Transnet Pension Fund Amendment Bill: hearings

Meeting report

PUBLIC ENTERPRISES PORTFOLIO COMMITTEE
13 October 2006
TRANSNET PENSION FUND AMENDMENT BILL: HEARINGS

Chairperson: Mr Y Carrim (ANC) assisted by Mr P Hendrickse (ANC)

Documents handed out:
Transnet Pension Fund Amendment Bill [B30-2006]

Submissions from:
Hannes Strydom
Venda Party and
C J Barnard

Submissions from:
SA Association of Retired Persons,
J Jooste – President of Silver Springbok Association,
Club 60 and
United Transport & Allied Trade Union (UTATU)

Submission from Willie Spies, MP on Transnet Second Defined Benefit Fund
Transnet presentation

SUMMARY
Transnet briefed the Committee on the amendments to the Transnet Pension Fund Act, providing a brief history of the pension funds and the principles for the Act amendments. It would allow transferring employees and pensioners involved in the re-structuring of Transnet the option of retaining membership in the Transnet pension fund structure.

A submission was heard from the United Transport and Allied Trade Union (Utatu) that highlighted a concern of the unions which was that new employees could not join the Transnet funds. The Committee said that it could not facilitate negotiations between Transnet and the unions and that these parties should meet to try and reach a solution before the next committee meeting on 17 August. There was not enough time to be resolving disputes during committee meetings as there were other pressing issues that the Committee had to attend to.

MINUTES
Transnet briefing
Mr Christopher Wells (Transnet Chief Financial Officer) stated that in April 2006 Transnet, the Department of Public Enterprises and Labour had agreed to allow State-Owned Enterprises (SOE) type members continued membership in the Transnet Retirement Fund (TRF) and to restructure the Transnet Pension Fund (TPF) into a multi-employer fund to allow continued membership of SOE-type members.

This Bill permitted these changes and had been approved by Transnet and the Board of Trustees of the three Transnet pension funds. The three funds were:
- Transnet Second Defined Benefit Fund which consisted of eighty thousand people had closed in 2000. That fund was merely paying out benefits and no contributions were being made to the fund.
- Transnet Retirement Fund is a defined contribution fund and
- Transnet Pension Fund is a defined benefit fund and would still be a closed fund, but renamed the Transport Pension Fund. It would consist of sub-funds belonging to mainly Transnet, SAA and Metrorail.

Ms Carla Prentice (Transnet Executive Manager: Special Reports) said that the Transnet Retirement Fund remained the principal Transnet fund. It was not a multi-employer independent fund. The TPF is one legal entity that enables participating employers. There is one sub-fund per principal employer which consists of active members. For example South African Airways (SAA) is only responsible to its sub-fund and these sub-funds have clearly defined “ring-fencing”. Sub-funds are separate but have the ability to work together. The sub-funds choose people to sit on the Board of Trustees. The Board of Trustees will ensure that the whole fund works together. The Act amendments were critical to Transnet’s restructuring and legitimising the continued membership of the SOE members.

UTATU submission
Mr George Strauss (President of UTATU) noted that at the beginning of the year Metrorail was on strike. This strike was 99% due to management of Transnet not communicating with labour. The structure of today (that is, the outcome of Labour and Transnet) was a result of vigorous negotiations. Everything presented in the amendments made sense except one matter that still did not sit well with him. His discomfort was caused by the fact that new employees coming into SAA and Metrorail could not join these funds. Mr Strauss wanted to know what the reasons were for their not being able to join. He said that Metrorail’s reasons were valid because people did not want to go provident funds but he could not understand why Transnet kept on insisting on this “new employees” rule unless there was a hidden agenda which could possibly lead to further problems. He requested that the clause dealing with new employees be deleted from the Act completely.

Discussion
Mr Y Carrim (ANC) opened the discussion by asking what the difference between principal and participating employers was and the criteria used to separate the General and Special Rules. Transnet was making amendments to the Transnet Retirement Fund . He asked why the twelve thousand people would stick to the TPF and not go to the Transnet Retirement Fund . He also asked what the difference was between the contribution and benefit fund and the reasons why a person would choose one benefit as opposed to the other.

