Tag: pension

Major changes loom in the pension industry

There is an unusual silence around the future of pension reform, even though it will both reshape the pensions industry and lead to some substantial wealth redistribution.

A social security paper incorporating pensions was released last year. But according to Mike Prinsloo, head of institutional research at Alexander Forbes, the document is light on detail.

The central proposal would have devastating consequences for firms such as Forbes and the employee benefits divisions of life offices such as Old Mutual, Sanlam, Liberty and MMI, as well as for union funds, which would lose virtually all their members. The paper foresees a 12% contribution of all earnings up to the unemployment insurance fund threshold (now about R190,000/year) going into the fund, which is now called the national social security fund (NSSF).

A 12% contribution of all earnings up to the UIF threshold is expected to go into the social security fund
Prinsloo says it is not clear whether this will operate like a defined contribution, where personal contributions are credited to each member, or whether there will be cross-subsidisation. The cross subsidy is often referred to by government spin doctors as defined benefit, though it has little in common with traditional final-salary schemes. A portion will certainly go to death and disability cover, and it might also incorporate unemployment insurance.
The process started as a pensions-only process in 2007, driven by then finance minister Trevor Manuel’s team at national treasury. The tone of the paper was one of co-operation with the private sector, as long as it got its act together on fees and rationalising funds. At the peak SA had an unmanageable 14,000 funds.
Senior treasury officials such as Andrew Donaldson talked of letting people opt out of the national fund, provided their private sector fund met certain governance standards.

There followed years of turf battles with the department of social development, which took a more hostile approach, even talking of abolishing all tax breaks on pension fund contributions. And some of treasury’s key goals have been held up by disputes in the National Economic Development & Labour Council. These include making it compulsory to preserve pensions and forcing provident fund members to buy pensions with their lump sums. Unions have insisted that any further progress on pension reform can take place only when the NSSF is up and running. In answer to questions from the Financial Mail, treasury claims to be on the same page as the department of social development when it comes to the NSSF.

But Old Mutual corporate consulting head Malusi Ndlovu is sceptical, saying there is still a difference in tone between the two departments, and it is not always clear who is responsible for what. Ndlovu says he would like to know whether there will be options for the private sector to take part in administration or investment management of the fund.

“There is a case for a single administrator, for economies of scale, but I believe it would be beneficial to have a diversity of investment managers to make the market more efficient,” he says.

Treasury will say only that provision will be made to ensure that investment of NSSF funds will be subject to a transparent and responsible investment mandate, and under the same regulatory oversight that is applicable to similar financial sector institutions. It is unlikely that the assets will be managed by the Public Investment Corp, as it would then end up owning up to 50% of certain shares and be even more dominant in the bond market.

Ndlovu says there was a proposal that the 1.2m members of the Government Employees Pension Fund should be exempt from joining the NSSF. But, apart from the issue of the hypocrisy of government exempting itself from its own law, the NSSF would need the contribution of government employees to bulk itself up and become viable.
Treasury insists that private sector pensions will continue to exist, though there needs to be further consolidation.

But Mathias Sithole, head of public sector & corporate consulting at Liberty, says there has been an increase in the number of standalone funds moving into umbrellas, with the total number of funds falling from 14,000 to 5,000 at the end of 2015 (statistics are slow to come out). “A small number of large multi-employer participating funds will dominate the industry, driving the necessary economies of scale,” Sithole says.

David Gluckman, head of special projects at Sanlam Employee Benefits, says that umbrella fund assets have
increased by a compound 25.6% over six years and now stand at R272bn.

Competition has increased with the entry of Allan Gray, Discovery and Sygnia.

Gluckman believes that by 2030 there will be 100 employer-sponsored funds, 10 commercial umbrella funds, 20 union-sponsored funds and five industry funds (such as those for mineworkers and metalworkers). Unions exercise substantial influence through their pension funds. They are sure to insist on their survival before NSSF is approved.

By Stephen Cranston for Financial Mail

Growing in the shadows of the once formidable Independent Media is an opaque company, seemingly controlled by Iqbal Survé, that claims it is defying the generally accepted narrative of a struggling media industry.

