STATEMENT FROM PUBLIC INVESTMENT CORPORATION (PIC)

The Public Investment Corporation (PIC), on behalf of its clients, does hold a substantial amount of bonds of various State Owned Entities (SOEs). A significant portion of the PIC’s bond-holdings in SOEs is Government-guaranteed. At the outset, it should be stated that SOEs have never defaulted on any of the PIC’s bond investments. It should also be contextualised that bondholders do not have the same rights as shareholders. 

The Government is the sole shareholder in SOEs and therefore has the right to appoint members to the boards of SOEs. The PIC is concerned with governance practices of certain SOEs and has engaged the National Treasury in this regard. The PIC is also currently in discussions with external company law experts to determine what changes can be made to the PIC’s governance policies to enable the PIC to exercise a greater degree of oversight on the governance structures of investee SOEs. 

The PIC has an Environmental, Social and Governance (ESG) Policy, which is based on corporate governance best practice, specifically for SOEs. This policy takes into account, inter alia, documents such as King IV, the Companies Act and the Public Finance Management Act. The PIC also has an ESG Rating Matrix with various metrics on environmental, social and governance best practice with which it rates the ESG scores of SOEs. The PIC actively engages all investee companies, including SOEs, on ESG matters based on PIC ESG policies and the ESG score derived from the ratings matrix. 

As a result of these engagements, Eskom understands what our views are on a number of issues, including governance. The PIC can assure government employees and pensioners that it is not conflicted as an organ of state, as all investment decisions are taken in the best interest of our clients and in line with client mandate requirements and the investment risk parameters stipulated by client mandates. 

In the case of the Government Employees Pension Fund (GEPF), this mandate is approved by the GEPF board of trustees and is based on a detailed asset and liability study. The continued support of SOEs will be underpinned by these mandate requirements. Moreover, all investments are also subject to a robust due diligence process which includes a credit analysis, ESG reports as well as risk and legal reports. The PIC remains fully committed to work with National Treasury and Government to improve governance and public finance management in SOEs.

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GEPF is not funding South African Airways (SAA)

Government Employees Pension Fund (GEPF) would like to reiterate and to assure its members, pensioners and beneficiaries that their pension savings are safe. 

Last week National Treasury told the National Assembly that it is considering various options to recapitalise South African Airways (SAA) which includes the Public Investment Corporation (PIC) who is our fund manager as a possible equity partner, however Treasury speculation is perceived as confirmation that the GEPF’s assets will be used through the PIC to Fund SAA. 

The GEPF would like to assure its members, pensioners and beneficiaries that the Fund has not received or been approached with such a proposal and no discussions have been held with GEPF on this matter, therefore we urge all our members and pensioners not to panic or read too much into this speculation. The GEPF through the PIC receives many requests all the time and rigorously considers the merits of all investment opportunities and invests prudently in the best interests of its members, pensioner and beneficiaries. 

The GEPF adheres to strict regulations governing its financial liability to members, beneficiaries and pensioners, as well as its financial soundness. Moreover, the GEPF has confidence in the PIC’s ability to prudently invest funds on its behalf in terms of the agreed investment mandate. The GEPF constantly monitors and evaluates the PIC’s performance in accordance with its investment policy and mandates. 

GEPF members, pensioners and beneficiaries are reminded that the primary role of the GEPF is to protect the wealth of its members and pensioners by safeguarding their retirement benefits through proper administration and prudent investment.

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Distant threats for investors

Long-term returns are achieved when the welfare of beneficiaries is assured. This is inextricably linked to economic growth and development that underpins high levels of employment at earnings which provide decent living standards

In May 2016 a South African court delivered a landmark ruling allowing a class action against gold mining companies. The court’s decision allows close to 1m gold mine labourers who contracted silicosis and tuberculosis – both fatal lung diseases – to seek damages. 

The claims are likely to stretch back more than 50 years to the high point of gold mining in the region in the 1960s and 1970s. At that time the industry employed close to 1m nationals of South Africa, Lesotho, Malawi, Mozambique, Swaziland and neighbouring countries. Some of the affected companies no longer own or operate gold mines. If damages are granted, the industry would be liable for hundreds of millions of dollars. 

Although the shares in these companies did not show a marked response to the court’s decision, shareholders in these companies will be affected by reduced returns in both income and capital gains. Past shareholders have enjoyed better returns as past share prices and income did not fully anticipate and reflect potential costs associated with external issues like lung disease. Up to 500,000 mineworkers have paid with their health. 

The long-term returns that institutional investors seek enable them to meet their obligations both when they are due and for the duration that they need to be met. A secondary requirement is to maintain the purchasing power of the payments. Likewise, returns can be used to fund growth-enhancing policies to support welfare. This is inextricably linked to economic growth and development that underpin high levels of employment at earnings which provide decent living standards. 

