Update: Former Eskom GCEO pension pay-out
17 November 2017
As you may have observed in the media, on 20 October this year, the EPPF (‘Fund’) appeared before Parliament’s Public Enterprises Committee which has been tasked with the Inquiry into alleged state capture at 3 State-Owned Enterprises (the SOEs).
Although this ongoing Inquiry is broad and focuses on the SOEs, the matter of the pension pay-out to the former Eskom Holdings SOC Ltd (Eskom) Group Chief Executive Officer (GCEO), Mr Brian Molefe, saw the EPPF requested by the Parliamentary Committee, to provide evidence, on the facts surrounding the retirement arrangement of the former GCEO within the EPPF’s knowledge.
As previously communicated to our members in our newsflashes, the Fund provided the Parliamentary Committee with facts of how it processed the retirement benefits of the former GCEO.
In summary, the former GCEO took early retirement with effect from the end of December 2016. In terms of the Fund Rules, penalties are applicable to early retirement. Eskom undertook to pay for the early retirement penalties and to purchase additional years of service. In line with the Rules, and in order to ensure that the Fund and other members are not prejudiced by this early retirement, the Fund calculated the applicable penalties and cost of the purchase of additional years of service which amounted to R30,1 million and Eskom paid this amount to the Fund accordingly.
Early retirement arrangements where the employer pays for the penalties and/or additional years of service are usually arrangements that are negotiated and agreed between the employer and the employee. The Fund ensures that, in line with the Fund Rules, the appropriate penalties and/or costs are calculated and paid over to the Fund so that the Fund and other members are not disadvantaged by the arrangement. This was done in this case as has been done previously with all other cases permissible under the Rules.
The Fund was advised by Eskom that the former GCEO retired with effect from 31 December 2016. In line with the Rules, he became a pensioner of the Fund with effect from 1 January 2017 and the Fund started paying him a monthly pension. He had also exercised the option to take a third of his retirement benefit in cash as a lump sum, as allowed by the Fund Rules.
Subsequent events
In addition to the information we previously provided to our members, the Fund has reviewed this transaction further and obtained legal advice on how to appropriately deal with it going forward to ensure that the Fund’s and members’ interests remain protected.
There are certain additional facts that have subsequently come to the Fund’s attention such as that the former GCEO was not a permanent employee of Eskom and in terms of the Rules he should not have been a member of the Fund. The Fund had previously accepted the GCEO as a member, on the basis of information provided to it by Eskom, that he was a permanent employee and therefore treated him as such.
Current status
The former GCEO monthly pension payment has been suspended and the Fund is keeping all the monies in its possession in the meantime.
From 29 November 2017 to 1 December 2017, the High Court of South Africa, Gauteng Division, Pretoria will hear a court application on the same matter brought by the trade union Solidarity, joined by the Democratic Alliance and the Economic Freedom Fighters. The Fund has been cited as a respondent in the matter and will provide all the facts necessary to assist the court in deciding the matter. The Fund has also in that matter acted to ensure that member and Fund rights remain protected by seeking an order for repayment of the monies already paid to the GCEO.
The Fund wants to reiterate that we would not do anything that would jeopardise the financial soundness of the Fund and therefore, our members’ benefits. The Fund would not unfairly favour any member at the expense of other EPPF members. Our main objective is to ensure that we are able to honour all promised benefits to members, pensioners and their beneficiaries.
