Transnet Second Defined Benefit Fund & sub-fund of Transport Pension Fund: Trustees report

Meeting report

Opening Remarks
The Acting Chairperson said that the main purpose of the meeting was to discuss the progress made in implementing the Committee’s Resolutions around the Transnet Second Defined Benefit Fund (TSDBF) and the Transport sub-fund. These resolutions had been adopted by the National Assembly on 18 November 2010. It was hoped to reach agreement and a joint plan on the way forward. The Committee had held numerous discussions and meetings with the Department of Public Enterprises (DPE), Transnet and other stakeholders on this issue. Transnet had made a commitment to discuss the matter with its Trustees and make good any deficit which might arise.

The Acting Chairperson noted his regret that the Committee was displeased that the two presentations were not received in advance of today’s meeting, leaving them insufficient time to study them prior to the meeting.

Presentation on the Transnet Second Defined Benefit Fund
Mr Peter Moyo, Chairman, Transnet Second Defined Benefit Fund, presented the progress made in implementing the Committee’s Resolutions on this Fund. The TSDBF was currently solvent, with a surplus of R2.7 billion, and had been well managed up to now. The Committee’s recommendations, adopted by Parliament, were that Transnet and National Treasury should make a cash injection of R1.963 billion into the Fund, as a funding solution for TSDBF and TPF, make an ex gratia payment of five months’ pension, a base upliftment of 3.21% and a 75% of the Consumer Price Index (CPI) annual increase on the 3.21% base upliftment for the future.

The TSDBF could not afford to implement all of Committee’s recommendations but could “almost” implement two of the three recommendations made by the Committee, namely that increases be linked to 68% of Consumer Price Index (CPI), subject to affordability, plus two of the recommended five months backpay and another month proposed for November 2011. The TSDBF could not afford to pay both 75% of CPI, subject to affordability of pension increases, and the current bonus structure, because this would land the TSDBF in a deficit position and the Trustees could not approve a rule amendment that would place the Fund in an unsound financial position.

A table of the cost implications of the Committee’s recommendations for the TSDBF was presented (see document, under title“TSDBF Cannot Afford PC Recommendations”). To increase pension payments by 75% of CPI would result in a liability of R3.2 billion, which, for 2011, would result in a R0.5 billion deficit. It would cost the TSDBF R4.7 billion to implement the Committees recommendations except for the recommendation to pay bonuses, and R7.9 billion if it were to implement all of the Committees recommendations, including its recommendation on bonuses. These scenarios would result in deficits of R2 billion and R5.2 billion respectively. The cost of the bonuses would thus be R3.2 billion.

The TSDBF had already implemented the recommendation in respect of two of the five months’ back pay since discussions on the matter commenced, and another bonus payment was proposed for November 2011. This would then bring the payouts to three months out of the five months back pay recommended by the Committee. He reiterated that the Trustees could implement either the improved pension increases of 68% of CPI, subject to affordability, immediately, or the current bonus structure, but not both. The Board of Trustees still needed to deliberate as to which of the two strategies was the best. Furthermore, the proposed 3.2% uplift was not at all affordable.

Mr John Benwell, Trustee, TSDBF said that the TSDBF supported the bonus strategy because 47% of the fund’s members received monthly pension payments of less than R1 500, while 37% received less than R1 000 a month, so that monthly percentage increases would amount to very small sums that were meaningless to pensioners. A number of pensioners’ groupings had said they would prefer to have bonus payments at the end of the year, instead of CPI linked pension increases, because they were more meaningful when received in a bonus lump sum.

Discussion
The Acting Chairperson wanted it to be stated clearly, for the record, that the Committee had always insisted that a funding solution needed to be affordable, fair and not jeopardise the future of the pension funds. It was never the Committee’s intention to jeopardise the position of TSDBF.