Linking national development and long-term returns 

The nature, size and horizon of investable assets inform what long-term returns are desirable and possible. The bigger the funds and the longer the investment time horizon, the higher the obligation to meet these criteria. 

Uncertainty and diversity of choices are the essence of the implied risk in investments. It is therefore important to appreciate that investment returns are always a function of investment risk associated with asset classes, duration and location. These are susceptible to short-term volatility. However, the primary risk for long-term investors is a permanent loss in the value of their investments. 

Long-term returns presuppose a long-term investment horizon. This is possible when investors have limited liquidity needs and are focused on achieving returns to meet a long-term objective such as income generation or replacement for individuals, and beneficiaries of pension funds. The source of long-term returns is productive investment in industry, infrastructure, and public goods and services that lead to sustainable growth and development. It is reasonable to assume earnings growth, interest and capital redemption will keep pace with the real economy and national development. 

The link between long-term returns and national development is best illustrated by the performance of equity investments. Economic growth will be constrained unless businesses are profitable. Earnings, the source of value for equity investments, are therefore both the result of positive economic activity and contribute to the development of diversified portfolios over different asset classes and jurisdictions. Institutional investors must overcome the immediacy and appeal of short-term returns, though they dominate the discourse to which investors are exposed. 

Institutional investors with little or no need for short-term liquidity can make use of ‘patient’ capital that allows them to invest in long-term assets which provide sustainable returns. But, like short-term investors, they cannot ignore the possibility of negative, and occasionally distant, external threats. ▪ 

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GEPF amend benefit rules for Members

In its endeavor to improve the benefits of member and pensioners, the Government Employees Pension Fund (GEPF) Board of Trustees is pleased to announce the improvement of the funeral and discharge benefit effective from 1 October 2017. 

The improvement to the funeral benefit for a GEPF member or pensioner, whose pension either commenced on or after 1 December 2002 or prior to 1 December 2002 and is still alive as at 1 April 2012, the funeral benefit payable upon death of such a member or pensioner and/ his or her spouse and/or eligible children and/or stillborn will be as follows, current amounts are in brackets: 

• In a case of a member or pensioner funeral benefit payable is R15 000 (R7 500) 

• In a case of a spouse funeral benefit payable is R15 000 (R7 500) 

• In a case of eligible child funeral benefit payable is R6 000 (R3 000) per child 

• While in a case of a stillborn funeral benefit payable is R6 000 (R3 000) per stillborn, provided that a child was born after 26 weeks of pregnancy who shows no signs of life. If the child was deliberately terminated, a funeral benefit is not payable. 

The improvement to the discharge benefit is that if a member has less than 10 years of pensionable service and is discharged for the following reasons: 

• Medical reasons ( not of their own doing) 

• When jobs are abolished, reduced, re –organised or restructured due to operational requirements 

• To promote the efficiency of the department 

• When the President or the Premier appoints the member to another position 

• When injured on duty; or 

• Incapability not as a results of own doing 

The discharge benefit will be consistent with and not less than the resignation benefit effective from 1 October 2017. 

Principal Executive Officer, Abel Sithole said that “these amendments will make a significant difference in our members, pensioners and beneficiaries’ lives. These changes also attest to the fact that the Fund is well managed. Sithole points out that the employer, members and pensioners do not have to make any additional contributions for these benefit improvements. He concluded by saying that the wellbeing of all GEPF members and pensioners is the reason why the Fund exists”. 

Members or pensioners who claimed for these benefits before 1 October 2017 will receive payment according to the previous rules. If their claims are effective on or after 1 October 2017 they will receive their benefits payment according to the new rules. Members and pensioners must note that the claim processes and the documentation that is required to claim these benefits has not changed and remains the same. 

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NOTICE TO ELECT TWO TRUSTEES TO GEPF BOARD

NOTICE OF THE PROCESS TO ELECT TWO TRUSTEES TO THE GOVERNMENT EMPLOYEES PENSION FUND BOARD OF TRUSTEES 

Notice is hereby given of the election process, in terms of the rules of the Government Employees Pension Fund, for: 

• a pensioner member trustee and substitute trustee; and 

• an active member trustee and substitute trustee representing the South African National Defence Force (SANDF) and State Security Agency (SSA) 

The term of office of both trustees will be four (4) years. The period will begin on the date of the first meeting of the new Board of Trustees. 

The elections are scheduled to take place between November 2017 and March 2018. The election process is independently managed by The Elexions Agency. 

CANDIDATE NOMINATION 

Nomination Instructions accompanied by a letter from the Principal Executive Officer has been sent to all pensioner members and active members employed by the South African National Defence Force (SANDF) and State Security Agency (SSA). Nomination packs are also available on the GEPF’s website: www.gepf.co.za, The Elexions Agency Offices on 0800 55 66 73 or by email at elections@gepf.co.za. 

