The Government Employees Pension Fund (GEPF) — which manages R2.3-trillion in assets on behalf of 1.2-million state employees — has dismissed calls for a pension contribution holiday, with the money instead directed to boosting state coffers.
GEPF chair Frans Baleni told journalists at a round-table on Thursday that the retirement fund had been approached by the Treasury to investigate the feasibility of such a contribution break, but it warned of the dangers of such a proposal.
“An enquiry was made to us by National Treasury, and we did look into the matter. First, it is not possible for a zero-contribution pause. That said, we were able to indicate that there’s a possibility of a percentage reduction of [a particular amount]; anything above that would be detrimental to the fund.”
Earlier this year — at the height of the budget impasse — Cosatu urged the Treasury to initiate discussions with the fund in a bid to raise about R53bn through withholding the employer portion of pension payments for a year.
“Right now the GEPF is funded at 110% of its capacity, which means that it can afford for everybody to retire tomorrow, not receive another contribution and still have change. So it’s overfunded and, look, you can’t do it forever but there is space to have a one-year contribution holiday — that’s R53bn,” said the labour federation’s parliamentary co-ordinator, Matthew Parks, in February.
Based on the risk appetite by the board, there was a decision taken to introduce a R2bn limit on decision-making on unlisted investments. The PIC can make investments above R2bn but final approval will be obtained through the GEPF. That was one of the controls introduced as far back as 2018/2019
— Sifiso Sibiya, head of investments at the Government Employees Pension Fund
The GEPF, Africa's largest pension fund, has grown from a portfolio of R127bn when it was established in 1996 to R2.38-trillion in assets under management in the 2023/24 financial year. It reported net investment income of R116bn, and a 4.9% return on investment.
A large chunk of its assets is managed by the Public Investment Corporation (PIC). However, the PIC has undergone its own governance failures, and was the subject of the Mpati commission, established in October to investigate allegations of mismanagement and improper investment decisions at the asset manager.
The commission was mandated to determine whether PIC directors or employees had abused their positions for personal gain; if whistle-blower protections were upheld; and to determine whether unfair practices influenced staff remuneration or bonuses.
Sifiso Sibiya, head of investments at the fund, said since the PIC had identified failures in some of the investee companies, the GEPF had introduced a R2bn investment cap on unlisted entities. “Ours is, how do we bring in processes and controls within our investment decision-making life cycle, to ensure we minimise potential for losses.
“But based on the risk appetite by the board, there was a decision taken to introduce a R2bn limit on decision-making on unlisted investments. The PIC can make investments above R2bn but final approval will be obtained through the GEPF. That was one of the controls introduced as far back as 2018/2019.”
Another accountability measure was the establishment of an investment liaison committee with PIC investment executives. “It goes through the pipeline, understanding some of the shortcomings that have been experienced in the past and asking the PIC to comply with the mandate.”
Sibiya said the executive committee he leads meets the PIC every quarter to receive detailed reports, and to ensure everything is aligned with the investment mandate. “In those quarterly reporting engagements, there is interrogation from all the risk reports, ESG reports, legal reports, as well as the investment performance.”
He said there was a mandate for the board to intervene, if it needed to, but there was also a relationship of respect with the PIC, as the GEPF did not want to be seen as a player and referee; so when the PIC makes decisions it can be held accountable.
“If we start playing in the kitchen, we might not be able to hold them accountable. That is the intricate balance we need to ensure in the oversight of the investment,” Sibiya said.
Baleni said with regards to the performance of the investments managed by the PIC, the listed entities were doing well.
“Overall, it is 96% performing; it is only 4% of the unlisted investments where we’re experiencing underperformance. We’re not taking it lightly,” he said.
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