Ms G Borman (ANC) said that the Committee Task Team, which was formed to deliberate on this matter, and the full Committee had worked with an actuary and representatives from Transnet, National Treasury and DPE when developing the recommendations. She had therefore understood that the recommendations that were reached were well-considered. She queried why, eighteen months later, it seemed as if the Committee was being taken back to a presentation made by the TSDBF in July 2010.

Mr Moyo replied that he did not think that the TSDBF had gone backwards. Instead, the TSDBF had considered the three recommendations and applied its mind to what was affordable, and that was the basis of its presentation today.

Mr Anoj Singh, Acting Chief Financial Officer, Transnet, added that the original costing of Parliament’s recommendations had not changed. The original costing had been R1.963 billion, which Mr Moyo had rounded off to R2 billion in the table on the third slide (see the fifth column of the table “TSDBF Cannot Afford PC Recommendations”). The affordability of the Committee’s recommendations had been a concern for Transnet throughout the process. With Transnet already being in a net borrowing position, it was logical that any call upon it to take out further debt to provide the R1.963 billion would come at the expense of Transnet’s capital expenditure. It would also negatively impact on Transnet’s borrowing ratios, such as its gearing ratio and it cash recovery. From a governance perspective, the Board had taken a decision to investigate the possible ways of implementing the Committee’s resolutions. The resolutions had been canvassed with Transnet management and shareholders, but not with the Board. Transnet would take the positions of the two funds into account in implementing possible solutions for the resolutions.

Ms Borman asked for clarity on whether or not the TSDBF was proposing to do away with the base uplift.

Mr Moyo replied that, besides the issue of affordability, the base uplift created other problems. If Transnet were to come in as an employer and fund the 3.2% base uplift, all other employees of Transnet might expect the same treatment. Benefits could not be extended to some members and not others. Employer issues therefore came into play.

Ms Borman said she thought it had been the Committee’s understanding that bonuses would fall away if the other recommendations were to be implemented. She asked for further clarity on this point.

Ms Borman had thought that the ex gratia payment was going to be a lump sum payment to pensioners to the value of five months worth of back pay and not something that was going to be paid in instalments. However, it seemed as if the TSDBF had already begun paying the ex gratia payment in monthly instalments. She also sought clarity on this point.

Mr Moyo replied that, because funding levels and the TSDBF’s solvency had to be taken into consideration, the TSDBF could not afford to pay a lump sum of five months pension payments to pensioners as the Committee had recommended.

Mr A Mokoena (ANC) asked if the members of the TSDBF had been consulted when it deliberated on the Committee’s recommendations. The Committee would not want to endorse proposals that had not been heard by the TSDBF’s own members.

Mr Moyo replied that the TSDBF had been careful to consult with the members of its Fund. When the matter first arose, Transnet had formed its own task team, which comprised the Trustees of TSDBF and Transnet, to ensure that Transnet was able implement the recommendations made by the task team. It was suggested, at the first meeting of this task team, that the members of the TSDBF be consulted on the matter. The task team had, however, decided to first develop its own recommendations and to then present these to the members of the Fund for comment.

Dr S van Dyk (DA) asked if the Acting Chairperson of the TSDBF had been appointed by Transnet or if he had been elected by the pensioners.

Mr Moyo replied that he had been appointed by Transnet and that he was also an independent director of Transnet.

Mr van Dyk said it could therefore be assumed that Mr Moyo was expected to adhere to certain Transnet instructions.

Mr Moyo replied that when he worked for the TSDBF he was required to exercise his duties only in the interests of the Fund, as Transnet and the Fund were two separate entities. However, he had to consider the interests of all of the stakeholders when making decisions related to the TSDBF, and this obviously included Transnet which was a major stakeholder. It would, however, be improper for Transnet to issue instructions to the Trustees of the TSDBF. There were three members of Transnet’s Board that were also Trustees of the Fund. The TSDBF also had pensioner-elected members who were Trustees. In all the meetings he had attended, all Trustees had always acted first and foremost in the interests of the TSDBF. For them to do otherwise, and to “wear the hat of Transnet”, would fly in the face of good corporate governance.

