Special Pensions Act Implementation: National Treasury briefing

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Finance Standing Committee

07 August 2007
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Meeting report

FINANCE PORTFOLIO COMMITTEE
8 August 2007
SPECIAL PENSIONS ACT IMPLEMENTATION: NATIONAL TREASURY BRIEFING


Chairperson: Mr N Nene (ANC)

Documents handed out:
Special Pensions Administration: National Treasury presentation
Special Pensions Board Final Report - February 2007

Audio recording of meeting

SUMMARY
National Treasury gave an update on the implementation of the Special Pensions Act focusing on: the qualification criteria, extension of benefits, communications and awareness campaigns, dissolution of the Board and devolution of functions to the Director General, common reasons for the non approval of applications, members serving on the Board, dissolution of the Review Board and devolution of functions to the Minister, irregularities being followed up by the Special Investigating Unit and key challenges which included the streamlining of the adjudication and review processes.

Questions from the Portfolio Committee focussed on the under 35s, clarification on statistics, 
dissolution of the Board and the devolution of functions to the Minister, processes for review and appeals, assurances of no fraud, amendments relating to the Non Statutory Forces option, and more information on categories of applicants who were not approved. The issue of the under 35s received a lot of attention and the Committee was going to follow procedures to feedback regarding this issue from the Executive.

MINUTES
National Treasury briefing
Mr Donny Jurgens (Chief Executive Officer: Special Pensions Administration in the National Treasury) gave an update on the implementation of the Special Pensions Act (Act 69 of 1996). The Act was promulgated in 1996 to provide special pensions to persons who made sacrifices or served the public interest in the establishment of a democratic constitutional order. The qualification criteria included people who had to be 35 years or older on 1 December 1996 and who had South African (SA) citizenship or entitlement to SA citizenship. The criteria also included full time service in a political organization which was restricted or declared unlawful. Banishment or restriction, political imprisonment and the inability to build a pension for at least five years were also included in the qualifying criteria.

The Special Pensions Act was amended in 1998 to include the extension of benefits to persons suffering from terminal diseases, payment advanced to the date on which a person became 35 and benefits to members of the legislature. Further amendments were promulgated in 2003 and 2005 which included the provision of monthly pensions for surviving spouses and orphans of pensioners as well as funeral benefits and the recovery of benefits paid to a person that was not entitled to a benefit.

National Treasury had embarked on an extensive communications and awareness campaign which included road shows, radio adverts, regional visits, inserts in major newspapers and briefings to political organizations. A total of 15 674 applications were approved by 31 December 2006, while 21 762 were not approved. With regard to spouse pensions, 226 were approved, 31 were not approved and 38 were outstanding. Two orphan applications were approved while four were not approved and three were outstanding. Funeral benefits for 186 applications were approved, 16 were not approved and 32 were outstanding. Benefits paid out totaled R 2. 01 billion and operational expenses were R 86.4 million.

The Board was dissolved on 28 February 2007 as per the Special Pensions Act and the powers of the Board were devolved to the Director General. Additional capacity would be added to fast track the adjudication process.

The common reasons for the non-approval of applications included, not meeting the minimum age and the minimum service requirement. Applicants also had to have had full-time service in a previously banned political organization and were required not to have committed a criminal offence after 2 February 1990. Other reasons for non-approval included persons who were actively engaged in actions to undermine efforts to establish a non-racial democratic constitutional order and who did not met the definition of a surviving dependant or disability. Insufficient information to support a claim for a special pension and suspicions of fraud also were reasons for non-approval.

Mr Jurgens also highlighted the members serving on the Board from 1996 to 2007. He explained the adjudication process which entailed files being pre-screened and prepared by the File Preparation Unit and examined by the adjudication unit within the Special Pensions Administration. Recommendations were submitted to the delegated authority for approval. It took approximately 90 to 120 days to finalise an application. Common cause for delays was missing documentation and the verification process.

The Review Board dissolved with effect 29 May 2007 and its functions were devolved to the Minister of Finance. Matters under consideration included the amendment of the schedule of benefits to increase pensions when the pensioner reached the age of 65. The payment of a monthly pension to the surviving spouses of persons who died before the Act was promulgated, was also under consideration. With regards to the age qualification criteria for under 35s, National Treasury remained committed to participate in this initiatives.

