Member Update: Business Maverick reporting

Member Update: Business Maverick reporting

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Dear Member,

We communicated previously that the Eskom Pension and Provident Fund ("the EPPF" or "the Fund") had been the subject of a series of negative reports by the Business Maverick over the past twelve months.


 The Fund has ensured that we provide corrections and context where appropriate, and even lodged a successful complaint against the publication with the Press Council Ombudsman. In the period following the favourable ruling by the Press Council Ombudsman, we noted that the reporting had become more balanced.

However, in the past two months, the Business Maverick has published three articles about the Fund, most recently on 1 February 2021. We have noted a particular article titled Is Eskom's pension fund a defined contribution or defined benefit fund? with concern due to the number of incorrect statements made in it. The report is not a true reflection of the facts, and it is critical that we provide clarity and context to our valued stakeholders.

The Fund's benefit structure

The article suggested incorrectly that the Fund has changed its benefit structure into becoming a defined contribution fund. This is not true. There has been no change in the Fund's benefit structure. We continue to provide our members and pensioners the same benefits, in accordance with the EPPF Fund Rules ("Rules"). The Fund's valuation report, as issued by the independent actuaries, clearly demonstrates the Fund's ability to honour our benefit structure obligations as set out in the Rules.

Eskom accounting treatment of the Fund

The article refers to the accounting treatment of the Fund in the financial statements of Eskom Holdings SOC Ltd (Eskom). Eskom and its auditors make decisions regarding the assets and liabilities that are reflected on Eskom's balance sheet. The issue of how the Fund liabilities are accounted for by Eskom is not a decision made by the EPPF. The accounting technicalities do not change the nature of the Fund nor its obligations, nor those of the principal employer. These obligations are defined by the Rules of the Fund.

Article corrections and context 

We believe that some of the statements made in the Business Maverick article need to be corrected or placed in context. These are listed below.

1. Defined contribution funds generally transfer the risk of market volatility to members, but often this is a preferable outcome because members pensions are increased".

This statement is inaccurate. Defined contribution funds transfer the risk of market volatility to members. This transfer of market risk is favourable in periods when investment returns are high, but in volatile and declining markets - as we have experienced in recent years - this is certainly not a preferable outcome. It is also worth pointing out that defined contribution funds do not guarantee pension increases or benefit payments.

Defined benefit funds, on the other hand, enable benefit payments linked to years of service and pensionable salary and therefore provide greater certainty. Eskom pensioners who retired during the recent market volatility retired with the benefits that were promised to them under the Rules of the Fund. Pensioners who retired from defined contribution funds had to bear the full impact of negative to low investment returns on their pension funds.

2. This has put the fixed funding model at serious risk. The liabilities of the EPPF according to the valuator's certificate included in the 2020 financial statements were approximately R101-billion, but even if the fund drops in value by as little as 1%, that is a loss of R1-billion, which our economy will struggle really hard to withstand".

The article has omitted the fact that the assets comparable to these liabilities are R143 billion for the corresponding reporting date - this is a healthy funding ratio of 135%. While we accept that no one can predict future asset growth given the current economic climate, the EPPF's assets have in fact grown beyond R155-billion over the last six months.

3. And it is well documented that the fund is playing the private equity field hard, and such investments are way too illiquid for a rainy day."

The Fund's investments in private equity are minimal in the context of the total investment portfolio. More than 90% of the Fund's investments are in highly liquid listed investments that can be converted to cash within a very short period of time. The Fund invests in private equity in order to diversify the portfolio, and to enhance investment returns.

The total assets invested in private equity amount to R3,4 billion, with an additional R1,1 billion invested in development impact investments. This amounts to 3% of the Fund's total assets as at 30 June 2020. The Fund's exposure to private equity markets is well below the prescribed limits for private equity investments set out in Regulation 28 of the Pension Funds Act.

4. Over the last two years, the increase awarded to the pensioner community was cut to just 1%".

This is factually incorrect - the pensioner increase was 2% for 2020 and 3% for 2021. In addition to this increase, pensioners received their annual bonus as well as a special relief COVID-19 bonus paid in July 2020.

5. "Eskom as the employer still fills the most seats at the table of trustees. Eskom executive appoints six representatives, and currently, employees have two seats".

The Board of Fund is comprised of 14 trustees who are appointed as follows:

  • Active members and pensioners of the Fund elect 50% of the 14 trustees:
    • Three bargaining unit representatives
    • Two non-bargaining representatives
    • Two pensioner representatives
  • The remaining seven members comprise of:
    • Two independent representatives
    • Five employer representatives


We reassure you that the Fund remains committed to serving our members and pensioners, and to securing your pension benefits. We will continue to keep you updated and informed regarding Fund matters.

Relevant information about the Fund and its benefits can be found at Members and pensioners are also welcome to contact our Call Centre on 0800 11 45 48 or to gain further clarity on these matters. 


Kind regards, 

Linda Soga Mateza 

Chief Executive and Principal Officer Eskom Pension and Provident Fund

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