Dr van Dyk repeated that the work done by the Committee’s Task Team had been a combined effort by the Committee, Transnet, DPE and National Treasury. In coming to its conclusions on the recommendations, the Committee had asked Transnet how much money would be needed to implement the recommendations. The actuaries told the Committee at that stage that a R1.963 billion cash injection would be needed to implement all three of the recommendations. The Committee could not, now, accept the statement that three months of the ex-gratia payment were being paid as bonuses, and not as a lump sum equalling five months pension payments as the Committee had recommended. It had been said in the presentation that some of the pensioners received R1000 per month, and that this year they received a 10% bonus. 10% sounded high compared to the annual 2% received by pensioners, but it must be remembered that the 2% was received every month while the 10% bonus was only a once-off payment based on the annual salary. Based on this percentage, a salary of R1 000 would warrant a bonus of R100 which worked out to R8 a month, an insignificant amount. It was therefore not true to suggest that the 10% bonus would bring relief to pensioners. This was the reason the Committee had decided to split the R1.9 billion up, and for part of it to go towards the once-off ex-gratia payment of five months pension, so that pensioners would at least get something in their hands. The Committee had taken into consideration the fact that many pensioners were very old and had wanted these pensioners to receive money while they were still alive. Dr van Dyk said that the Committee had been told that the ex gratia bonuses were being paid because the pensioners had been neglected since 2000, only having received mere 2% increases on their annual pensions. The Committee had said that if the TSDBF could afford this, then it could continue paying ex gratia bonuses subject to affordability. These, however, would be over and above the R1.9 billion cash injection and had nothing to do with the cash injection.

Mr Moyo replied that the ex gratia payments that the TSDBF had proposed were based on what was affordable for the Fund. It had never been his understanding that there would be a payment of R1.9 billion to the TSDBF. The cost of linking increases in pension payments to 75% of CPI would, on its own, cost R3.2 billion, and that would bring the Fund into a deficit of R0.5 billion. He further corrected Dr van Dyk, noting that the 10% bonus amount was calculated on the annual earnings of pensioners. A pensioner receiving R1000 per month would receive an annual bonus of R1200 and not R100, or R8 per month, as stated by Dr van Dyk.

Dr van Dyk said that in order for the two pension funds to implement the Committee’s recommendations, the rules needed to be amended, and that amendment would have to be approved by the Minister of Finance and the Minister of Public Enterprises. It seemed that both of the Ministers were committed to doing this. The Minister of Finance said in August 2011 that he had met with the Minister of Public Enterprises and an agreement had been reached saying that Transnet would be responsible for providing all of the funding. It seemed to Dr van Dyk that the problem at the moment was with Transnet. Even Mr Benwell from the Board of Trustees held a view different to that of the TSDBF Acting Chairperson about the once-off bonus payment. It seemed to the Committee, taking into account a letter written by Mr Molefe to Mr Maluleke about the delay, that Transnet was “passing the ball back to the TSDBF”. This was despite the oft-stated position that, over and above what the TSDBF could afford, R1.9 billion was needed and Transnet should pay for it all. The problem was that Transnet was not paying the money over to the TSDBF. He questioned the real reasons for the delay. He asked specifically if Mr Moyo had received instructions from Transnet to pass the ball back to the TSDBF, or whether Transnet was really committed to paying the R1.9 billion. If it was committed, then he wanted to know when the payment would be made.

Mr Moyo disagreed that he and Mr Benwell differed in their opinions. Mr Benwell had said that if the cost of the CPI-linked increases and the bonus payments were the same, then it was a matter of figuring out which strategy was best for the pensioners.

Mr Moyo then addressed the question on the process by saying that Transnet was the guarantor of last resort for the TSDBF. Transnet’s obligation arose only if the TSDBF was in a deficit position. If the TSDBF was not in a deficit position, it could not call on Transnet to supply it with money. This obligation of Transnet’s was “evergreen”. Mr Moyo said there was nothing to suggest that Transnet and the Board of Trustees of the TSDBF had not done the restructuring jointly. To suggest that Transnet had bulldozed the Board of Trustees or that the Trustees were irresponsible was incorrect, and he said that if there was any suspicion that this had happened, then the relevant information must be presented to the Board of Trustees. The Trustees had to make sure that the fund remained solvent and that it paid the benefits.