Irregularities were identified in the implementation of the Special Pensions Act. A desktop study was commissioned by Treasury to investigate irregularities and evidence of fraudulent activity. Treasury also engaged the services of the Special Investigating Unit which commenced in January 2007 and would be completed by July 2008. 

Key challenges included the streamlining of the adjudication and review processes so that all outstanding applications would be finalised within 18 months and the verifying of information provided by applicants.

Discussion
Mr S Asiya (ANC) said that the Finance Portfolio Committee and the National Assembly were not taken seriously by the Department. The Committee had passed a resolution that the under 35s should be looked at by the Department. He asked why the Department had not made progress with this issue.

Mr D Gibson (DA) said that he did not understand the statistics provided by National Treasury with regard to outstanding applications. He noted that outstanding applications on page 7 of the National Treasury presentation indicated that at the end of December 2006 there were 8 712 applications outstanding while at the end of 1998 there were 10 519 applications outstanding. He wanted to know how many applications were outstanding and why there still appeared to be so many applications outstanding.

Mr Jurgens responded that the statistics was an indication or benchmark to indicate what happened during a specific time. He said that the original Act only intended a 12 month period during which people would have applied. If the process was closed at that stage there would only have been 1 300 applications received at that time. He confirmed that the statistics only gave an indication of what was happening at that specific time.

Mr Gibson also enquired about the process from here on given that the Board has been dissolved and the functions devolved to the Minister of Finance. He asked if it meant that Treasury staff would decide who would receive a pension and who not. Mr Gibson asked if there could not be a more formalised procedure.

Mr Jurgens responded that staff had to ensure in reviewing, that the applicant’s information met the criteria that have been legislated. In the past it was also a member of the staff who ensured that that information was correct.

Mr Gibson asked if there was any process for review given that there were appeals in the past to the Review Board which were upheld. He asked for more information on this issue.

Mr Jurgens replied that the powers and functions for the review process remained as it was only the executing authority which had changed. The powers of the Review Board were given to the Minister who would delegate to a public official as per the Act.

Furthermore, if somebody found additional information they could come back to the administration with their application.

Mr Gibson also asked if the department would carry out the request of the Committee and put a request before the executive with a proper proposal.

Dr G Woods (IFP) referred to the suspicion of fraud that had been one of the main reasons for non-approval of applications and irregularities in the implementation of the Special Pensions Act. He asked if the Treasury would be able to reassure the Committee that their net or processes were adequate to pull out the chancers.

Mr Jurgens replied that Treasury was taking the possibility of fraud very seriously and reassured the Committee that the Special Investigating Unit scrutinised every application.

Mr M Johnson (ANC) requested a full report by the 21 August 2007 from Treasury on those resolutions passed by Parliament, especially the one referring to the plight of those under 35.

Secondly, Mr Johnson said that he read a report that indicated that the Department of Defence was also dealing with issues similar to those of this Committee. Military veterans experience things that others only theorise about. Military veterans had come up with recommendations. He wanted to know if those recommendations talked to whatever was being done from a Treasury point of view.

Mr Jurgens responded that Treasury had made a presentation to the Joint Standing Committee on Defence. There was however no direct working relationship on the under 35s matter. Non Statutory Forces did not fall under Treasury’s purview but the closing date had been extended until March 2008 because a lot of questions still remained unresolved.

Mr Johnson asked for further clarification on page 3 of the presentation which related to the 1998 amendments which included benefits paid to members of the legislature.

Mr Jurgens responded that in the original documentation, a member of parliament would not have been able to get a monthly pension. The money would have been paid into a preservation fund until retirement age. The amendment meant that the Member of Parliament could get their pension on a monthly basis.

Mr Johnson also wanted feedback from Treasury regarding the 2003 amendment on the Non Statutory Forces option. Within a very short space of time people were told that they had to go for this option or the other without any or minimal education. Those affected found themselves in a situation where they only afterwards realised the meaning of a decision they had taken. These people might have wanted to take a different view. He asked what recourse was in place to undo the damage done.

