By Rosemary Hunter
The FSCA is investigating, Akani is appealing, and the retirement investment industry waits.
The Chemical Industries National Provident Fund (CINPF) has a long and troubled history which, despite the efforts of its current board, it seems unable to put behind it.
There is plenty at stake in this case, both in terms of the governance signal it sends to other funds, as well as the fact that the CINPF is a R6bn fund, with 21,000 members. Established in 1987 by the forerunner to the Chemical Energy Paper Printing Wood and Allied Workers Union (Ceppwawu), the CINPF had bought administration, actuarial and consulting services from companies within the NBC Group from the start.
But in November 2019, the CINPF’s board terminated its contract with the NBC companies, citing poor performance and high fees. It then appointed Akani Retirement Fund Administrators as the fund administrator; Novare Actuaries and Consultants as its investment consultant; and Moruba Consultants and Actuaries to provide actuarial services.
NBC didn’t take this lying down. It challenged the CINPF board’s decision in the high court, claiming it had been tainted by fraud. Disturbingly, it claimed that the CINPF’s chair Reginald Sema, vice-chair Ayanda Sithole, and principal officer Bonginhlanhla Dangazele, had all received money from the Neighbour Funeral Scheme (NFS) – which shared directors and premises with Akani – as a reward for ensuring that Akani was hired.
Akani didn’t dispute that these payments had been made, but claimed it was all above board. Rather, it said the payments were made because those three people had all bought funeral policies from NFS in August 2019, three months before NBC was replaced, and each was due money because some person whose life was “insured” had died. Akani said the fact that this money was paid to all three people on the same day, one day after the CINPF decided to terminate NBC, was just “coincidental”.
However, in July 2021, Justice Bashier Vally ruled that NBC didn’t have any legal standing to challenge the CINPF’s decision, as it had no right to remain appointed to provide services to the fund. (The case continued nonetheless as similar corruption allegations had been made by other members of the fund, who joined the court action against the CINPF.) Vally ruled that the board of the CINPF had been justifiably concerned about NBC’s performance, and its decision to terminate its appointment, and hire Akani, Novare and Moruba, was not reviewable under the Promotion of Administrative Justice Act (PAJA).
On the corruption allegations, Vally said there wasn’t enough evidence to find that there was a corrupt relationship between NFS and the three CINPF office-bearers. Their explanations for the payments, he said, were “not far-fetched or untenable”.
Akani’s links to NFS were irrelevant, he said, and anyway, the Financial Sector Conduct Authority (FSCA) and the police were better placed than the court to investigate the merits of those corruption claims. But Vally did express the hope that the FSCA would indeed probe those allegations, given the extensive evidence presented in the papers. In the end, he dismissed NBC’s application, and also refused it leave to appeal.
But the case didn’t end there. Later, with the special leave of the Supreme Court of Appeal, a full three judge bench of the high court heard the appeal – and reversed almost all of Vally’s rulings.
In a judgment on behalf of the unanimous bench in June this year, Judge LR Adams made a number of far-reaching findings.
Most notably, he ruled that a court isn’t entitled to decline to hear evidence and decide issues simply because it believes that would be best investigated by other bodies. Adams said the public has an interest in the proper administration of a pension fund, and it is for this reason that administrators are subject to statutory regulations and required to avoid conflicts of interest. This is why the CINPF’s decision did amount to administrative account under PAJA – contradicting Vally’s earlier finding.
But more devastatingly for the CINPF and Akani, the court found that those payments made to the three officials did amount to “bribes”. Adams said there was no evidence that NFS was licensed to issue funeral policies, and the three CINPF office-bearers hadn’t properly explained the nature of their relationships to the people whose deaths had allegedly triggered these payments.
And, unlike Vally, Adams said Akani and CINPF’s explanation for the payments were “so far-fetched that it [could] and should be rejected on the papers”. Rather, Adams said, Akani had indulged in “fraud and corruption” to thwart a competitor.
Though Dangazele, the CINPF’s principal officer at the time, has since died, the court ruled that Sema and Sithole had violated their fiduciary duties to the CINPF, and were not “fit and proper” persons to hold office.
In the end, the court set aside the CINPF’s decision to fire NBC and hire Akani, Novare and Moruba, removed Sema and Sithole from office, and awarded costs against the fund. This leaves CINPF in a difficult position. On 10 August, its new board gave Akani notice that it was terminating its appointment on the grounds of poor performance, with Momentum being hired to replace it.
For Akani, which was found to have paid bribes, it was a devastating finding. This was made worse by the FSCA taking the unusual step on 14 July of announcing that it had conducted a “search and seizure” of Akani’s premises. The FSCA said this was part of an investigation launched “after the FSCA received complaints which contained sufficient information to create a reasonable suspicion that financial sector laws may have been contravened by Akani”.
The regulator said it couldn’t disclose details of the investigation, so at this point, we don’t know if the probe was prompted by Adams’ judgment in the high court case, or other evidence. But given these allegations, Akani almost had no option but to appeal that ruling. Its deputy MD Jack Malebana described Adams’ ruling as wrong “in law and fact”, saying that if it was left unchallenged, it may “be misconstrued as gospel truth” by the industry.
For those with an eye on efforts to clean-up the retirement industry, the appeal will be keenly watched. It remains to be seen whether any other court buys Akani’s explanation for what Adams described outright as bribe