Mr P van Dalen (DA) asked if the pensioners would like the status-quo of the bonuses to remain the same, and not have the recommendations from Transnet implemented.

Mr Moyo replied that the status-quo related to the guaranteed 2% increases. The bonuses had only been paid in the last few years because of the TSDBF’s financial position. Given the limited resources of the Fund, it had tried to manage the ex gratia payments by paying three out of the five months and linking increases to 68% of CPI.

Mr van Dalen asked if Transnet’s funding of the recommendations would put the pensioners in a better position or not. It sounded to him that it would not. He then asked why Transnet and National Treasury were not funding the recommendations as the Minister of Finance had agreed to in Parliament. He questioned if the Minister had misled Parliament or whether he had been under a different impression to the Committee. He wanted to know exactly what the problem was.

Mr Ravesh Rajlal, Director: Asset and Liability Management, National Treasury, replied that the position of National Treasury was the same as that taken by the two Ministers, namely that Transnet should fund the deficit in the TSDBF.

Mr M Sonto (ANC) said that the matter before the Committee today was very serious, and straightforward answers were needed. The Committee did not want this process to drag on, and he demanded when it would be concluded.

Mr Moyo replied that if the delegation and the Committee could reach an agreement during this meeting, then the Board of Trustees could immediately start working on the implementation of the resolutions. If either the increases linked to 68% of CPI, alternatively the bonuses, could be agreed upon today, then the matter could be speedily implemented and resolved.

Ms C September (ANC) said that, at the end of the day, the Committee needed to be told that there was a commitment to adhere to the “principle matter” at stake.

Ms September asked if the trade unions had been consulted on the matters before the delegates and the Committee.

Mr Moyo replied that the TSDBF would like to have done this but had first wanted to come up with its own package. 

Mr Harry Gazendam, Trustee, TSDBF, added that turning this issue into a labour issue could result in charges of unfair labour practice being laid by the current Transnet labour union. If Transnet were to fund something for a limited group of employees or ex-employees, off its balance sheet, then that would constitute unfair labour practice. This was a very complex issue and Mr Gazendam urged the Committee to consider this very carefully before it engaged the unions at a national level.

Ms September suggested that one of the Committee’s legal advisors be asked to come to give guidance on the matters being discussed.

The Acting Chairperson replied that this could be done

The Acting Chairperson said that in June 2011, when Transnet appeared before the Committee, it had informed the Committee of the Transnet Board’s 10 June 2011 decision to instruct management to find a funding solution. A surplus of approximately R3 billion had at that stage also been reported. The question was raised how this surplus could be used to benefit the members of the TSDBF. It was then said that Transnet could only fund a deficit in the TSDBF and that it would then need to know the amount of the deficit, which could only be known if the rules were changed. The Committee was told that the cost could not appear in Transnet’s books until there was a deficit. The CEO of Transnet had concluded that briefing by saying that Transnet would fund any deficit. He asked where Transnet stood on funding any deficit, and said it might be found that Transnet had a constructive obligation to make good on any shortfall.

Mr Moyo repeated that Transnet’s constructive obligation only came into play if the TSDBF were in a deficit. The Trustees would however run into problems if they were to propose or pass any rule amendments that placed the TSDBF in a deficit position. Transnet could only come in if the TSDBF was insolvent, which it was not. The two entities were therefore trying to meet each other half way. The TSDBF was prepared to reduce the Fund’s surplus to zero by linking increases to 68% of CPI.

