Special Pensions: progress report by Deputy Minister of Finance

Committee: Defence

Chairperson: Mr J Maake (ANC)

Date of Meeting: 16 Nov 2012

Summary

Members of the National Treasury, led by the Deputy Minister of Finance, briefed Members on the current status of Special Pensions granted to those whose ability to cater for their pension needs had been compromised by their participation in the liberation struggle. Applicants had to be verified as being former members of liberation movements, their spouses or other defined dependants. The administration of the pensions fell under a division of Treasury and an Appeal Board had been established after previous bodies had been disbanded. Of approximately 72 000 applications, 22 000 had been approved and some others were still being processed.

Members questioned the process of verifying applications, and the integrity of the process was challenged bearing in mind the high rate of declined applications. A research unit was in place and used various official and other sources. There was an audit process. The purpose of the special pension was re-iterated and was only intended to compensate those who had sacrificed their financial prospects in the service of the liberation struggle. Most of the beneficiaries had applied for recognition of service under the Non-Statutory Forces (NSF) regulations for those eligible for government pensions (working in other government departments or absorbed by the South African National Defence Force). Special Pensions were discontinued in such a case.

The briefing by the Department of Defence on the registration of military veterans in the database of the South African National Defence Force, was deferred.


Minutes

Mr Nhlanla Nene, Deputy Minister of Finance, was not sure if the communication had gone out correctly. He did not think that the Special Pensions Board (SPB) had received the invitation, and was under the impression that the National Treasury would be conducting the briefing on their behalf.

Mr D Bloem (COPE, Free State) noted the poor attendance by Members at this Friday meeting, especially by those from the ruling party. He said that he would listen to the briefing and then had another meeting to attend. The Chairperson said that Members had been informed, but some might be arriving late. Two apologies had been received.

National Treasury presentation on Special Pensions
Deputy Minister Nene said that Special Pensions had been implemented in terms of an Act of 1996. Progress had been slow since then. In 1998 the legislation had been amended to accommodate applicants older than 35 years and younger than 50 years who were paid the minimum annual pension of R6 000 per annum until the age of 50 years, upon which the normal pension beneļ¬ts will be payable excluding the 3% downward adjustment. In 2003 Parliament had passed another amendment to accommodate late applications. Many people had been unaware of the provision and had therefore not applied during the original window period. In 2005 there was another amendment to provide for new benefits, such as the pension for spouses and orphans, and funeral benefits. In 2008 another amendment had extended the right to a pension to persons between 30 and 35 years of age. Other categories of beneficiaries had been identified. In fulfilling its constitutional duties, government had made a number of interventions of which the Special Pension provision was but one.

Mr Stadi Mngomezulu, Deputy Director-General (DDG): Corporate Services, National Treasury, said that the Special Pensions Board had been established by an Act of Parliament, and a Review Board. The SPB fulfilled the administration functions, including deciding on the award of pensions. The Review Board would hear objections to any decisions made by the SPB. Both of these bodies had since been disbanded, and a unit headed by Mr Kabelo Jonathan now dealt with applications on an apolitical basis. An Appeal Board had been established, consisting of three persons with one reserve member. It was the Appeal Board that should have been present but had not been invited.

Mr Mngomezulu described the daily tasks of the unit. It was headed by a Director, who was the Senior Manager: Special Pensions. Functions included verification and research, adjudication, appeals (outside of the Appeal Board process), payments and documentation.

Mr Mngomezulu said that many applications were denied. Insufficient documentation was often the reason.

Mr Kabelo Jonathan, Senior Manager: Special Pensions, National Treasury, said that beneficiaries were persons who met all the statutory requirements of the Special Pensions Act. Applicants had to be, or qualify to be, South African citizens who had been engaged in the liberation struggle before 2 February 1990 or a spouse, child or other dependant of such a person. The types of dependant were specified in the Act. The meaning of 'orphan' was also included in the definition.

Mr Jonathan said that at the end of October 2012, there were a total of 7 754 beneficiaries. These included 1 137 between 30 and 49 years of age, 4 968 between 50 and 64 years, 331 over 65, 58 orphans and 1 260 widows. There could be more qualifying persons, but where life certificates were not submitted annually, benefits were ceased. The unit was trying to trace such people.

Mr Jonathan said that 72 810 applications had been received. Of these, 22 307 had been approved and 37 780 declined, 9 438 were late, 1 324 applications were dormant due to incomplete applications and another 1 961 were being processed. All relevant details had to be submitted otherwise the application would be declined. This figure included applications awaiting approval or subject to an appeal.

Mr Jonathan said that most of the beneficiaries had applied for recognition of service under the Non-Statutory Forces (NSF) regulations for those eligible for government pensions working in other government departments or absorbed by the South African National Defence Force. Special Pensions were discontinued in such a case.

Mr Jonathan said that regarding persons under the age of 35 at the time, 9 924 applications had been received of which 9 874 had been processed. Of these applications, 3 440 fell outside the prescribed age window and 41 applications were incomplete. The backlog had been reduced substantially since the last briefing to Parliament.

