NEWS & ANALYSIS

Brian Molefe didn’t qualify to be member of Eskom pension fund – Parliament

Committee hears how SOE calculated a R30m pension payout for CEO for just 18 months of service

COMMITTEE LEARNS THAT MR MOLEFE DID NOT QUALIFY TO BE A MEMBER OF THE PENSION FUND

Parliament, Friday, 20 October 2017 – The Portfolio Committee on Public Enterprises was briefed by the Eskom Pension and Provident Fund (EPPF) on the pension payout of the former Chief Executive of the power utility, Mr Brian Molefe.

Acting Chairperson, Ms Zukiswa Rantho, said the Committee needs to understand the circumstances of the pension payment of former Chief Executive, Mr Brian Molefe. “How did the Pension Fund come to the conclusion of paying R30m to a person who had worked for 18 months.”

Briefing the Committee, the Chief Executive of the Pension Fund, Mr Sibusiso Luthuli, said in calculating the cost of the early retirement, actuarial factors which took into account, among other things, the CEO’s pensionable emoluments, length of service, early retirement penalties, age, gender and marital status were considered. The associated costs amounted to R30.1m. The costs were invoiced to Eskom and Eskom paid the costs to the Fund on 23 March 2017. Eskom bought 13 additional years of service for Mr Molefe and waived certain penalties once Mr Molefe turned 50.

The calculation contemplated the following:

Had Mr Molefe actually retired at the age of 63 years (with a start date of September 2015) he would have been entitled to pension calculated with reference to 172 months’ actual pensionable service;

At the time of his retirement, Mr Molefe had approximately 16 months’ actual pensionable service;

In order for the Fund to provide a benefit as if Mr Molefe had retired at the age of 63 years, Eskom had to purchase 156 months’ additional pensionable services; and 

In order to fund Mr Molefe’s pension as if he had retired at the age of 63 years and had pensionable service of 172 months, it was necessary for Eskom to make payment to the Fund of an amount of R30.1m.

 Responding to the questions, Mr Luthuli told the Committee that it was not the first time that Eskom had bought additional benefits for its employees. Members of the Committee raised a concern about the payout of executives who take early retirement and purchase the years of service as a matter of common practice.

The Committee was of the view that the Fund should be privy to contracts of Eskom employees. If the Fund knew Mr Molefe was on a five-year fixed term contract, he would have not been a member of the Fund as his contract disqualified him to be a member. Mr Luthuli indicated that members from Eskom who qualify to be on the Pension Fund are only permanent employees. According to a legal opinion that the Fund sought, it also indicated a legal view that Mr Molefe was not supposed to be a member of the retirement Fund.

 In examining the presentation, the Committee said the Fund’s ethical code of conduct required the Fund to raise concern and alarm bells in the purchasing of benefits if someone will be paid an amount of about R30m.

Ms Rantho said: “I am worried about the Eskom Pension Fund because it looks like it will work for the executives but not for the lay person at Eskom. Eskom is an SOE, Eskom gets money from the government and if there is misappropriation of funds. I am concerned about the manner in which funds are being handled. The Fund must look at the rules and check what you have learnt from this process and maybe there are things that you’ve learnt.”

Statement issued by Ms Zukiswa Rantho, Acting Chairperson of the Portfolio Committee on Public Enterprise, 20 October 2017