Being a trustee at the Eskom Pension Fund is a lucrative gig

1 Jun 2020

The responsibilities of a trustee are reflected in regulatory scripture. It preaches as its first commandment to always honour the best interests of the fund’s members. But South Africa’s Pension Funds Act, penned in 1958, is a road to hell paved with good intentions.

The board of trustees at the Eskom Pension and Provident Fund (EPPF) earned an average of R6,6-million over the five financial years between 2016-2019. Fees paid to board members amounted to R8,8-million in 2019, up 35.5% from 2018, which makes 3.2% of the total administration costs on average in the latest period.

Fourteen members are on the EPPFs board of trustees, but seven members’ appointments by the Eskom executive – as representatives of the employer – were stripped of their paying perks, following a reportable irregularity disclosed in the 2018 PWC audit report. The audit finding forced the CEO and principal officer at the time, Nophasika Lila,to reverse the previous years’ allocations.

So, excluding them from the calculations, the average cost per paid board member for 2019 was approximately R834,000, or approximately R91,000 per meeting. This excludes travel, training and other expenses. In 2015 the equivalent cost was approximately R487,000, or R46,000 per meeting.

The PWC trustee remuneration surveys were done in 2010 and 2014 and, using annual CPI increases as per statistics South Africa, projected these to 2019. The fee per trustee from 2010 projected to 2019 was R156,636 per annum, or R11,223 per meeting (the survey provided both numbers).

The 2014 projections to 2019 for the annual trustee fee revealed an annual cost of R127,813, and if the same number of meetings calculated from the 2010 survey is used, this equates to R9,158 per meeting. This indicates that the trustee fees have not kept pace with inflation, but instead have lagged.

Even if we use the higher projection of R11,223 per meeting, this means that the EPPF board members receive remuneration at more than eight times that of the pension funds surveyed by PWC.

The board charter of the EPPF states that it meets at least once a quarter, usually in Johannesburg. “Additional meetings may be convened when major issues arise that need urgent resolution.”

This is a pretty lucrative gig by anyone’s standards.

The travel, training and other costs for board members in 2019 soared, amounting to R2.6-million compared to an average of R413,000 in the previous four years, or the equivalent of R203,000 per board member in 2019 and an average R31,000 for the previous four years (all board members were included in the calculation).

... the EPPF board members receive remuneration at more than eight times that of the pension funds surveyed by PWC.

Although the EPPF had denied Business Maverick access to the detailed explanatory notes, member and insider reports reveal some insight into one of the costly components, which is extensive international travel.

The current chairman of the board of trustees, Mantuka Maisela, is said to have taken personal trips abroad on the EPPF’s dime, while the fund bankrolled fellow board member Cynthia Khumalo, an employee from Eskom, to accompany the EPPF’s human resources head, Shyless Nkuna, on an HR learning and development course to Las Vegas last year.

The EPPF has confirmed that Khumalo, in her capacity as chairperson of the human resources and remuneration committee, attended the Society of Human Resources Management Conference in Las Vegas, alongside Nkuna, in line with the Fund’s Learning and Development Policy as well as the Board and Committee Member Induction and Training Policy, effective 1 September 2016.

The Fund added that due to its global investment portfolio, which comprises 30% of its total portfolio, the investment teams, which include the trustees on the sub-committee, occasionally travel internationally to conduct the necessary due diligence in global markets where the Fund has exposure.

Travel expenses for general staff members, which includes the executive, appears for the first time in 2019 at the staggering amount of R12.4-million, or 4,7% of total administrative costs.

That means that every EPPF staff member, including contractors, had an attributable cost of R99,976 for travel for the year – bearing in mind the board’s travel costs are not included in this amount.

The EPPF says that travel expenses were previously reported under the membership, development and other administrative expenses line item. “To provide greater transparency, travel expenditure was reallocated from this cost category in 2019. This was done in order to report the total travel expenditure incurred by the EPPF in a single line item.”

Trustees are also afforded the luxury of digital devices and an added bonus in the form of mobile data. iPad Pros were purchased, with smart pens included at around R25,000 a pop.

The EPPF justifies the perks as part of the Fund’s digitalisation efforts, and in accordance with the Fund’s mobile device policy. “The Fund has been able to save on printing costs as the voluminous Board packs are now loaded onto the devices for Trustees in preparation for Board and committee meetings,” the EPPF states. But this does not tally with insider accounts, who say they still print out packs in bulk for every board member.

The oddest trustee line item comes in the form of R583,000 in legal fees that were paid in 2018 for the board. It is unusual for litigation fees incurred by the board to be paid for by the Fund. All the EPPF had to say about that was, “the Board was engaged in a legal matter relating to a Board member,” without divulging further details. Insiders say the member was Ben Steyn.

The emerging trend from the cost analysis of the oversight committee is that not only is the board of trustees a growth in expense, but not acting in the best interest of members further fuels the fires of executive discontent in their failings in fiduciary governance by not properly governing the way members' money is spent.

Meanwhile, a new board of trustees has been elected at the EPPF and will take over on 1 July – with one or two of the old guard back in the saddle. Hopefully, a fresh perspective will prove positive. BM

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