The Acting Chairperson asked what Transnet and the TSDBF had agreed on. It would be helpful for the Committee to know that the two entities were working towards a joint plan on how to implement the decisions made by Parliament was needed. A decision on how to move forward needed to be made today. CPI-linked increases, as well as the continuation of bonuses, had never been on the table as far he could recall, but TSDBF had raised it as a possible option.

Mr Moyo replied that the Acting Chairperson was right that the continuation of bonuses as well as the CPI-linked increases had not been on the table at the time, but some of the Fund’s members seemed to believe that the bonuses should stay the same, even if the recommendations were implemented, and so he had covered all of his bases by presenting this option.

Mr Moyo said again that the views of Transnet and the TSDBF on what was affordable for the Fund were the same. If everyone could agree on the proposals made by TSDBF in the presentation then they could be implemented without further delay. The TSDBF was trying to find a way to do this without having to change any of the rules, since the rule amendment process was very tedious. The Transnet Board had to consider the amendments, which had to then be passed on to DPE, then on to Parliament, and then the National Treasury. He asked if an alternative to this could be found, and was hoping that the Committee would agree on the partial implementation, as presented today. He stressed that the proposals presented had been considered by all the stakeholders and were indeed a joint plan from Transnet and the TSDBF.

The Acting Chairperson said the Committee had been told that the higher the ex gratia payment, the lower the uplift on the base fee would have to be. The Committee had initially wanted the uplift on the base payment to be 10%, but had been told that this was unaffordable. It had therefore agreed to drop the base uplift so that the five months pension ex gratia payments could be afforded. He sought more clarity on this.

Ms Borman asked if Mr Moyo was saying that the beneficiaries would prefer to have the bonus, rather than the recommendations that came from Parliament.

Dr van Dyk replied that he had pay slips to prove that some of the pensioners received R100 per month. He even had a pay slip that showed a person who, after deductions, received only R1 per month and would gladly share this with the Trustees. In any case, the point still held true for a person who earned R1 000 per month, and would receive a R100 increase based on a 10% bonus figure. This was a small amount. The ex gratia bonus had nothing to do with the bases of the pension, but were, as their name implied, once-off payments.

Dr van Dyk said that the Committee Task Team, which included representatives from Transnet and DPE, had also taken into consideration that the recommendations needed to be affordable, accessible and reasonable. The Task Team had asked Transnet to explain to it how much would be needed. Transnet’s actuaries were involved, and they and provided Parliament with the figures, which the Committee had insisted over and over again should be affordable, accessible, feasible and reasonable. For the Trustees to now come to the meeting with recalculations, and a completely different story, suggested that the Committee was misled on the earlier occasion. It was Transnet itself who replied to a question of the Committee that R1.9 billion would be needed.

Mr Moyo said that the numbers being discussed today were the same as discussed previously and that the Committee had not been misled by Transnet. His understanding was that National Treasury had said upfront that it could not afford the funding and its view was that Transnet should pay. Should this go to Transnet, then Public Finance Management Act (PFMA) processes and approvals needed to be sought, and the Transnet Board had to be sure that it had the required funds.

Dr van Dyk repeated his earlier question, asking if Transnet would honour the decision made by the two Ministers and Parliament, and not attempt to get TSDBF to find a solution

Mr van Dalen said that Mr Moyo was telling the Committee that the TSDBF could not afford to implement all of Parliament’s recommendations, which the Committee had known from the very beginning. However, Transnet and the National Treasury had undertaken to assist with the funding of the R1.9 billion that was needed to implement the recommendations. He thought that the main points were being missed. Transnet had withdrawn money from the TSDBF and had promised to pay the money back but never did. The Committee was trying to ensure that this was put right. The Committee never tried to put pressure on the TSDBF, but wanted the outstanding “legacy issue” to be fixed.

Mr van Dalen said that Transnet and National Treasury should in fact be telling the Committee why they were not giving the money to the TSDBF to implement Parliament’s recommendations.

Ms September said that Parliament adopted the Committee’s Report, and it was within the Committee’s rights to seek a legal opinion on how to move forward. At the end of the day, if a Report with recommendations to the TSDBF had been adopted in Parliament, and the TSDBF had not followed up on it, then the Committee had to consider what further steps to take.

