Transnet Pension Fund Amendment Bill; Eskom Conversion Bill: briefing

Meeting report

LABOUR AND PUBLIC ENTERPRISES SELECT COMMITTEE
4 October 2000
TRANSNET PENSION FUND AMENDMENT BILL (B57B-2000) AND THE ESKOM CONVERSION BILL: BRIEFING

Documents handed out:
Transnet Pension Fund Amendment Bill
Final draft of Eskom Conversion Bill

These minutes are complied by G Abdullatief, Committee Secretary of Labour and Public Enterprises Select Committee

The following departmental officials were in attendance:
Mr A Nkuhlu, Chief Director: Department of Public Enterprises;
Mr D Matjila, Director: Department of Public Enterprises;
Ms G Serobe, Executive Director, Finance: Transnet Limited; and
Mr T Bosch, Senior Manager: Department of Public Enterprises.

MINUTES
Transnet Pension Fund Amendment Bill
Ms Serobe said that the Bill proposes a transition to two Funds, viz, the Transnet Second Defined Benefit Fund for Pensioners and the Defined Contribution Pension Fund for Active Members, in order to solve Transnet's deficit problem.

To ring-fence pensioners.

To broaden the scope of the guarantee of the employer to include the Transnet Second Defined Pension Fund for pensioners.

To include the Transnet Second Defined Pension Fund under the scope of recoveries of amounts in respect of the Transmed Medical Scheme.

To deem the obligations of the employer and the State in respect of the New Fund and the Pension Fund in proportions by the State Actuary.

To enable Transnet to establish its' own Pension Fund, subject to the approval by government.

There is currently one Transnet Pension Fund known as the Defined Benefit Pension Fund that comprises both active members and pensioners. The Defined Benefit Fund leaves all obligations to the State. Switching over to the new Fund will release Transnet and Government from their obligation. The obligation is due to a historical problem and the current government has to redress the obligations of the past.

Amendments are required of the Transnet Pension Fund Act 62 of 1990 and the Transnet Pension Fund Rules.

Discussion
A question was asked as to whether a feasibility study had been done to ensure that the staff is agreeable to the switch.
Ms Serobe indicated that four Actuary firms have been employed to look at the interests of all the parties. The switch would also equalse all staff, for example, in the past black widows never received money when their husbands died, but now money will be put aside for that purpose. Also, there was a period when black employees were not part of the initial Fund. Transnet will now pay the monies for the period they were excluded, in order to put all employees on an equal footing.
Ms Serobe assured the Committee that Transnet had looked at all issues that would prevent staff from moving over to the new Fund. Mr Nkuhlu indicated that the majority of the staff is willing to switch over to the new Fund as there are many benefits they stand to gain. When the staff switches over, they do not have to make an additional contribution. If however for some reason a staff member decides not to switch, he/she can remain with the current defined benefit pension Fund.

A question was raised as to whether the Board of the new Fund will be governed by the same rules of the current Fund. Mr Nkuhlu indicated that there are no rules governing the Board in the current Fund, but the members will decide upon the rules of the new Fund once it comes into operation.

Eskom Conversion Bill
Background
Mr Nkuhlu stated that the Bill has not been formally referred to Parliament, but is currently tabled with Cabinet.
Eskom was established as a Commission to supply electricity to the country in accordance with the Electricity Act 42 of 1922.
Eskom remained in existence in terms of the Electricity Act 40 of 1958.
The Eskom Act 40 of 1987 established its continued existence up to date.
The Eskom Amendment Act 126 of 1998 provided for the conversion of Eskom into a company.
The Taxation Laws Amendment Act 30 of 2000 made Eskom a taxpayer.
Eskom is currently run by an Electricity Council and managed by a Management Board appointed by the Electricity Council.
It is subjected to an audit of its financial status on a five-year basis and has to report to the Minister on its affairs and functions every financial year.

Incorporation
Eskom is being incorporated to bring it in line with Corporate Governance and to appropriately structure its businesses for efficiency and effectiveness and to bring it in line with its counterparts globally.
It is also being incorporated to give effect to the Eskom Amendment Act 126 of 1998.
Incorporation will be done by means of the Eskom Conversion Bill and by deeming the existing entity to be a company by a certain date once the bill is passed.

Implications
Eskom's status will then change from a Commission to a Company.
It will be bound by the Provisions of the Companies Act 61 of 1973.
There will be no job losses.
The new entity will take over from the present entity in all respects (including workers).
Eskom to become a corporate entity and to be run by a Board of Directors.
The present Electricity Council and the Management Board to be dissolved.
Its relationship with the shareholder to be regulated by Memorandum and Articles of Association in terms of Company Law.
Due to its nature, Eskom will be exempted from certain provisions of the Companies Act.
The Chairperson thanked the Department for the presentation and adjourned the meeting

MEMBERS PRESENT
Chairperson: Mr S L E Fenyane

Eastern Cape
Ms B N Dlulane

Free State
Ms C S Botha

Kwazulu-Natal
Mr M J Bhengu
Mr N M Raju

Mpumalanga
Ms M P Themba

Northern Province
Mr S L E Fenyane

North-West
Mr Z S Kolweni

The following apologies were received:
Dr P J C Nel (Free State); Ms Q D Mahlangu (Gauteng); Mrs E N Lubidla (Northern Cape) and Mrs J Witbooi (Western Cape)