Candidate nominations must be submitted using the prescribed nomination form and must reach The Elexions Agency on or before 12h00 on 15 December 2017. Nominations received after the deadline will not be considered. 

Nomination forms must be marked for the attention of: The Returning Officer, GEPF 2017 Board of Trustees Elections and may be returned through any of the following methods: 

• Fax: 086 428 1356 

• Email: elections@gepf.co.za 

• Post: P O Box 3318, HOUGHTON, 2041 or Business Reply Envelope which is prepaid. 

VOTING 

Voting for the qualifying candidates will be conducted between January and March 2018. Detailed information on the voting rules and procedure will be communicated to all nearer to the commencement date of the voting process. 

FURTHER ENQUIRIES 

The election process is independently managed by The Elexions Agency. All enquiries pertaining to the election must be directed to Ms Bontle Mpakanyane on 0800 55 66 73 or email: elections@gepf.co.za.
Click here to go to Pensioner Election forms and papers.
Click here to go to Forces Election forms and papers.

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STATEMENT: GEPF position on Steinhoff shareholding

Government Employees Pension Fund (GEPF) has taken note of the current concerns regarding possible lapses in governance at Steinhoff International Holdings and assures its members, pensioners and beneficiaries that their pensions are safe. 

As at 31 March 2017 the GEPF through PIC owned about R28billion in Steinhoff International Holdings which is about 10% of the shares of the company but 1% of the total assets of the Fund. The impact of significant movement in the share price on the GEPF is significant but manageable. 

As a defined benefit fund, the movement in the value of individual investments does not affect the benefits to members and pensioners. Therefore benefits to members and pensioners are safe. 

The GEPF expects the highest standards of corporate governance from all investee companies. Allegations of accounting irregularities by Steinhoff International Holdings N.V., that have exposed the company to possible criminal investigations, are a serious concerns for the GEPF. 

The GEPF through the PIC is monitoring the situation while awaiting further information from investigations by domestic and international regulators and/or law enforcement agencies, to decide on an appropriate course of action.

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PIC/GEPF statement following a meeting on Steinhoff

The Investment Committee of the Government Employees Pension Fund (GEPF) and the Public Investment Corporation (PIC) held a meeting yesterday to discuss the recent developments regarding Steinhoff. It is important to note that notwithstanding the collapse in the Steinhoff share, the GEPF portfolio remains financially healthy, because of its diversified nature. It is also important to note that GEPF members’ benefits will not be changed by these developments, given that the GEPF is a defined benefit pension fund. The investment loss recorded was 0.6% of the total GEPF portfolio on 6 December 2017. Despite the fall in Steinhoff share, the total GEPF equity portfolio had created a value of approximately R140 billion over the preceding 12 month period, and had performed better than the equity benchmark. Albeit a relatively small reduction in the total portfolio, and despite the signs of recovery in the share price this week, the PIC and GEPF remain deeply concerned about Steinhoff. 

GEPF and PIC agree that the recent developments point to serious governance challenges at Steinhoff and that the following steps are necessary to secure the GEPF’s interest in the company: 

1. GEPF and PIC will insist on the appointment of at least two independent non-executive directors on the Steinhoff and Steinhoff Africa Retail (STAR) boards. 

2. GEPF and PIC will highlight their discomfort with the lack of independence of the Board, including the possible conflict of interest by Dr Christo Wiese as interim Chief Executive Officer. Furthermore, the GEPF and PIC will express their concern about the Steinhoff Audit Committee concluding the terms of reference of the investigations independently. 

3. GEPF and PIC will insist on representation on the Board Committee tasked with investigating the Steinhoff situation, so as to ensure that the process is transparent and that, amongst other matters, the terms of reference address critical governance issues. 

The GEPF and PIC believe that now, more than ever, the Steinhoff matter makes a case for the need to rotate auditors and long-serving board members in investee companies, an issue that the PIC has continuously raised. 

The PIC would like to state that it has engaged with Steinhoff consistently but has often not received positive feedback from the company. Specifically, the PIC has previously pointed out structural issues relating to the material shareholding of the Steinhoff and Wiese families, which are perceived to create the dominance of controlling shareholder representatives on the Board and as a result, potential conflicts of interest. 

The PIC has also raised concerns about the absence of a clear assessment of the risks introduced by the Steinhoff group’s acquisitive strategy as the company has become progressively complex. 

Whilst the PIC has tried to use its position as a major shareholder to vote against some of the resolutions tabled at Steinhoff annual general meetings, the reality is that the PIC is only one amongst many shareholders who have voted differently on certain resolutions. 

The PIC, on behalf of the GEPF will continue to raise environmental, social and governance issues in all its investee companies for the benefit of their stakeholders. 