Mr Jonathan outlined the internal process followed by the unit. An application would go to the political verification and research stage. Political bodies would be approached to verify membership of liberation armies. If the verification officer was satisfied, payment would be made; if not, the application would be declined. An applicant could lodge an appeal through the client care centre in the event of the application being declined. The appeal section would conduct the process, but the decision would be made by the Appeal Board. There was no recourse to contest any decision made by the Appeal Board, unlike the case of the former Review Board which could be challenged.

Discussion
Mr S Esau (DA) said that the numbers were not adding up. He wanted to see a breakdown of the dependants. He asked how many people had served full-time in the liberation forces. A number of persons who had signed up for NSF registration were in fact former South African Defence Force (SADF) members. He was unable to see who the former members were and the dependants. Pay-points also needed to be identified. Various Departments were identified for different categories of persons. Money was being held at National Treasury but could not be disbursed.

Mr D Joseph (DA, Western Cape) asked if there were any public representatives receiving special pensions. He asked why applications had been declined. The SPB had been abolished, but the diagram still referred to an Appeal Board and a Review Board.

Mr A Maziya (ANC) asked how this system related to the Military Veterans Act. Many children had been born in exile. In some cases their parents had died while still in exile. Some of these children were still under the age of 30, and the system would be closed by the time they reached this age. He asked if there was a deadline for applications. The form was complicated and he had tried to complete it himself. He asked what was meant by full-time participation in the struggle. Some of those involved in South Africa had still been fully employed while conducting their activities while those in exile had been supported. He asked if there was a support office.

Mr D Maynier (DA) felt that Friday was the new Saturday, given the lack of ANC Members at the meeting. The definition of full-time involvement in the struggle needed a complicated investigation. He asked what standard of evidence was used in making the determination. He asked if there was any audit process on the list of beneficiaries.

Mr M Motimele (ANC) asked what happened to a person who might have resigned from the NSF. He asked who would be regarded as 'certain persons' in the Act. He was also interested in how 'full-time' was defined. He was surprised at the low number of orphans. He asked what criteria were used in appointing members to the Appeal Board.

Mr V Manzini (DA, Mpumalanga) asked if only those who had the privilege of going abroad would benefit. His involvement in South Africa had denied him the chance to study further.

Mr Maziya said that there was a problem with references. He knew of cases where applications had been declined without any contact being made

The Chairperson said that there were huge disparities between benefits given to former SADF and NSF members. Special pensions were not the type of leverage to bring comfort to NSF members. Considering these disparities, he asked if National Treasury was looking at another mechanism to assist and intervene. Regarding the different benefits of the NSF and special pension, the former was based on the number of years served. A number of applicants had reverted to the NSF pension. The majority of the R1.6 billion allocated was going to NSF pensions. Special pensions were taxed. He understood the need for all income to be taxed, but this was not an ordinary form of income and resulted from special circumstances. In Algeria, persons who had performed full-time service of ten years had benefited by having the length of service doubled for their pension calculation. National Treasury should be innovative. He had conducted a workshop in his constituency. There were aggrieved children, and he had submitted a report to National Treasury. Cases were being made against the children while divorced spouses still received benefits.

Deputy Minister Nene replied that special pensions addressed the plight of a certain category of persons who had brought about democratic government. There were other interventions. In terms of the legislation, a beneficiary should be one who made sacrifices to bring about democratic government. A number of circumstances were listed, such as being in full-time service of a political organisation. This could only be verified by the organisation itself. The person should have been prevented from leaving a certain place, or from being within a particular place by some legal decree. In some cases applicants had been charged for fraud as they had actually been in the employ of the state. Persons in full-time employment had the chance to earn a pension with that body. Service in NSF was also recognised elsewhere, but the target group for special pensions had served their organisations in other ways. The third category was imprisoned persons for any offence committed with a political objective. The state had kept records.

Deputy Minister Nene said that some people had obtained benefits fraudulently. Such people had been prosecuted, and payments to these people had been deemed wasteful expenditure. In applying the law, accuracy was needed. There was a difference between military veterans and special pensioners. A time period was specified. Benefits were based on the inability to provide for a conventional pension during the time of service. The Government Employees Pension Fund (GEPF) would be the single pay-point.

The Deputy Minister said that if the army had been 70 000 strong it would not have taken so long to defeat the previous regime. Parties had been expected to publicise the special pensions among their members. A number of road-shows had been held. In some cases disgruntled persons had held National Treasury staff hostage. Public representatives were not excluded from the process. The 37 000 declined applications were for a number of reasons. There was a perception that anyone who had thrown a stone at a “Mellow yellow” qualified, was incorrect. The former boards had been disbanded as they no longer had applications to process. The most important thing was to process applications in terms of the law. Advertisements were placed, and there was also a head-hunting process to find the right people to serve on the appeal board. Government could not offer the same service benefits, and often retired persons were considered.

The Deputy Minister said that children born in exile could apply if the parents had passed on. When orphans reached working age they were no longer regarded as dependants. The application form was complicated, but had been simplified. Some constituency offices had been very helpful in assisting applicants. A number of other criteria had to be satisfied, and an application might be approved or declined without the need to contact any of the referees quoted.

