Pension fund’s expensive litigation

August 30, 2013 by  
Filed under Wind Energy Tips

THERE are about 3,500 private sector pension funds in South Africa. Between them, they care for the pension savings of about 8-million members and amount, very approximately, to R2-trillion (excluding government pension funds). It may sound a dull sector but, believe me, it’s very big, potentially powerful, too often mismanaged, and it can elicit passionate emotions.

So, when things go wrong, they invite all manner of additional problems. One of these is the lengthy and expensive argument that’s been going on between the Standard Bank and attorney Tony Mostert, curator of the South African Commercial, Catering and Allied Workers Union’s (Saccawu) national provident fund.

He was appointed curator in 2002 so he’s had 11 years at its helm. You’d think that by now he’d have the fund sorted out.

No chance of that.

Instead, he instigated an action in 2005 against WipCapital (an arm of black women’s empowerment company WipHold), Standard Bank, its subsidiary SCMB Securities, and the union’s own administrative services company. In what has become all too commonplace in South Africa’s legal system, that case still has a last hurdle to clear.

According to the latest issue of Today’s Trustee, WipCapital was mandated by the trustees of Saccawu’s pension fund to protect the fund’s share portfolio. WipCapital trotted off to Standard. The deal agreed was that Standard would put a floor under the fund: if the value of the portfolio fell below a certain price, the fund could oblige the bank to buy the shares at the floor price. In other words, this was a put option. The converse of the deal was an agreed ceiling. If the value of the shares exceeded the ceiling, Standard could buy them at the ceiling price: a call option.

Then Standard instituted a hedge to protect itself. Having taken custody of the shares, the bank began trading them in July 2002. Mostert’s appointment as curator took effect in September 2002. He was provided with full details, including those of the hedging strategy; Standard kept him fully informed monthly of the portfolio valuation.

In July 2005, Mostert issued summons. He alleged the 2002 agreement was void because it wasn’t signed by three trustees, as per fund rules. He wants all the shares returned plus dividends back to 2002. Standard said the agreement was perfectly valid because the trustees had given the fund’s principal officer the necessary authority. In any event, it said the agreement was voidable (could be cancelled) but wasn’t void because no effort was made to cancel it. By allowing it to run, Mostert was party to it.

The matter went to arbitration and the single arbitrator, former Supreme Court of Appeal judge Louis Harms, found for Mostert. Standard took the matter to an appeal tribunal (retired judges Howie, Smalberger and Nienaber). They ruled against the arbitrator and sent the matter back to him.

He reconsidered and dismissed all claims against the bank except the claim for 2.9-million MTN shares. This is, says Today’s Trustee, inexplicable. I agree. The tribunal found that the agreement between the parties was indeed voidable but had not been voided, which is why it sent the matter back to the arbitrator.

Unsurprisingly, Standard is going back to the tribunal, which will meet in November.

How much is all this costing? The guess is R15m in legal fees. If Standard loses in November it will cost it somewhere in the region of R500m. If Mostert loses, he will send the charges through to the fund. The members will pay.

Once again, the Financial Services Board (FSB) is involved. It recommends curator appointments to the courts; almost invariably, to my knowledge, the courts go along with it. So, though the FSB may claim it doesn’t appoint curators, that’s just sophistry.

The big question remains: why has Tony Mostert been so favoured? He is curator, I understand, of seven pension funds, and the fees he has earned must make even Croesus envious. In a profession overflowing with well-qualified practitioners, are there really so few capable of restoring pension funds to health?

I WAS taken aback the other day to discover that environmental impact assessments will not, in effect, be necessary for wind farms and for solar photovoltaic energy systems. It seems the Department of Environmental Affairs has asked the Council for Scientific and Industrial Research to identify those geographical areas best suited for wind and solar photovoltaic energy projects.

Once approved, these renewable energy development zones will be developed without environmental authorisation (subject to some conditions). The chances are probably good that future developments will be undertaken without public comment and, frankly, there isn’t much certainty about how any of this is going to work.

My attention to this was stimulated by a little known organisation called Save the Eagles International, which is concerned about the apparent failure to make adequate provision for buffer zones.

Many otherwise critical natural areas will be quite unprotected — nature reserves, marine protected areas, protected environments, world heritage sites and, if you can believe it, national parks.

My pet hate in this are those monstrous gargoyles called wind turbines. They are 140m tall, have a sweep area the size of a rugby field, a generator that weighs 70 tonnes, and three 7-ton rotors flying around with a speed at their tips of 300km an hour. Innocent birds going from A to B don’t stand a chance.

What really gets me about the foolishness and considerable expense involved is that neither wind turbines nor solar photovoltaics can be relied upon for base energy.

If the wind doesn’t blow that gargoyle is useless.

If the sun doesn’t shine, then whatever has been saved in batteries will be used pretty quickly.

All this ignores the huge opportunities being presented in the form of Mozambican gas, available in such quantities that many generations won’t have to worry about adequate supplies. This doesn’t take account of what might be available off this country’s western seaboard, or of the Karoo’s shale gas.

Why are we so intent on wasting precious effort and money?

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