, because the GEPF is a guaranteed benefit fund, which legally must pay out the guaranteed level of pensions and benefits, the government, which means the tax-payers, will then have to bail out the GEPF.
This huge diversion of public funds will then inevitably lead to both tax increases and public spending cuts, further delays in implementing the national health insurance scheme, comprehensive social security, free education, infrastructure maintenance, and cuts in the existing levels of spending on essential services. It will therefore be an assault of the living standards of the poor and the goal of a better life for all!
SAFTU however rejects the call by FEDUSA that if its members’ savings are used to bail out state entities, the workers’ pension funds should be handed to privately owned money managers.
This would put the management of workers’ pensions into the hands of private companies motivated by the search for maximum profits, regardless of the ethics of the companies in which they bought stakes, with still no guarantee that they will make any better returns than the PIC and will be even less accountable to the public than the PIC.
SAFTU supports the call by its affiliate NUPSAW for the National Treasury not to use the PIC to re-finance bankrupt SOEs and not to squander workers’ money in either public companies bankrupted by cronyism and corruption or private companies who use the workers’ money to enrich themselves.
The federation demands an immediate moratorium on any further use of GEPF funds by the PIC until those guilty of corruption and mismanagement have been prosecuted and forced to repay the money they have stolen, and until the boards of these loss-making monoliths have been sacked and replaced by democratic and accountable representatives of the community, workers and the country.
The PIC itself also needs to be made more democratic and accountable, so that the employees have representatives to take decisions on how their money should be invested and mandate the PIC officials to implement these policies.