Dr van Dyk commented that this process had been dragging on for more than a year. Expectations were created among the pensioners and the issues had to be finalised. Dr van Dyk was glad to hear the comment from Treasury and the commitment, but noted that there still seemed to be a problem with the execution of that commitment.  

Dr van Dyk asked if it was true that, both in the past and at present, bonuses paid to Transnet management were conditional on an improved balance sheet. If Transnet were to assist the TSDBF by funding the R1.963 billion deficit then this would lead to a weak balance sheet for Transnet, and possibly no bonuses for the managers of Transnet.

Mr Singh replied that he did not think that the incentives of Transnet management had anything to do with the resolution of the matter. Transnet had a significant borrowing programme for the next five years. In consequence, the affordability of assisting the Fund had always been an issue.

Mr van Dyk asked what the view of the Transnet Board was, and why it had not adhered to Parliament’s recommendations.

Mr Moyo replied that the Chairperson of Transnet should comment on it, and he could not make any comment on Transnet’s view.

Mr van Dalen said it seemed clear to him that the TSDBF could not afford the recommendations and the National Treasury did not have the money. However, Transnet did have the money, and he believed it must fund the deficit. Members had firstly been told that the funding was affordable, but now were given another answer.

Ms Borman agreed that this process had taken far too long already. One gentleman, who was very proactive on the issue, had even died in the meantime.

Mr Moyo agreed that the process had gone on for a very long time. When the Minister came into office one of the first things he had said was that he wanted to resolve the Fund issue. However, the matter had been difficult. He reiterated that before Transnet was empowered to act on its obligation, the Fund had to be in a deficit position, yet the Trustees of the Fund were effectively precluded from creating a deficit. He pleaded once again with the Committee to at least consider approving the TSDBF’s recommendations so that they could be implemented speedily, even though they did not meet the Committee’s demands. If the financial position of the TSDBF improved, it would be more than happy to increase the benefits for its pensioners.

The Acting Chairperson tried to summarise the issues. The Report of the Committee on the issues, dated 18 November, was tabled in the ATC and was adopted by the National Assembly. This Committee could not change this Report and neither could anybody else. The TSDBF, in the tables presented, had calculated that a R2 billion deficit would result should the Fund implement all of the Committee’s resolutions. The column in which this calculation appeared was the most important, and reflected the cost of implementing Committee’s resolutions. According to the table, the Committee’s resolutions would cost R4.7 billion and reduce the current surplus of R2.7 billion to a deficit of almost R2 billion.

In Parliament through the Minister of Finance, and in deliberations and briefings by Transnet to the Committee, it had been stated that one option to implement was to draft the rule amendments (which first had to be approved by the Board of Trustees, then by the Transnet directors, then the ministers of DPE and the Department of Finance, then gazetted), after which a deficit could be recorded, which Transnet would then cover. There were thousands of pensioners who had been very patient for more than a year and were awaiting this outcome.

The Acting Chairperson stated that National Treasury had made only one remark in this meeting, to the effect that it had, through all the deliberations, understood that at the end of the day, Transnet would fund the deficit. This was what the Committee had also understood. However, he did not get the sense that a joint plan on how to implement the decision of Parliament had been presented to the Committee in the meeting. The TSDBF had come to the Committee with a proposal to partially implement, but that did not assist the Committee, who was obliged to report back to Parliament on how the decision had been implemented.

The Acting Chairperson therefore formally proposed that the TSDBF and Transnet must meet again and the TSDBF should return to the Committee in one week’s time, to present a joint plan agreed upon by the Trustees of the Fund and Transnet, on how to implement the decision. The Committee had heard the reports on progress, and commended the TSDBF for its efforts, but noted that the base uplift and the other recommendations were all crucial, so the Committee was hesitant to accept a piecemeal plan.

Members present agreed that this should be the way forward.