Mr Wells (Transnet) explained that Metrorail, SAA and Transnet were participating employers and that they needed to include things that were specific to their sub-funds which may not impact on the other sub-funds. On the issue of the rules, he said that Special Rules were employer specific and how they were drafted was that they took Transnet rules and amended them.

Mr Wells continued that a defined benefit fund was a fund in which the rules of the fund determine exactly what the benefit to the employee is going to be despite the performance of the employer. A defined contribution fund is a fund where the employer and the employee each make contributions and have contribution rights but the benefit the employee receives depends on how the markets have performed. The Contribution Fund had performed well but people that are more risk averse would prefer the Benefit Fund as the risk of receiving small benefits is minimal.

Mr Chris Gololo (ANC) asked how many members were on the Board of Trustees and how those members were selected.

Ms Prentice (Transnet) replied that each recognised union appoints a trustee. Four trustees are selected from the sub-funds. This meant that there was a balanced representation between employer and union.

Mr Hendrickse (ANC) asked what the difference between a pension fund and a provident fund was and why SARCC did not have a pension fund.

Mr Peet Mantz (Transnet Principal Officer) replied that in a pension fund there were certain deductions that the person was entitled to and an example of that was the Defined Contribution Pension Fund. In a provident fund a person received a lump sum but both the employer and employee contributed and in this fund a person had already paid tax on the contribution so when they received the benefit, it was tax free. The fact that SARCC had a provident fund, did not make it worse or better than the Transnet Pension Fund.

Mr Hendrickse (ANC) asked, with respect to new employees not being able to join, what the implications would be of putting that clause in the General Rules and not the Act.

Mr Wells (Transnet) replied that Transnet wanted to structure matters for the changing needs of the work environment. By way of example, he said that if Barloworld and Anglo-American employees were to leave their companies, they would join the other company’s funds.

Mr C Wang (ANC) suggested that the correct thinking would be that, for example, the new employees of SAA would want to join the fund of the new company and not the old company.

Mr George Strauss (UTATU) said that 99% of employees belonged to the Transnet funds. He added that any new member would want to join where the majority of the people were. It was not true to say that new employees would be outside parties. New employees should have a choice about which fund they wanted to belong to and that the Transnet Retirement Fund should also be a choice.

Ms Desmoreen Carolus (ANC Parliamentary Researcher) asked what the financial implications of adhering to Mr Strauss’ request would be.

Mr Carrim (ANC) firstly addressed Mr Strauss by saying that he could not come to the Committee and say that Transnet had a hidden agenda. Mr Strauss had to state what the hidden agenda was. He asked whether it was just an opinion of UTATU or did all the unions feel strongly about the new employees. Mr Carrim then addressed Mr Wells asking why he wanted this clause about the new employees in the Act and not the general rules. Lastly, he asked the unions why they wanted the clause in the rules and not in the Act.

Mr Strauss (UTATU) replied that he wished he knew what the hidden agenda was but it was the feeling he was getting from interaction with Transnet. He could not understand what the hidden agenda was just like Mr Carrim could not either. On the issue of all the unions sharing the same views about the new employees, Mr Strauss said that he was the spokesperson for all the unions within Transnet and that they all shared the same view.

Mr Wells (Transnet) explained that Transnet wanted what every company wants by having only people that work for them belonging to them. He gave an example by saying that SAA was a huge volatile entity and that SAA has image changes with different strategies with respect to the environment. SAA was in a compromised situation. When business closes down or moves, the employees leave the company. Existing employees belonging to various funds was due to the compromised position of Transnet. He said that Transnet had compromised for members of SOE being part of Transnet for historic reasons.

Mr Ezrom Mabyana (SATAWU President) commented that he had nothing add except that he was also still confused about the clause regarding new employees.

Mr Wells (Transnet) took SAA as an example. He said that the benefits of employees had been negotiated with the trade unions. He said if 20 employees joined SAA it would not really be cost-effective to start a fund only for those 20 employees. Transnet, SAA, SARCC had a holding company and the holding company in his opinion was government. The board consisted of eight labour representatives and eight management representatives and that at the meeting they had discussed the concern regarding new employees and they had laid this concern to rest.

