The shenanigans at the biggest pension fund in the country – the GIPF [Government Institutions Pension Fund] – have created the mistaken impression that Eldorado has (again) revealed itself in our lifetime. Recently, Lawrence Ihuhua, secretary general of NBWU as well as the Public Servants’ Committee, made the accusation that employers loot the pension funds of the employees and that they also want in on the gravy train. The problem is that you cannot have your cake and eat it too. A pension fund is not a cash loan and the rules for its administration are set out in the applicable law. And let us state this unequivocally: pension funds are there to provide benefits for their members upon their retirement.
Pension funds, in our country, are regulated in terms of a 56-year-old Act, the South African Pension Funds Act 24 of 1956, but Namibia has not kept up with the amendments that South Africa has made after our independence. In terms of the said Act, the beneficiaries of the funds are solely the employees. However, both the employer and the employees have a vested interest in the health of the fund. For this reason, they are entitled to jointly appoint trustees who manage the investments of the funds and/or jointly agree to outsource the management thereof to a third party.
The employees need, at all times, to be kept in the loop on the performance of the funds by those who act as their representatives. It is when these lines of communication break down or do not exist that suspicion and other problems arise, as seems to be the case at the GIPF. The Act recognises exclusively the trustees as the sole (legal) custodians of pension funds. It is the trustees who have the fiduciary responsibility and can be arraigned in the courts for any and all malfeasance. Therefore, the ménage a trois between Namfisa, GRN and GIPF where there are allegations of wrongdoing is as clear as mud given the fact that the employer received reports, flashing red lights, as far back as 2004. For the aggrieved, litigation against the trustees may have delivered a quicker resolution.
In December 2008, a rogue investment manager, to wit, Riaan Potgieter of Prowealth infamy, committed suicide after helping himself to the pension savings of retirees. He made more than N$100 million disappear, it was reported at the time. Our culture and upbringing is not to talk evilly of the dead but, truth be told, Potgieter was a skunk. One of the most notorious cases of pension fraud ever committed was the one by Robert Maxwell in the UK. In 1991, he embezzled reportedly more than 440 million pounds of the Maxwell Communications Corporation and Mirror Group of Newspapers, setting a dishonourable precedent for Potgieter and his ilk to emulate! Potgieter’s fraudulent actions were promptly handled by the courts and his assets sequestrated. Again, there may be a lesson here for those who feel frustrated by the employer’s snail’s pace in the case of GIPF.
Government is the regulator of all pension funds. And unlike misconception to the contrary, GIPF is not a state-owned enterprise (SOE) but a private pension fund registered in terms of the Pension Funds Act 24 of 1956. By Regulation 28, the government requires all pension funds to invest a minimum of 35% of total funds in their portfolio in local instruments, both listed and unlisted. Whereas investment in local shares (if and when available) may be relatively low risk, investments in bricks and mortar, particularly via third parties as in the case of GIPF, are fraught with incalculable risks.
And this may be the genesis of the games played with the amount of N$600m being bandied about which went up in smoke. True, we should wait for the report to tell us whether the entire amount is investment risk or whether there is skullduggery involved. But clearly, there is a clash between the fiduciary responsibility of trustees to optimise returns for members and the government weighing in on the trustees to take on the cause of local investment and economic development. Therefore, the events at GIPF may result in the government having to revisit its diktat.
The time has come, not to nip and tuck it but to consign the Pension Act 24 of 1956, in toto, to the museum or grave, whichever may be the more salubrious resting place. In its place must come a law informed by the developments and progress made in the industry in the last six decades.
The principle of the new Act will still be the same, namely, a piggy bank for the elderly for their sunset years. Using the information of our neighbours as proxy, not more than 10% of Namibians are actively saving towards their old age. This spells disaster for citizens in old age in a country with limited welfare cover.
So no, we should not encourage members of pension funds to dip into their savings now. On the contrary, we should teach them sound financial habits of setting aside, in a regular and standard fashion, part of their income for old age when they are no longer working. I do. You should as well. Because only the rich can live off their investments and other incomes.