Dr van Dyk added that the TSDBF should also return with dates and a time frame for the implementation of the resolutions.

The Acting Chairperson understood that the Committee was putting the TSDBF in a difficult spot but stressed that the Committee could not accept a situation where the decision of Parliament was partly or wholly ignored.

Mr Moyo replied that one week was too short a time to convene all of the meetings that would be required for a new plan to be created. He suspected that Transnet would also have to convene a Board meeting and take into account PFMA implications.

The Acting Chairperson replied that the issue did not need to be unnecessarily complicated, and did not understand why the decision of Parliament could not be implemented, and time frames drawn.

Mr van Dyk said that he had agreed with such a short time frame because everyone was already familiar with the issues. It should not take much time for the TSDBF and Transnet to propose a new plan.

Mr Moyo responded that the PFMA and governance requirements were a reality as Transnet could not attempt to move forward without complying with these.

Ms Borman said this was an important issue. If Transnet had a board meeting on 24 November 2011, then perhaps the TSDBF could then report to the Committee on 25 November 2011.

The Committee and delegates reached consensus that the TSDBF and Transnet would return to the Committee at 09h30 on 25 November 2011 to present its joint proposal on how to implement the Committee’s resolutions, with time-frames for the implementation.

Transnet Sub-fund of the Transport Pension Fund
Mr Garry Pita, Chairman of the Transport Pension Fund Board, presented the progress made on the Committee’s three recommendations on the Transnet Sub-fund, which was a subsidiary of the Transport Pension Fund (TPF). The TPF was a separate entity which was managed independently of other Transnet funds. The Transnet sub-fund had 4 440 pensioner members and 809 active members. No bonuses had been paid to date as the sub-fund was awaiting the approval of the rule amendments which had been submitted to the DPE on June 2010. Because of this and the expectations of pensioners, especially some who had made comparisons with the TSDBF, which had made bonus payments, a lot of pressure had been put on the Trustees of the sub-fund. The three sub-funds of the TPF had different rules. Currently, all sub funds had guaranteed pension increases of 2% while the amended rules for the Transnet sub fund (which still needed to be approved) made allowance for guaranteed pension increases of 2% plus ad hoc bonuses.

The Transnet sub-fund could afford the cash flow consequences of all the Committee’s recommendations which would cost it R792 million. The overall impact would still allow for a surplus of R172 million. The method for implementing the recommendations still needed to be discussed, and would be subject to the approval of the principal employer.

Discussion
Ms September said Mr Pita had not mentioned any dates by which the rules would be changed. The impression was that the rules were not to be changed because of the affordability issue. She asked Mr Pita to clarify if he was saying that the TPF could not afford to implement the recommendations, or if he was saying that the rules were going to be amended.

Mr Pita replied that the rules had been submitted for amendment to the DPE on June 2010. These rules, which were to allow for ad-hoc bonuses, had not yet been approved.

The Acting Chairperson asked Mr Pita to confirm that the Transnet sub-fund could fund all three of the Committee’s recommendations.

Mr Pita confirmed that the Transnet sub-fund could afford the cash flow implications of all of the Committee’s recommendations. Discussions about the best way of implementing the recommendations were still under way. The current rules did not allow for the fund to implement the Committee’s recommendations. Additional rule amendments were needed to implement the recommendations, and those would be subject to employer approval.

Ms September requested that the Department of Public Enterprises comment on the pending approval of the rule amendments that had been submitted in June 2010.

Ms Raisible Lepule, Deputy Director-General: Transport, DPE, told Mr Pita that that he should have followed up with the Department after not having received a response after more than one year.

Ms September interjected saying that the Committee was not interested in internal disputes.

Ms Lepule addressed the original question, saying that the DPE had responded and had received the concurrence of National Treasury on the amendments. The Transnet sub-fund would receive the rule amendments. It should be stated however that additional rule amendments were needed to implement the Committee’s current recommendations, as the current rule amendments made provision for the bonuses only.

The meeting was adjourned.