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Preliminary List of Candidates 2018

GEPF PENSIONER MEMBER TRUSTEE ELECTIONS 

PRELIMINARY LIST OF CANDIDATES – 16 JANUARY 2018 

Below is a Preliminary List of Candidates for the GEPF Pensioner Member election for objection purposes. Objections must be submitted in writing to the Returning Officer via the following: 

FAX: 086 428 1356 | EMAIL: elections@gepf.co.za 

THE CLOSING DATE FOR OBJECTIONS IS 21:00 ON 19 JANUARY 2018 

1 BUSO LUTHANDO GILBERT 

2 CHABALALA RISIMATI WILLIE 

3 CHUEU MACHA SAMUEL 

4 CURRIE MADELIEF 

5 DAVIS STANLEY 

6 DE VILLIERS DANIEL JOHANNES 

7 DE WIT ANDRIES LOURENS 

8 FERGUSON MALCOLM GRANT 

9 HECKROODT DR ANNETIA SOPHIA 

10 LE ROUX, DR FRANS FRANCOIS 

11 MABOYE MOSIDI MIRRIAM 

12 MACHETHE MPEDI ALPHEUS 

13 MAGAELA MAMPURU ELIAS 

14 MAHOLWANA KUTALA EMELINE 

15 MBOKAZI SIMON ZWELIBANZI 

16 MENONG MORAOLE ISRAEL 

17 MONTJANE LESIBA DAVID 

18 MOTIANG MMUTLE JOHANNES 

19 MQAMKANA SAMSON MPHAKANYANA 

20 MUNASUR AMICHAND 

21 NAICKER NIRANJANI 

22 NEL FREDERICK 

23 NGOETJANA VINCENT MANARE 

24 ROJI OLYMPIA NOKWANDA 

25 ROMIJN GYSBERTUS HENDRIK ERNEST 

26 SAMBO ALBERT VIKIMPI 

27 SEABI MAUDU JOHANNES 

28 SERFONTEIN GIDEON JOHANNES 

29 SHABANGU, BRIG HARRY 

30 SIFUNDZA MHLABA STEVE 

31 STRAUSS HENDRIK HERMIAS 

32 THOMPSON ISA 

33 VAN EYK MULDER 

34 WATSON ESTHER BARBARA 

35 WIID ANTON JOHANNES

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Government Employees Pension Fund pensioners receive 5.5% annual pension increase.

Government Employees Pension Fund (GEPF) has announced an annual pension increase of 5.5% to its pensioners and beneficiaries with effect from 1 April 2018. 

The GEPF has granted this increase to enable pensioners and beneficiaries to keep up with rises in inflation. Inflation over one year until 30 November 2017 was 4.6% thus making the increase granted higher than inflation and higher than the 75% of Consumer Price Index (CPI) provided in terms of GEP Law and Rules. 

An analysis of the assets held by the Fund in relation to the valuation of its liabilities undertaken in 2016 showed that the Fund is 115.8% funded, which means that there are sufficient assets in the Fund to cover its actuarial liabilities in full. However, increases above those provided for in GEP Law and Rules is granted at the discretion of the Board taking the Fund’s investment performance into account. 

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How does the GEPF recover tax on behalf of SARS?

All GEPF clients (members, pensioners and beneficiaries) have the responsibility to submit their tax returns to SARS every year during the income tax return season. Pensioners and beneficiaries should obtain the IRP5 from GEPF in order to submit their income tax returns in line with requirements. Active members can obtain these from their employers. 

Please note if the source of income is only from GEPF (no other income sources and no other pension from GEPF (e.g. husband or wife pension in addition to the pensioner’s pension) and the pension is R350 000 or below, and the GEPF deducted the correct tax and no deductions or medical tax credit rebate that the pensioner wants to claim, the pensioner is not required to submit an income tax return. 

Take note: 

Receiving income from more than one income source 

If a pensioner or beneficiary is receiving income from more than one source and each pays money to SARS on your behalf for tax, you might be paying less tax than you need to because the combined income may put you into a higher tax bracket. This means you will have to pay in more at the end of the tax year when SARS gives you an assessment after you submit your income tax return. You can however request the GEPF in writing to deduct additional tax to make provision for an extra deduction paid to SARS. This could prevent pensioners from paying higher arrears to SARS upon tax assessment. Additional tax /voluntary tax deductions will be added to the PAYE on the IRP5 certificate at the end of the tax year. 

Garnishee orders (IT88/AA88) from SARS 

SARS legally appoints the employer (GEPF) in terms of Section 179 of the Tax Administration Act ,28 of 2011 to withhold and immediately pay over to SARS monies/tax owed in the form of AA88 and IT88 (garnishee orders) .. These deductions will not be updated or included on the tax certificate issued at the end of the tax year. The request to cancel the garnishee order will only be done upon receipt of a Withdrawal of Third Party Appointment letter from SARS.

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