Experts say GEPF’s transformation policy ‘a political ideal, not pension related’

Transformation to meet broadbased black economic empowerment (B-BBEE) goals at South Africa’s biggest pension fund is about to begin.

The Government Employees Pension Fund (GEPF) is a defined pension fund governed by the Government Employees Pension Law of 1996. As a defined benefit fund, members are guaranteed their pension benefits. Assets under management as at 31 March 2022, the most recent audited annual report, are R2.3 trillion.

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The GEPF Investment Policy Statement, paragraph 11, states: “Members are not exposed to investment risks prior to their retirement because of the defined benefit nature of the fund.

“Once they are in receipt of a pension, pensioners, or survivors enjoying dependants’ pensions after the death of a member, are exposed to investment risks to the extent that such risks may adversely impact the fund’s ability to afford pension increases above the minimum set out in the pension increase policy.”

Transformation policy

GEPF chair Dondo Mogajane recently announced the launch of the transformation policy, saying as “South Africa’s largest investor, we understand the important role we can play in addressing South Africa’s socioeconomic imbalances through supporting and facilitating transformation, economic growth, job creation, and positive environmental outcomes”.

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“The transformation policy will be used to guide investments that will promote socioeconomic transformation, identifying specific impact areas that will be targeted to realise our objectives.”

The association for the monitoring and the advocacy of government pensions (AMAGP) issued a press release on 11 October, stating: “Economic transformation is a lofty ideal but it is a political ideal, not pension related.”

AMAGP added: “This policy is a brazen violation of the founding Government Employees Pension Law (GEPL).

“The object of the fund shall be to provide the pensions and certain other related benefits as determined in this law to members and pensioners and their beneficiaries.

“The GEPF does not allow the chair of the GEPF board of trustees, or the board itself, or GEPF senior management to pursue political goals with pension money. This renders the GEPF transformation policy unlawful.”

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The AMAGP said: “The approval of the policy in violation of the GEPL also raises the question of whether the members of the GEPF board of trustees indeed passes the ‘fit and proper’ test prescribed in legislation for all trustees of pension funds.”

Four key areas

The four key areas identified include transformation at industry-level, economic transformation, socioeconomic transformation and in environmental sustainability.

The GEPF envisages the “growth of black-owned asset managers, private equity fund managers, fixed-income asset managers, audit firms, actuaries and other relevant emerging financial service providers within the sector”.

The policy is aimed at advancing B-BBEE and transformation within the broader economy, and to support access to finance for black-owned small- and medium-sized enterprises, fostering job creation and economic growth.

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“I believe that for too long, the financial sector has been comfortable with the same. It is for this reason that we at the GEPF have taken the crucial policy decision to address some of the challenges that we face as a country, as an industry and as an institution,” Mogajane said.

The transformation policy statement will be made available in due course.

– news@citizen.co.za

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