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Vultures waiting for Transnet pensioners

For an impoverished ageing pensioner, all they comprehend is a broken promise.

This is a brief history of the old, the forgotten, and the dispossessed. Pensioners should be seen and not heard, even if they are struggling, and battling to put food on the table. After all, their lifespan is diminishing. Macabre? This is how the Transnet pensioners have been treated since 2003.

Is this a foreboding of the future – that of looted pension funds, and struggling pensioners? That employees may battle to make promises stick? Is this an indication of how workers are going to be treated when they are no longer economically useful? Or is this merely another example of a state-owned entity behaving badly?

To briefly recap the past – when, in 1990, the SA Transport Services was converted into a company, Transnet SOC Ltd, two defined benefit funds were inherited from the South African Railways and Harbours Administration. These funds were merged into the Transport Pension Fund. In 2000 the Transnet Second Defined Benefit Fund was created to house the pensioner members of the Transport Fund. These funds fall under the Transnet Pension Act, and are therefore not subject to the Pension Funds Act, nor are they subject to supervision by the Financial Services Board. It should be noted that guaranteed benefit funds, which fall under the Pension Funds Act, are mandated to distribute any fund surplus to members. This does not apply to these Transnet Funds.

The pensioners were assured that there would be no change to their pension benefits. As they understood it, the annual increase would be 2% plus an increase to take inflation into account. This is what came to be referred to as ‘the promise’. This was kept until 2003, after which the annual increases were no more than 2%. Inflation shot up to 4.82% in 2006, reaching 7.57% in 2007 and 9.35% in 2008. It has remained high, coming down slightly to 4.50% in 2017.

During the years, these pensioners had to make do with paltry 2% increases. “Bonuses” were occasionally dished out, but it has not been possible to quantify the impact.

In 2014 two pensioners, Pretorius and Kapa, were granted the right to represent the pensioners of these two funds in a class action lawsuit against the Transport Pension Fund (TPF) and the Transnet Second Defined Benefit Pension Fund (the funds).

However, the case heard in the Pretoria High Court in 2016, was about exceptions. The objective of an exception is to dispose of the case or a portion thereof in a timely manner.

The pensioners only achieved a partial victory. Leave to appeal was denied in the High Court and the Supreme Court. This matter was heard by the Constitutional Court in April 2018, and the pensioners were granted the right to appeal the High Court judgment.

The pensioners have made the following claims:

  • The promise that the funds had failed to keep and that the funds should be ordered to pay the arrear increases taking into account 70% of inflation from 2003. The pensioners also argued that the failure to keep the promise constituted a breach of contract, unlawful state action and an unfair labour practice.

Transnet and the funds raised exceptions to the arguments but the ConCourt dismissed them and ruled that it does not deprive the respondents of the opportunity to raise [arguments] as “substantive defences in their respective pleas”.

The ConCourt also ruled that unlawful state action, unfair labour practice, and the breach of contract are all constitutional matters.

  • That the legacy debt of R171.8 billion as at April 1 1990, which was actuarially determined, plus interest of no less than 12% per annum as from April 1 1990, should be paid to the funds.

Transnet has failed to pay this amount over to the funds.

The exceptions raised by the funds and Transnet were not allowed by the High Court.

  • That the donation of 40% of the TPF members’ surplus, in the amount of R309.1 million that was made to Transnet on November 23 2000, constitutes an unlawful donation and is invalid and should be paid back by Transnet.

The exceptions raised by the funds and Transnet were not allowed by the High Court.

Final outcome far off

The full legal arguments and counter arguments, supported by all the facts, still have to proceed to court. The constitutional principles of reliance, accountability and rationality will be fleshed out. The court will have to decide on the fundamental social security rights, pensioner expectations and legitimate expectation.

That the ConCourt clarified the employer-employee relationship in regard to pensioners, and held that “Labour law jurisprudence under the Labour Relations Act recognises that unfair labour practices under the act may extend beyond the termination of employment” and opined that the facts of this case “provide a compelling basis not to restrict the protection of section 23 (fair labour practice rights) to only those who have contracts of employment”, will be scant relief.

It will also be scant relief that important legal principles on these highly complex issues may ultimately be developed when this case is heard.

For an impoverished ageing pensioner, all they comprehend is a broken promise, and not enough money. It will take many years before this matter is finally resolved. By then, many pensioners will have passed on. Can Transnet not simply do the right thing and settle with the pensioners? Does one really need jurisprudence to rule on such a matter?

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And while this debate rages on – the pensioners starve. Most will be dead by the time this is resolved. Yet their Management live the high life – ex “lucky Montana”. Put them all in jail.

The impact is wider than just the Transnet pensioners. The families of these pensioners are also financially affected, ask me how I know. Transnet management – you are going to burn in hell by repeatedly refusing to do the right thing. Ever heard of the blind whip/ fate/ the wheel that turns/ God’s eye?

Jurisprudence. The only shambok that reminds the government to behave

“It should be noted that guaranteed benefit funds, which fall under the Pension Funds Act, are mandated to distribute any fund surplus to members.” – Rubbish. Go and read section 15C of the Pension Funds Act.

To clarify – although Trustees may allocate surplus to members under Section 15C, they may also allocate surplus to the Employer, and they may also decide not to allocate surplus at all. And before the Trustees may take any decisions regarding the surplus, they must follow the prescriptions regarding surplus in the rules of the fund first.

Nasty situation like many other defined benefit pension plans worldwide.
I havent’t run the numbers but I would hazard a guess that the Transnet pensioners with a 2% increase per year might nevertheless still be better off than private sector pensioners with similar service who had their defined benefit fund converted to a defined contribution fund sometime say in the early 2000s when low-risk interest rates were high and longevity risks seemed lower making for pretty low actuarial fund values comming out of the defined contribution plan.
For example, if you are are contributing to a defined contribution fund try heading over to the Government Employees Pension Fund website and doing a ficticious calculation on the gratuity (lump sum) and pension due you. Then divide the annual pension by the life annuity rate escalating at CPI you would get from a major South African provider and add that to the gratuity. I think many will find they are way worse off than the benefits provided by GEPF.

My experience with dealing with GEPF is that they are incompetent, couldn’t care less and exceedingly inefficient. If you want to waste a day visit their offices in Sunnyside Pretoria – suggest you take refreshments with you

Thank you, now I understand the backstory. Until now, I was confused about the Transnet pension saga. All I can say is South Africa is a very hard country to grow old in! Such detached callousness from Transnet and the Government. Offering pensioners a peaceful check out of life would be kinder, but Government are too high principled for that option! Rather starve them slowly and delay until they are all dead. Hypocrites.

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