The ANC’s non-payment of workers’ provident fund contributions has big implications for the governing party’s top six officials, especially Paul Mashatile. But have trustees done their job?
There is still no end in sight to the stalemate between the ANC and its employees who haven’t received their provident fund contributions for seven months now. The fracas began when, after not being paid for three months, some of the governing party’s staff members enlisted the National Education, Health and Allied Workers’ Union (Nehawu) to sue their employer in the Labour Court. The ANC then, evidently reluctantly, paid some of the outstanding salaries.
But the party’s real problem lies in the hundreds of thousands of rand that it still owes in provident fund contributions. It’s a scandal which could have several legal consequences for the ANC’s top six officials. President Cyril Ramaphosa, already mired in a legal scandal over the robbery at his farm, can ill afford this right now, a few months ahead of the party’s elective conference in December. And Paul Mashatile, the ANC’s treasurer-general, could even be held personally liable for breaches to the Pension Funds Act because of how the party behaved.
The scandal first erupted in January, when Nehawu asked the Labour Court to compel the ANC to pay the outstanding salaries and benefits. At that point, the ANC owed the 19 workers suing it R630,190 in salaries and benefits for each month it hadn’t paid them. According to their employment contracts, the ANC was supposed to deduct R186,394 per month collectively from the salaries of these workers, which it was then meant to pay over to various service providers – including the SA Revenue Service (Sars), the Unemployment Insurance Fund (UIF), the Medshield Medical Scheme, Sanlam Provident Fund and the Sanlam Funeral Benefit Fund.
The court papers revealed that while the ANC did indeed deduct the money it was meant to pay to these providers from the salaries of these workers, it just never paid it over. That’s already damning enough – but that’s just the employees’ contributions. The ANC itself was also supposed to make employer contributions towards the funeral fund, provident fund and medical aid. And it didn’t do that either.
At the end of March, the ANC filed an answering affidavit, admitting that it owed the provident fund R222,375 in arrear contributions for its workers at that point. In an affidavit, signed by Paul Mashatile, he says the ANC has since paid the workers their October to December salaries. The medical aid premiums for October to December were also paid to Medshield in February, while Sanlam received the funeral contributions for November and December in January. However, it hadn’t settled the provident fund contributions, which hadn’t been paid since October 2021. Mashatile said the party was ‘trying to raise funds’ but that it promised to settle all outstanding contributions within 12-months. He also promised that the party will keep up with current contributions from April 2022.
As for why it had fallen behind, Mashatile blamed the introduction of the Political Party Funding Act, which came into effect in April last year, for not being able to raise enough donations to run the ANC’s operations. It is also receiving less public funding from the Independent Electoral Commission, money which is given out in proportion to a party’s support. But with its share of the vote having plunged in recent years, it means the ANC is getting less public money that ever.
“It is unfortunately the reality that the ANC has been struggling to maintain its operations at current levels,” said Mashatile. “Donors are no longer as willing as they once were to contribute to the funding of the ANC”.
Mashatile’s excuse rings hollow, however, given that the other parties – notably the DA and Action SA – aren’t short-paying their staff. Or failing to hand over their retirement savings. To critics, however, this is another sign that the ANC believes it is above the rules which govern everyone else.
Financial hardships are not an excuse
Here again, the ANC is on the wrong side of the law. According to the Pension Fund Adjudicator’s annual report for 2020/21, the number of complaints lodged by funds against employers for non-payment of contributions is on the rise. Some, like the ANC, have advanced financial hardship as their excuse. But the legal precedent is unequivocal: financial troubles can’t be used as an excuse.
In December 2021, the Supreme Court of Appeal ruled that when employers find themselves in a financial predicament, they can’t choose to pay some debts and not others.
In that case, the SA Post Office (SAPO) hadn’t paid retirement contributions to the Post Office Retirement Fund since May 2020. Instead, it prioritised paying the institution’s running costs, and sometimes medical aid contributions, rather than pension fund contributions. It was a big deal, since the Post Office owed R40m per month in pension contributions. But while its financial position had deteriorated dramatically since Covid, Judge Clive Plasket ruled that the Post Office nevertheless had a statutory obligation to pay its employees’ contributions, and its own contributions, to the Fund every month.
“SAPO, like any other debtor, cannot choose which debts to pay. If it is trading in insolvent circumstances, its board’s obligation is to place it in liquidation, not to pick and choose which of its debts to honour,” wrote Plasket last December.
It’s a precedent which leaves the ANC in a precarious situation. And the question remains, who is holding the party to account?
An administrator of a provident fund which is owed money is obliged by law to take all reasonable steps to enforce its claims. And it’s also obliged to report any non payment (if it’s been outstanding for more than 90-days) to the director of public prosecutions, and to the regulator, the Financial Sector Conduct Authority (FSCA).
Sanlam is the administrator of the ANC’s provident fund. Asked whether it has reported this non compliance, Sanlam said it has been “engaging” with the party, but said that it is the board of trustees of the fund that really bear the statutory duty to report the matter to the prosecuting authority.
The FSCA reported that the fund did report the ANC’s failure to pay contributions to the regulator. And the FSCA then wrote to the party, and told the provident fund members what was happening. The regulator said there is a plan in place for the ANC to settle the outstanding contributions, but added that its engagements are “still on-going”.
Olano Makhubela, the FSCA’s executive for retirement fund supervision, said that under section 7D of the Pension Funds Act, the board of the fund are responsible for ensuring the contributions are paid.
“The FSCA currently has no clear jurisdiction in respect of the employer, and this shortcoming in the law is currently being addressed by proposed amendments in the legislation,” said Makhubela.
Mashatile in the firing line
For Mashatile, the consequences are serious. According to section 13A of the Pension Funds Act, when an employer fails to pay fund contributions, not only are they liable for late payment interest, but certain people in that organisation will be liable for the unpaid contributions and interest. And the person who is in control of an organisation’s financial affairs – in this case Mashatile – can be held personally liable for that non payment.
According to the ANC’s constitution, Mashatile and any other two national executive committee (NEC) members receive and bank all money on behalf of the party. Yet there may be criminal consequences too. This is because any person who contravenes section 13A is guilty of an offence and liable, if convicted, to a R10m fine or imprisonment for us to 10-years.
Rosemary Hunter, a pensions lawyer at Fasken (and contributor to Today’s Trustee), says that since you can’t put an organisation like the ANC in jail, Section 332(5) of the Criminal Procedure Act says that a person who is a director or employee can be deemed to be guilty of the same offence. They can only be exonerated if they did not take part in the commission of the offence and couldn’t have prevented it. But it’s the board of trustees which could be accused of flouting their duties too. “If the board fails to comply with these duties – whether statutory or fiduciary – over a substantial period of time, the FSCA could require the board members to vacate office on the basis that they are no longer fit and proper to act as board members,” said Hunter.
The FSCA reiterates this view. Says Makhubela: “Regulation 33 of the PFA requires that the board of trustees report the contravention of section 13A to the prosecuting authorities”. In this case, however, Makhubela says that board of trustees told the regulator it hasn’t reported this case to the prosecuting authority. But Makhubela said the FSCA won’t require the board to vacate the office because it did report the matter to the regulator. “Part of the regulator’s strategy and role is to enable the resolution of matters as efficiently – in terms of time and financial resources – as possible, and without always resorting to the courts,” he said.
As it is, he says, the prosecuting authorities are inundated with other issues. But the FSCA has committed to monitoring the ANC provident fund issue “closely”, he says. “We will make an informed decision if we feel all pragmatic steps undertaken have failed to remedy the problem,” promised Makhubela.