COSATU

Here’s the bark. Where’s the bite?

The labour federation is determined to remain “revolutionary”. Resolutions taken at its national congress spell out what it means for pension funds. Or rather, what it would mean if the leadership has its way.

Every three years Cosatu holds a national congress. At its most recent, late last year, resolutions were taken that are important reflections of its thinking on retirement funds. Some are a little frightening, if not unexpected and on occasion perhaps not unwarranted, for the frustration and mistrust they convey. Several appear to derive from ideological conviction, as in unions’ attempts to control the assets of pension funds, that the labour federation can conceivably bring to bear on national policy.

Here are examples from the transcript, quoted verbatim but in summary, with the more obvious typographical and other errors corrected. TT resists the temptation to comment.

On trustee training:
The pensions legislation places fiduciary duties on trustees. Trustees’ knowledge on pension-fund matters is very limited and therefore they rely completely on service providers for expert advice. In most cases, training provided by asset managers may be biased towards the service providers rather than focusing on members’ interests. “Affiliate Education Department” is not ready to provide training to trustees and union leadership on pension matters.

It is therefore resolved that trustees be made aware of the pensions legislation but encourages them to carry out their duties with due care. Expert advice on its own is not detrimental to members’ interests, but it becomes dangerous if trustees entirely rely on experts especially on basic issues rather than specialised knowledge. The union must play a role in ensuring that asset managers, who want to provide training, focus on soft and core issues.

As a transition phase, the union education departments may outsource trustee training but work towards providing it themselves. The training must empower trustees to deal with all challenges which are confronting trustees like governance, risk and return etc.

On surplus distribution:
Cosatu has embarked on a protracted struggle to get the surplus legislation passed. Unions are not playing a meaningful role to celebrate the victory. Instead, it is left to the FSB to ensure the surplus distribution.

It is therefore resolved that the unions celebrate the victories by ensuring that former fund members benefit from the distribution. Shop stewards, trustees, local offices and funds must embark on a massive publicity campaign for maximum distribution. We must make sure that employers are not even getting a cent out of the surplus money.

On bulking:
Another wave is taking place in the form of housing loans. Service providers have negotiated with the banks that, because there is a big number of workers who acquired loans, the service providers should get discounts. The discount is credited to the service provider and not to the fund.

It is therefore resolved that no service provider has the right to negotiate any bulking service or benefit without the knowledge of trustees and shop stewards. Any benefit negotiated in the name of funds must accrue to the fund members. Service providers must declare to the trustees all business interests which relate to the funds.

On trustees’ terms of office:
The Pension Funds Act does not state the duration for trustees and makes no provision for trustees to be “recalled”.

It is therefore resolved that Cosatu proposes amendments to the Act whereby the term of office is limited to four years and that trustees may be “recalled”. Also, the election of trustees in all funds must take place at the same time “like shop stewards”.

On trustee independence:
In the Ceppwawu court case (see ‘Trade Unions’ stories elsewhere in this TT edition) the union mandated the trustees to do specific things and the trustees refused. The courts stated that the trustees are independent. On the other hand, the unions have played a critical role in reforming the retirement industry but they are expected not to intervene even if it is in the interests of workers.

It is therefore resolved that unions must continue to play a revolutionary role given that there is an imbalance in the whole social security system. Legislation must give unions space to participate in the retirement industry by allowing union representation on the funds. Individuals seconded to funds must account to union structures and be subjected to union recall and accountability.

On socially-responsible investment:
Unions have committed 5% of assets to SRI but only 2% has been invested.

It is therefore resolved that Cosatu will encourage its affiliates to achieve the 5% within 36 months. An institution will be investigated to assist. It may be the Unity Corporation, or establish an SRI desk or even use Kopano Ke Matla or one of the affiliate investment companies (e.g. Numsa Investment Company).

On black economic empowerment:
Although the B-B BEE codes are in place, black companies only manage about 1% of the (retirement funds) industry. Trustees have not shown confidence in black asset managers.

It is therefore resolved that 25% of assets under management be transferred to black-owned companies by 2011.