Mr Johan Coetzee, South African Airways Pilots Association (SAAPA), commented that he was in agreement that the principle surrounding the new members would be cost-effective.

Mr Hendrickse (ANC) asked if he was correct in saying that the new employees issue was a policy issue and not a financial issue.

Mr Wells (Transnet) replied that it was both a policy and financial issue because he was not in a position to say that there would not be cost implications. The issue about the new employees was being discussed as though it was something ground-breaking. There was nothing sacred about Transnet Retirement Funds and that other funds performed just as well.

Mr Strauss (UTATU) said that the unions were not saying that the new members should be able to belong to the TPF. They were in actual fact saying that they should be able to belong to the Transnet Retirement Fund .

Mr Gololo (ANC) asked whether Transnet had the intention of getting rid of the Transnet Retirement Fund in the long-term.

Mr Wells (Transnet) replied that the Transnet Retirement Fund was going to be a continuing fund for Transnet only. He could not say for certain what vehicles they would have in two or three years' time as new ones could emerge.

Mr Hendrickse (ANC) suggested that the issue was whether the clause about new employees should be put in the rules then they could be discussed between employers and employees.

Mr Wells (Transnet) replied that if the clause were to be put in the rules then there would be some uncertainty. Transnet’s asset base was going to be massive and the percentage of people not part of Transnet fund was going to decline.

Mr Carrim (ANC) said that they were dealing with two separate issues that were related. The first issue was whether or not new employees should go on to the Transnet Retirement Fund and the second issue was whether the first issue stated above should be set out in the rules or be enacted in law. The unions must not allow Parliament to become a negotiation forum. These issues were determined by the outcome of class struggles and they could not come to Parliament and raise issues that are unresolved. He suggested that a sub-committee should be set up and these two issues be settled outside of Committee meetings.

Mr Carrim told the union representatives that they had settled the dispute on the grounds that the new employees would not join the Transnet Retirement Fund and they could not all of a sudden come to Parliament and effect a change. The Minister was a shareholder and that this was an issue they needed to resolve with the Minister and then only after having gone to the Minister, go to Parliament. He asked the union representatives if this was part of the settlement and whether it had been raised with the Minister.

Mr Strauss (UTATU) said that it was not part of the settlement and that he had written to the Minister and asked if they could meet again.

Mr Carrim (ANC) suggested that Transnet and union representatives meet on Monday to reach a compromise if that was possible about the new employees being part of the Transnet Retirement Fund . He added that if by the next time they all meet, it was still undecided whether the clause goes into the Act or the rules, then the Committee would decide.

Mr Wells (Transnet) commented that they had tried to get together with the unions but those opportunities had not been taken up.

Mr Carrim emphasised that they had four weeks and that they could not afford to lose the four hours of their next meeting. He requested that both sides meet and told them that the Committee was not a commission of enquiry.

Mr Gololo (ANC) suggested that Mr Hendrickse chair the meeting between Transnet and the unions.

Mr Hendrickse (ANC) read out the submissions by members of the funds. One stated that the person had written two letters to Transnet that had not been replied to.

Mr Wells (Transnet) replied that they would investigate these letters that had not received a response and then send an apology letter to the person as well. He commented as part of his closing remarks that the funds received from the V&A Waterfront sale would go into the Second Benefit Fund and it was not true that Transnet would have a hand in them as Transnet had corporate governance rules in place. He mentioned that the issue of certain Transnet pensioners earning less than what the state was paying was of particular concern to Transnet and that it was being looked into.

Mr Carrim (ANC) asked whether people who did not know about the pension fund could still apply. This question was based on a submission from someone who asked as a black person who started working for Transnet pre-1994 if he could join the pension fund.

Mr Mantz (Transnet) said that the criteria had changed and whether or not a black person could belong to the Pension Fund depended on the number of years they had worked for Transnet. Previously they had to have worked for five years.

Mr Hendrickse adjourned the meeting.