The Deputy Minister said that Parliament would have the final say on the legislation. There had already been several amendments. Taxation should be considered, but as matters stood, special pensions were regarded as taxable. He would respond to the letters forwarded regarding children and divorced spouses being treated differently.

Mr Mongezi Mngqibisa, General Manager: Government Pensions Administration Agency, said that a number of variables had been considered in reaching the figure in the budget. All information was recommended to the Minister of Finance by actuaries. An increase of 4.6% was anticipated. National Treasury had budgeted R200 million as a transfer to the GEPF for NSF pensions. The Department of Home Affairs (DHA) was the custodian for life and death in the country. The process of proving a beneficiary was still alive was cumbersome, and pensions were suspended if the proof was not given. The database had been integrated with that of DHA to verify that beneficiaries were still alive. This was working well. The previous style of verification was still applied for those over the age of 60.

Deputy Minister Nene said that the integration with DHA had removed a lot of the administrative burden from National Treasury. Now, when notification of death was received from DHA, the person was removed automatically from the benefit system.

Mr Jonathan said that the responsibility of advising the death of a beneficiary was still with the next of kin, but updates were received from DHA fortnightly. Families had 36 months to apply for benefits. The administration could not consider any cases submitted after this period. The definition of 'certain people' was contained in the Act. Previously there was only a lump sum payment for spouses but no monthly pension. The 2005 Amendment made provision for spouses and orphans up to the age of eighteen to apply for monthly payments. Orphans between the age of eighteen and 23 could apply for continued benefits while still studying. The age cut-off did not apply in the case of certain permanent disabilities. Spouses who had received a lump sum were given new benefits in 2005. A closing date of 31 December 2006 had been set for applications. The 2008 Amendment extended surviving spouse and orphans benefits to those that had missed the previous deadline, and set a new deadline of 12 January 2012.

Mr Jonathan said that the number of orphans had been reduced as children had reached the age of 23. There was a reliance on political organisations for verification of membership. The research unit took the matter further. Secondary data was collected through other organisations through court, prison and police records. Some applicants liked to drop names of persons with whom they might have served time in prison for non-political offences. Employment records and Unemployment Insurance Fund (UIF) records were also checked. Any person who had undermined the cause did not qualify, such as police informers. School records were also used to verify claims. The question was whether the applicant had been prevented from providing for a pension during that time.

Mr Jonathan said that there was an internal audit process. Samples were taken and audited. The Special Investigating Unit (SIU) had been involved at times as well. Government pension legislation made provision for recognition of service in the NSF and affected persons were therefore ineligible for special pensions.

Deputy Minister Nene said that the NSF pension was an attempt to compensate NSF members as this was not compatible with full government pensions.

Mr Jonathan said that NSF and special pensions were two different dispensations. NSF was administered within the GEPF agency. The approximate 23 000 NSF pensions were included in the 72 810 special pension applications. This was because of the different age groups covered as the legislation had been amended. Most of the applicants who had been approved for special pensions had instead opted for NSF pensions. Some beneficiaries were spouses or children and had been given once-off payments. Families had been able to apply for benefits for deceased relatives.

The Chairperson said that the question of military veterans might have to be considered at some other time.

Mr Joseph said that there had been a history of corruption in the pension system. He asked if government was satisfied with the accuracy of the data supplied by DHA. He asked if the National Treasury was managing the pensions itself, or if the management of the pension function was outsourced.

Mr Maynier understood that a political organisation should verify service. He asked if it was fair to assume that political organisations had provided false information, perhaps willingly so, given the number of rejected applications. He asked who was responsible in these organisations for providing information.

Mr Motimele said that Mr Maynier's question was irrelevant. No matter who had approved the application, the system had picked up errors.

Mr Maynier felt that the Chairperson had overruled his question on the basis of protecting a certain group and not the National Treasury.

Mr Esau said that all the persons envisaged were military veterans. He was looking at the cash flow over a few years. The budget was not only in that of the Department of Defence (DoD). The figures of those who qualified were not correct. He wanted to know if there was parity, especially regarding war veterans and other grants. He wished to see parity in the award of benefits to military veterans.

Deputy Minister Nene said that the use of DHA systems had brought tremendous efficiency benefits. People still had the opportunity to present themselves if the system had declared them dead, but there had been no such cases to date. He would have responded to the political question. The confusion over the statistics had to be dealt with. Not all recipients of special pensions were in fact military veterans. The DoD would provide more detail at the next interaction.

In terms of databases that they were going to hook up with to check information, Mr Mngqibisa listed: SABRIC
(South African Banking Risk Information Centre), RICA (Regulation of Interception of Communications and Provision of Communication-Related Information Act), FICA (Financial Intelligence Centre Act) and various other credible databases. All pensions were paid by government itself and payments were not outsourced. This involved an amount of R30 billion into bank accounts. Some payments were made through the Post Office where beneficiaries did not have bank accounts.

The Chairperson said that some issues might have to be taken up with the Finance Portfolio Committee. Many students were still at tertiary institutions up to the age of 24, and this age limit of 23 should be reconsidered.

The meeting was adjourned.