This company, Africa Media Group (AMG), has swooped out of nowhere to buy Independent Media’s profitable community newspaper division, and is also thought to have become the recent proud owner of other “business units” that were formerly part of the media company.
In early February, staff of the community newspapers were told at a meeting that the division had been sold to a company with a “long history” in media — AMG.
Apart from Sandy Naudé, previously head of Independent’s Cape division and now set to head the new entity, and group executive Howard Plaatjes, none of the staff at the meeting knew anything about the media company with the “long history”.
The parties who financed the R2bn acquisition of Independent appear unaware or unconcerned about the asset restructuring going on
No detail was provided about the price paid for the only newspaper division within Independent Media making any profit. In fact, the only thing staff were told was that AMG’s majority shareholder was Sekunjalo.
However, this would suggest a related-party deal, as the colourful businessman Survé is the executive chairman of both Independent Media and Sekunjalo.
Yet the apparent sale of the community newspaper division to one of Survé’s own companies has deeper implications for Independent Media’s other shareholders, which include government pensioners.
As far as anyone knows, Independent Media is 55% owned by the Sekunjalo Independent Media consortium (led by Survé’s Sekunjalo Investment Holdings), the Public Investment Corp (PIC) holds 25%, and a Chinese consortium 20%.
If Survé is stripping out the profitable arms of Independent, this would seem to be detrimental to the other shareholders, including the government employees, who remain saddled with the less-profitable parts of the business.
Sekunjalo also owns a company called African News Agency (ANA), which was launched in March 2015 after the demise of the SA Press Agency (Sapa).
Last week, Independent Media reported that ANA had raised US$80m from unidentified sources in China, the US and the Middle East.
ANA describes itself as “Africa’s first content-syndication service” and it claims, as of three months ago, that it has reached more than 1bn users. That it can make such outlandish claims is largely due to partners with which it has reciprocal arrangements, including China’s Xinhua News.
The dramatic (though unaudited) pace of its alleged growth seems all the more incredible, given a revolving door in key management positions. In recent times, ANA founding chairman Ladislas Agbesi has been replaced by Arthur Mutambara and founding CEO Chris Borain has been replaced by Grant Fredericks.
“With this [$80m] investment ANA has in total raised $165m since its inception,” Independent Media said last week. The media company then went on to report how Sekunjalo is now one of the most valuable media investors in the country.
“The total placing has resulted in 15% of the shareholding now held by international investors and 85% of shares belonging to the Sekunjalo Group.”
This puts the value of the Sekunjalo Group’s stake in ANA at just under $1bn — an immensely steep valuation. It is puzzling, given that Sapa had little value when it closed shop three years ago.
However, even though government pensions are on the line at Independent Media, there is little communication about what is going on at the company.
No detail has been publicly disclosed about the price paid for Independent’s community newspapers, and Naudé did not respond to requests for comment.
The value of the Sekunjalo Group’s stake in ANA is puzzling, given that Sapa had little value when it closed shop three years ago
At the same time, reports have emerged that Independent Media’s 50% share of Allied Publishing (a joint venture with Times Media, which owns this publication) has also been stripped out of Independent Media and is now part of Sekunjalo.
Allied distributes newspapers and magazines for both media companies.
Industry sources told the Financial Mail that pivotal functions within Independent — such as editorial, subediting and IT — have been organised into self-contained business units.
These business units are now charging Independent’s newspaper titles for those services. However, it is unclear whether the business units are still part of Independent or have also been stripped out and are now part of the Sekunjalo Group.
All of the restructuring means it’s now impossible to know what assets are left in Independent Media, which was valued at R2bn as recently as 2013.
Remarkably, the parties who financed that R2bn acquisition of Independent appear to be either unaware or unconcerned about the asset restructuring going on within the company.
The largest provider of funding was the PIC, which means it has the most to lose. If the assets are being sold, not only does this leave a cloud over the current value of the PIC’s initial R166m investment in Independent, but it also raises questions over the media company’s ability to repay the loans taken out to buy the company, which stood at R1bn a year ago.
The PIC has a representative on Independent Media’s board of directors. Despite a number of approaches, the PIC had not provided comments by the time the Financial Mail went to press.
The SA Clothing & Textile Workers’ Union (Sactwu) is thought to have paid more than R100m in 2013 for a stake in Independent Media, as part of the Sekunjalo Independent Media consortium. But Sactwu also seems unaware of the restructuring.
In one of the more intriguing aspects of this battle, another party that could be hard-hit by the restructuring is Oakbay Investments, which is owned by the equally controversial Gupta family.
Oakbay has taken Survé to court, demanding 27.5% in Sekunjalo Independent Media consortium, which it says Survé agreed to give it back in 2012. The two parties are due to go head-to-head in the high court next month.
In early 2013, Oakbay apparently handed cash to Survé to secure a stake in the Byzantine Independent Media control structure, as he was negotiating to buy the company from the former Irish owners, the Independent Group.
The plan at the time was that Oakbay would get 50% of the Sekunjalo Group’s stake in Independent Media. From the outside, it is impossible to say if Survé ever had any intention of completing that transaction or whether Oakbay was just one of the many parties corralled into his hastily constructed consortium.
In June 2013, when the list of shareholders in the consortium (which would own 55% of the media company) was disclosed, Oakbay wasn’t among them.
Instead, that list included Sekunjalo Investment Holdings, Cosatu investment company Kopano ke Matla, Sactwu Investments, the Food & Allied Workers’ Union (Fawu) and a special-purpose vehicle housing a 10% stake for employees. These various parties would hold a combined 63% of the Sekunjalo Independent Media consortium.
The other 37% supposedly comprised “a number of broad-based value-adding partners”, including the Black Business Chamber (Western Cape), Mandla Mandela’s Mvezo Trust, the Western Cape Development Trust, Umkhonto we Sizwe Military Veterans Association, various unnamed “women’s business community organisations” and prominent entrepreneurs Sandile Zungu and Groovin Nchabeleng.
However, some of those members of the consortium have told the Financial Mail they have no idea what happened to their promised shares.
Says Fawu general secretary Katishi Masemola: “I haven’t heard anything about it since we were offered a very small stake years ago. We still haven’t signed any papers …
we had no intention of paying anything and felt if we were getting it for free, there was no harm to us.”
Another group that was offered shares says it was impossible to know exactly what was going on back in 2013, because the names of the companies being used by Survé’s consortium kept changing. “There were companies within companies so it was impossible to know who was being offered what,” a source at that group says.
At the time, Independent Media’s staff were also promised great wealth by incoming chairman Survé at various staff meetings. Since then, the staff numbers have been pared back by retrenchments and there has been no sign of shares.
One of the companies offered shares at the outset says the only thing that can be said with any certainty is that Sekunjalo looks set to score by feeding off the demise of the print media industry.

By Ann Crotty for www.businesslive.co.za

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