The Chairperson said that the Committee did not expect the officials from Treasury to respond on behalf of the Executive. The Committee’s resolutions were directed at the Executive and the Committee had to hold the Executive to account. The Committee understood what process was to be followed through the Office of the Speaker. He asked the Treasury officials to respond to matters related to legislation that they were given to implement.
 
Mr Johnson responded that Treasury was the implementing arm of the Executive and should be held accountable.

Mr Nene referred to the Treasury presentation on page 18 which indicated that “the House requests the Leader of Government Business to provide feedback on the adoption of the Resolution with particular reference to co-ordinating the implementation of programmes which will provide education, skills and other measures”. A Portfolio Committee resolution that went to the House and was adopted by the House and instructive to the Executive, required that the Executive should then respond to the House of Parliament.

Mr Asiya said that he agreed with Mr Johnson. When one looked at the PMFA, the role of the Executive and the administration were almost interlinked. When a resolution was tabled the Head of Department had to implement it. The Executive’s duty was on policy and other political issues. If the Chairperson ruled the matter as a policy matter then on the 21 of August 2007 the members of the Executive would have to appear before the Committee.

Mr Nene accepted Mr Asiya’s suggestion.

Mr Jurgens said that he could not respond to the under 35s issue immediately.

Mr Asiya noted that it was a stressful process for people who fought to liberate the country to get benefits whereas the democratic state took care of the oppressor. He recommended that research be done in other African countries such as Mozambique and other non African countries on how they dealt with these issues.
 
Mr Johnson referred to the 47% of applications not approved by 31 December 2006. He got the impression that a number of the no- approved applicants fell under the category of being under 35 in 1996. He wanted a better sense of the categories not approved.

Mr Jurgens responded that 11 000 of the non approved applicants included the under 35s. He could only provide more information on the other categories within ten working days to the Committee.

Mr Johnson also referred to the issue of tax related to lump sums received under the special pensions. People complained about tax issues and he wanted clarification on the tax issue. It seemed as if the oppressors were helped and those who helped with liberation were punished. Apartheid army veterans continued to receive benefits like discounts at shops and tax exemptions. He asked if there were other alternatives for tax exemptions.

Mr Jurgens replied that he could not comment on the tax question because it was a policy issue. He did mention however that a recent funeral benefit that was introduced was tax free.

Mr B Mguni (ANC) said that he did not expect positive developments from the Department about the Committee resolution regarding the under 35s. The only positive development was the extension of the closing date to March 2008.

Mr Jurgens responded that the closing dates he mentioned did not refer to the closing date for special pensions but referred to the closing date for the Non Statutory Forces option, which was not part of the Special Pensions Act specifically.

Mr Mguni also asked if the auditors who had been appointed would be as sensitive as the former Board members given that the Board had dissolved. Former Board members were former commanders from the liberation movement who would know the situation and some of the people who applied for pensions. He was not sure if the auditors would have the same insight into issues as the former Board members did.

Mr Jurgens replied that the Special Investigating Unit’s job was not to take over the adjudication process or outsourcing the decisions to auditors. Their job only related to cleaning up the system and addressing the issue of irregularities. The Treasury administrative capacity would take the political nature of applications into account.
 
Mr Mguni reiterated his concern that there was no solution to the under 35s issue. He said that many of those comrades were destitute with some of them dying.

Mr Y Bhamjee (ANC) congratulated the Special Pensions team on the excellent work they had done so far. He indicated that from a procedural standpoint that three senior people were required to appear before the Committee. Firstly, the Committee had to write to the Speaker to ask for a progress report. Secondly, he indicated that the Committee still had the option to write to the Leader of Government Business and ask for a report. Thirdly, he mentioned that the Committee has a good relationship with the Minister and the Deputy Minister and could also ask for a report from them.

Mr Jurgens thanked Mr Bhamjee for his supportive comments.

Mr Gibson said that the under 35s ruling was a policy and political matter. The law needed to be changed in order for officials to implement it.

The meeting was adjourned.

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