After the resignation of director-general Dondo Mogajane, the institution realises the need to keep his deputy, Ismail Momoniat, on in some role. At this point, it can hardly afford to sacrifice 50-years’ experience.

Ismail Momoniat, the Deputy Director-General of national treasury, is due to retire in August after a towering 27-years at the institution. It’ll leave a gaping hole – not just because he is responsible for SA’s tax and financial sector policy, but also because he’s its longest serving official in the top structures, having been there since 1995.

This prospect has left many uneasy, since it comes at a time when treasury has lost a number of well-reputed officials who managed to keep the country’s finances secure during a decade in which it was open season for pillaging.

For a start, Dondo Mogajane, the director-general of treasury, opted not to renew his contract after a 23-year stint at the organisation, and left on June 7. To all intents and purposes, the director-general runs treasury, reporting only to the political head, being the minister.

So when Mogajane walked out the door at 40 Church Square in June, a lot of institutional memory went with him. Were Momoniat to leave at pretty much the same time, that would amount to a loss of 50-years’ experience.

Interestingly, finance minister Enoch Godongwana appointed Momoniat as an interim director-general, to fill Mogajane’s role, while the process of picking a replacement continues. This suggests he may yet have a role to play at treasury after his retirement, in some capacity. “I clock 65 (years) in August. I am engaging with the minister [around] a possible future role,” Momoniat told Today’s Trustee. “I may still be around. I still want to contribute to the public sector if I can. If the system wants to still have me, I will stay to contribute as long as it works for both of them (National Treasury) and myself,” said Momoniat.

Momoniat has been a leader in the formulation of retirement reforms, including the creation of the twin peak model, which regulates the prudential and market conduct aspects of SA’s financial sector.
Fondly known as “Momo”, he is known to be averse to working in the private sector, preferring to work in the public service. This is something of a contrast to many of his one-time colleagues who have gone on to great things – Maria Ramos, at Transnet and Absa, and Lungisa Fuzile, now at Standard Bank.

Before he left, Mogajane confirmed that the thinking was to keep Momoniat at the institution in some or other role. But he quickly added that this doesn’t mean there’s not a solid pipeline of potential successors when it comes to tax and financial sector policy.

“If you look at Treasury broadly there is depth on the system,” said Mogajane.

However, sources au fait with the thinking at SA’s exchequer said that it would make sense for Momoniat to be given a mandate to refine the country’s anti-money laundering mechanisms.
There’s clearly a pressing need, given the evidence that emerged in the Zondo Commission of widescale holes in the system, which allowed the Gupta family in particular to siphon millions out of the financial system.

This is urgent, since the global Financial Action Task Force (FATF) put SA on notice last year after a “mutual evaluation” said there were serious gaps in our money laundering rules that had to be fixed, otherwise SA would be “grey-listed” for money flows.

And as the SA Reserve Bank noted in its financial stability report, this is a big risk to the country, as it would hike the cost for banks to do business, and expose SA to a greater degree of financial criminality – something we can hardly afford.

No shortage of successors

There would be precedent for keeping Momoniat in such an advisory role: the National Prosecuting Authority (NPA) has retained the skills of retired prosecutor Billy Downer (much to Jacob Zuma’s chagrin), while JSE-listed companies often keep retired CEOs on as consultants.

But Mogajane stresses that the process must be transparent and fair. And a committee of Cabinet Ministers would have to sign-off on such a new appointment. “Anything is possible depending on what role will be within the rules and for a specific period … we are looking at various options on how we are going to retain him,” he said. “[But] it can’t be in a full-time capacity.

There are a number of people, however, who may be on the slate to potentially replace Momoniat.
Outside the system, there are experienced former treasury officials such as Olaotse Matshane, Olano Makhubela and Roy Havemann who come with sturdy reputations.

Matshane, for example, is the head of policy statistics and industry support development at the SA Reserve Bank. She began her career as an economist in treasury’s budget office, helped draft the Co-operative Banks Act, and is now a member of the FSCA’s prudential authority. At treasury, she was previously chief director in the financial sector policy division responsible for financial inclusion, market conduct and consumer financial education – a role which covered everything from retail credit, to insurance, medical aids and fintech.

Makhubela is now responsible for retirement fund supervision at the FSCA. But he had a 17-year stint at treasury until 2017, where he ended as chief director for financial investments and savings. At the FSCA, he served as its acting commissioner, so he has a sense of the politics involved in a senior role too.

Havemann, a former treasury chief director of financial markets, spent 15-years at Church Square, after joining in 2002 as deputy director of macro forecasting.

But there are some strong internal candidates too for the top roles. The favourites include Yanga Mputa, the chief director of tax, Errol Makhubela, chief director for financial markets and stability, and Chris Axelson, chief director for economic tax analysis. Mputa, in particular, has been spoken of as a potential replacement for Momoniat for some time.

The 65-year retirement fallacy

Evidently Momoniat isn’t quite ready to hang up his boots. Which illustrates why compulsory retirement at 65 can seems quite artificial.

Momoniat says there’s an increasing likelihood that this retirement age will change – but not just because of his birthday in August. “As we tend to live longer, as mortality has improved generally, many countries have increased the retirement age to sixty-seven years or more. We will face the same pressure to allow people to work longer. The writing is on the wall,” he says.

