I write to you at a time when the world at large, and South Africa in particular, is making steady progress in its recovery from the Covid-19 pandemic. However, global optimism has somewhat waned, and increased levels of uncertainty and volatility have in recent weeks come to the fore. This is largely due to the Russian-Ukrainian war and its impact on global markets - the oil price in particular; inflationary pressures and responding increases in interest rates; changes to legislation and regulations governing pension funds in South Africa, and closer to home, the ongoing Eskom unbundling.
As the Fund, we are monitoring and assessing these developments, and continue to take the necessary steps, as required, to protect and/or advance the interests of the Fund and its members and pensioners.
In the interim, and keeping with our spirit of accountability, I thought I should provide you a brief update on some of the Fund’s activities for the six months period ended 31 December 2021.
Opening the year on a strong footing
The Fund has gained momentum in the first half of its financial year and has made great strides in addressing the numerous challenges confronted, whilst consolidating and improving services to our members and pensioners. Below are some highlights for the period:
In January 2022, the annual pension increases were implemented. We are pleased that the Fund was able to pay full inflation (CPI) increases of 5% for the calendar year 2022. Most importantly, we were able to ensure that all pensions are adjusted for CPI, since 1 January 2001 (or date of retirement, where this is a later date). This amounted to an average pension increase of 7,3% for some pensioners. This is a significant milestone in the history of the Fund, and we take comfort that this will go some way in alleviating the financial pressures that some of our pensioners face on a daily basis.
Improved Integrated Reporting
The Fund’s 2021 Integrated Report, which was published in December 2021, reflected on the progress made during the financial year. In formulating the content of the Integrated Report, the Fund factored in information requests from our members and pensioners, whilst drawing on best practice as published in the Global Pension Transparency Benchmark survey. This is in addition to the monthly and quarterly investment performance and decisions, that are published on our website www.eppf.co.za. This is a significant step forward in our commitment to remain transparent and to keep you informed. I invite you to have a look at the Integrated Report and raise any matter you feel is unclear to you. For a copy of Integrated Report, Click here.
The Fund’s assets under management grew from R166 billion at 30 June 2021 to R184 billion at 31 December 2021. Below is the investment performance against applicable targets at 31 December 2021.
I am pleased with the investment performance for the period, which compares favorably with that of other retirement funds with similar investment objectives to that of the EPPF. Click here to access the most recent performance reports.
Making it easier for members to interact with the Fund
As reported in the Integrated Report, the Fund continues to roll out its digital capabilities. These are aimed at improving the convenience for members when interacting with the Fund and/or accessing information. As most organisations can attest to, at times the implementation of new technologies can be an inconvenience to its customers. This is also true for the EPPF. I would like to thank you for your patience and understanding during this period.
We have since stabilised and optimised the performance of some the new digital channels, and work continues on others. Nevertheless, I am pleased to note that approximately 11,000 pensioners have already utilised the USSD functionality to submit their evidence of survival thereby ensuring continued seamless payment of their pensions. I thank you for choosing to utilise this channel and encourage our members to continue to engage with the Fund through its the Mobile App, WhatsApp and USSD communication channels.
Looking ahead at the remainder of the financial year
Our key focus for the months ahead includes the continued monitoring of investment performance under volatile market conditions; improving the quality of our services to members and pensioners; and addressing legacy matters that have challenged us in the past. Below is a brief update on some key areas:
As has been widely reported in the media, the unbundling of Eskom Holdings SOC Ltd into three subsidiaries is in progress. The Fund is in regular contact with Eskom Holdings SOC Ltd with a view to understanding the nature of the unbundling and its impact on the Fund and its members. In addition, the Fund has conducted its own actuarial and scenario modelling exercises, as well a possible response plan. At this stage, we are comfortable that the Eskom unbundling presents no material impact on the Fund and its members. However, this matter remains work in progress and we will monitor developments in this regard and activate the necessary responses should the circumstances require.
Government has recently announced two key amendments to regulations governing pension funds, namely:
1. Amendments to Regulation 28 limits – aimed at enabling pension funds to increase their investment allocations to Infrastructure Investments asset classes, as well as Global Assets. The Fund welcomes these two amendments. The Fund is of the view that the increased allocation to infrastructure is a preferred alternative to the prescribed asset approach, as initially proposed. While the Fund views infrastructure as an asset class that is a good fit for the Fund and for the nature of our fund’s liabilities, we will continue to evaluate each investment proposal on its merits, its risk profile, and its ability to generate cash flows that will enable the Fund to honour its obligations to members. The increased allocation to global assets is also welcomed. This amendment increases the investment choices that are available to pension funds, which can be used to generate investment returns from different markets and enhanced diversification within their investment portfolios; and
2. Proposed two pot system – the objective of this amendment is to permit retirement fund members to access a portion of their retirement savings before retirement, while the second pot can only be accessed on retirement. The Fund recognises that there are many members of pension funds in South Africa who are experiencing financial distress, and the proposed amendment will go some way in providing short term financial relief to such members. However, this needs to be weighed up against the potential benefit payable at retirement if a withdrawal was not exercised. The Fund awaits further clarity on how this regulation will work and will then develop a position on how to move forward in this regard. It is important to note that this is currently a discussion paper to allow industry to comment. We will keep members informed of further developments.
Improving our service to members
The Fund recently conducted an independent survey amongst our members to establish the level of members’ satisfaction with the services provided by the Fund, as well as how members perceive the brand. I would like to thank you for taking the time to complete the survey and for providing us with this feedback. We have analysed the results and have developed a work plan to improve the required areas. The roll out of this plan will soon commence and members can look forward to a journey that will focus on service improvement across all channels and enhanced communication.
Addressing legacy matters
Work continues to address key issues that remain a challenge. This includes the Brian Molefe matter and the Steinhoff matter. Below is a brief status update. Click here to read more.
Brian Molefe matter - The matter is finally set to be heard at the North Gauteng High Court on 16 -17 March 2022. The Fund seeks to have the Courts determine the amount which Mr. Molefe must pay back. Once the Courts have ruled on the matter, the Fund will ensure that all monies are recovered expeditiously. We look forward to bringing this matter to a close in the near future.
Steinhoff recovery - The Western Cape High Court has approved Steinhoff’s proposed settlement offer. The settlement process includes a 3-month waiting period from 15 February 2022. Steinhoff has begun the process and will soon contact claimants through the class action representatives. The Fund forms part of the class action and will participate in this process.
Executive leadership changes
I would like to take the opportunity to bid farewell to our outgoing Chief Investment Officer (CIO) Ndabezinhle Mkhize, and to thank Ndabe for the contribution and value he has added to the EPPF and our members during his tenure. Phathutshedzo Mabogo and Thabo Letlaka, both currently serving as Deputy Chief Investment Officers at the EPPF, are acting as joint CIOs in the interim, while a rigorous recruitment process for the CIO position is currently underway. I am also pleased to announce the appointment of Ms. Thandie Mashego as Chief Financial Officer (“CFO)” with effect from 1 February 2022. Thandie is a qualified Chartered Accountant with 23 years of experience in Finance and Investment management. I wish Thandie, Phathutshedzo and Thabo all the success in their new roles.
We look forward to the year ahead
Lastly, as the Fund grows from strength to strength, I would like to thank you, our members, for all the patience, understanding, support, wisdom, and input that you have provided to us over the years. We value these contributions and most importantly the relationship we have with you. I look forward to the road ahead, as we continue to work together in taking the Fund to greater heights.
Chief Executive & Principal Officer