Another problem with retiring at 65 is that life expectancy has increased vastly in recent decades, which means people can live for 20 or 30-years after leaving a job – but now with less money to sustain themselves. Yet there are nuances to it, and SA’s soaring rates of youth unemployment imply that something must be done to draw these people into the workplace.

“The other objective is that we have to build up the asset base and wealth of black South Africans deprived under Apartheid,” says Momoniat. “We need broad and mass-based [empowerment] – I am not in support of narrow based B-BBEE.”

Interestingly, he says plans are afoot to implement mandatory retirement contributions for workers contracted and in casual work. This is part of a plan to “widen coverage to vulnerable workers,” he says. If it happens, this should provide some sort of retirement buffer for blue collar workers, who have largely been excluded until now. “[This] will require government to put a law in place that obligates all employers to contribute to a pension fund. Then the question arises whether this should not be a national savings fund, at least for those who do not belong to an approved large retirement fund,” he says.

The details have yet to be thrashed out with unions, employers, and the retirement fund industry, but it could involve some government contribution too. Says Momoniat: “we can consider better incentives for low-income workers. For example, the state could consider contributing R1 for every R1 you save, once we are in a better fiscal position”. This could set the platform for the idea to evolve into a mandatory system of enrolling all staff – even casual workers – onto a retirement platform, since saving for retirement is a habit that ought to be developed early. It would be a big deal, affecting vast swathes of society. In the new gig economy, a greater number of workers are considered ‘part time’ workers, who then fall out of the retirement savings net. But on the other side of the coin, imposing a greater liability on employers might also limit the number of jobs being created – and this vast unemployment rate, 34. 5% officially, is the country’s greatest Achilles heel. Momoniat said it would be short-sighted of employers to argue this way. “We need social stability. Nobody is financially secure in the country unless everybody has a stake in the economy,” he said.

‘A system that worked for service providers’

Dealing with the minutiae of pension funds is something Momoniat never imagined, when he joined treasury at the age of 38, back in 1995. “When I started at Treasury in 1995, I did not work on retirement policy, but on the budget and intergovernmental fiscal relations. Secondly, I regarded myself as still young, and I thought I did not need to worry about retirement,” said Momoniat. After 2005, that changed. At the time, the pensions industry was impossibly fragmented: there were no less than 13,000 funds. Not only was there a need for a clean-up, many people simply cashed out their funds when they resigned, rather than preserving their savings. Then in 2006, it emerged that some in the industry had been “bulking” – essentially aggregating all the assets of funds they managed, negotiating better interest rates with banks or getting a rebate, and not passing this onto the pension fund members whose assets they were managing.

Alexander Forbes, in particular, was at the centre of it – something it later apologised for, and sought to refund pension fund members. Momoniat describes this as a “disgraceful practice” designed to “loot retirement fund savings”. But there were other problems too, including ‘stripping’, where employers used the excess cash in a pension fund for themselves illegally. “The industry was very opaque — deliberately so, to conceal high fees and charges, and poor governance practices. Many trustees deferred to the providers and were over-dependent on them. There were all these kinds of problems and conflicts. There were cushy relationships between trustees and the people that they got to manage funds, including kickbacks [and] there were no disclosure,” Momoniat said. Part of the problem was that some retirement funds were too small, so there was no economy of scale which allowed them to negotiate better rates with service providers. And, of course, there was the perennial problem of unclaimed benefits.

Here, black people were the most disadvantaged, says Momoniat, as many of them had won the right, through various trade union battles, to be provided with a provident fund by employers. But many of them didn’t realise they had funds to claim, after they left their job. And tracking them down proved to be a nightmare. “People did not have identity numbers. And many were technically not South African citizens because they were condemned to belong to the Bantustans,” he says. “Some workers did not know where, or how, to access their funds [and] administrators dealt with employers and not employees, so did not have their details after they left their jobs.

It’s an illustration that the system was constructed in such a way that it served the service providers, rather than retirement fund members. After 2005, when Momoniat took over retirement policy, treasury tried to harmonise the system to protect clients from unfair practices, including high fees that deprived them of higher savings growth. Predictably, he says, treasury encountered huge resistance. “What we tried to do was to harmonise the system to have one form of pension, and harmonise the tax contribution deduction and annuitisation system. But some of the reforms had to be delayed because of resistance from trade unions.”

In the end, the 13,000 were consolidated down to 3,000. The way Momoniat sees it, even this is too many: there’s scope to reduce the number of funds further, to cut fees that eat into retirement savings. Nonetheless, he says the introduction of preservation funds – where savings are kept until retirement after someone resigns from a fund – was a welcome milestone that has made a big difference to the country. At last count, there was R262bn held in SA preservation funds.

This represents progress – but it’s nowhere near perfect. In a policy paper entitled ‘Encouraging South African households to save more for retirement’, treasury last year spoke of a plan to introduce a ‘two pot system’: one will be used to preserve two-thirds of savings until retirement, and the other would be accessible to someone leaving their job. It’s a reflection that retirement reform, more than anything, is more of an art than a science. And treasury would be well-advised against turfing out those who’ve been doing the painting for years, simply because they reach the age of 65.