Address By Minister of Justice & Correctional Services Ronald Lamola, MP, held jointly with the International Pension and Employee Benefits Lawyers Association at the Cape Town International Conference Centre
Ms Muvhango Lukhaimane, the Pension Funds Adjudicator of South Africa Judge Malcom Wallis
Retired Justice Dennis Davis
Ms Cathy Smith Chairperson of the International Pension and Employee Benefits Lawyers Association
Distinguished Guests
Introduction
It is my singular honour to be part of this important gathering which will have long lasting effect on the outlook of our society.
We welcome you to our beautiful country, you’re on the tip of the African continent, adjacent to the Table Mountain, Robben Island and those who enjoy fine dining you are not far from our vineyards.
You can also visit one of beautiful cities DBN, those who love nature can’t leave our country without visiting our world-renowned nature reserve Kruger National Park.
Intergenerational Justice
Pensions by their nature are investments into the future hence the pension related protests in France, it is about what is the best investment for our future. It is a contentious financial and political question that is always contested between all the role players including labour. It is the same in our country.
This borne out by the following revelation by the World Bank: the global population segment aged 65 and older will have doubled from 10% to 20%. Nearly 1.3 billion people – 80% of the elderly – will live in Low Income Countries (LICs). Yet only around one-third of the population in these countries have any sort of formal retirement income.
Pension systems contribute to promote long-term savings and which in turn stimulates economic growth. They are also an increasingly important source of sustainable finance and leaders in greening our financial systems.
Therefore, I think we can all agree to an irresistible conclusion, that decisions that pension funds take today should have a positive bearing on intergenerational justice. The present-day generation ought to consider not only its own interests but also those of future generations.
It is against this background that I believe, organizations like the International Pension and Benefits Association (IPEBLA) and the Pension Lawyers Association (PLA) are well positioned to lead the global conversation about intergenerational justice.
South Africa launched its first Code for Responsible Investing in South Africa (CRISA) in 2011 to encourage institutional investors and service providers to integrate environmental, social and governance (ESG) issues into their investment decisions.
CRISA 2, launched by the CRISA Committee in September 2022, building on the first CRISA Code (2011) contains five voluntary principles for stewardship and responsible investment as a key component of the South African governance framework.
The primary objective of CRISA 2 and its principles is to affirm CRISA as a key component of the governance framework for South Africa. As you deliberate in your conference , it will be much more important to assess the extent in which the global pension fund industry has integrated intergenerational justice as a key pillar towards sustainability.
In a country like ours which is still reconstructing and remoulding itself after centuries of colonialisone of the prevailing legacies of this historical injustices is borne out in the high levels of inequality we see and experience in South Africa.
This can only be improved if we have state owned enterprises which are investable. It is for this reason that our administration is determined to ensure that that skills and human resources we have in these state owned enterprises are highly skilled and well equipped to fulfil their mandate.
The Two-Pot Retirement System
South Africa has been faced with the reality that people are not saving enough and that their retirement savings may not be enough to sustain their livelihoods during retirement.
In 2020 one of our reputable South Africa annual savings equal to about 15% of GDP and in the present fiscal year a deficit equal to 15% of GDP. On 29th July 2022 government released 2022 Draft Revenue Laws Amendment Bill.
The Bill contains key amendments on retirement reform to move towards a “two-pot” retirement system. The amendments enable South Africans to also save for non- retirement purposes, whilst preserving more of their savings for retirement.
These amendments aim to encourage members to preserve their retirement savings by making it more flexible to accommodate unforeseen pressures that members face during the span of their working life. It makes it possible for workers not to resign from their employment merely to access their retirement funds. The implementation date of the Two-Pot Retirement System is 1 April 2024.
International Jurisprudence
We continue to learn and benchmark ourselves from other jurisdictions in terms of which we should sharpen our policy frameworks. We expect this conference to discuss matters and cross pollinate ideas so that lawyers in South Africa can continuously advise on best practice.
South African lawyers may well learn more on how matters of age discrimination could be interpreted in the pension industry that has rapidly changing demographics as was the case in the United Kingdom Appeal Court of matter of Lord Chancellor v Macleod [2018] EWCA Civ 2844.
Briefly , the facts of this matter are as follows ; when changes were made to public sector pension schemes in April 2015 in the UK , they introduced protections for older members to ensure that the changes would not negatively impact their pension (i.e. reduce it.)
In December 2018, the Court of Appeal ruled that younger members had been discriminated against because the protections only applied to older members.
Grey-listing in South Africa, an enforcement outlook
Institutional investors form part of the backbone of the South African economy, this included both incoming and outgoing pension investments. Many of you in attendance today see Africa, especially South Africa as a for investment destination], a country which is rich not just in culture but its resources and employment capital.
A difficulty that we have been faced with recently is the grey listing, resulting in increased focus on the costs and perceived costs associated with investing in South Africa, or doing business here.
It is well publicised that as of February 2023, the Financial Action Task Force (FATF) placed South Africa as a jurisdiction under increased monitoring. As a policy-making body, FATF works to generate the necessary political will to bring about national legislative and regulatory reforms.
The FATF places a jurisdiction under increased monitoring, when the country has committed to resolve swiftly the identified strategic deficiencies within agreed timeframes.
In the circumstances, the department has a responsibility to play its role in the South African government’s response to ensuring that the country meets international standards regarding the prevention of money laundering, terrorist financing and proliferation financing.
As such, the department, through its various entities and channels, has to continue its efforts to align the justice system with best practices and global standards in a manner that is continuous and sustained.
To this end, the department has taken several steps such as establishing the Anti- Money Laundering (AML) Desk within the National Prosecuting Authority (NPA). The desk has formulated an Anti-Money Laundering Desk Strategy which covers investigation and prosecution of money laundering and terrorist financing.
Considering that fraud was a key area in the FATF’s risk assessment, through the Asset Forfeiture Unit, the department intends to improve on the work undertaken since November 2019 that has pursued cases of foreign predicate offending relating to charges of fraud.
With the understanding that Grey listing of a jurisdiction can result in a more strained economic environment, which in turn lends itself to increased criminal activity, the department will strengthen its measures within the prescribed time periods to avoid the medium to long term impact of increased international scepticism towards South African institutions.
Rule of law and strengthening of legal institutions
In addition to efforts to rectify the conditions that resulted in Grey listing, the fulfilment of the potential of the country and its prosperity depends on the rule of law.
Rule of law is a fundamental component to the continued growth and development of any country and creates a sense of trust between, prosecutors, the public, and the justice system which in turn increases the likelihood of a more civil and productive society.
Additionally, strong enforcement structures, and an independent judiciary foster an increased participation in the exercise of rights and a trust in the country’s ability to protect the rights and interests of the population.
As such, the fight against corruption ought to be understood as a key priority for the department. The misappropriation of state resources undermines the government’s ability to meet its challenges and hinders service delivery and costs South Africans trillions in monetary value lost.
Pension Funds are not exempt from the realities of corruption and have seen a fair share of investigations and commissions in this regard. Additionally, slow economic recovery has negatively affected business owners in several ways including the ability to pay salaries and benefits.
South Africa continues to adopt a dynamic approach to combatting corruption through a number of domestic and international strategic relationships that are geared towards tackling corruption.
We are steadily building the capacity and the skill set in the National Prosecuting Authority to ensure that it becomes an institution which able to tackle sophisticated organised crime and corruption.
Addressing Organised Crime
In early mid 2000s South Africa was global trailblazer when it came to responding to organised crime. We are rekindling that capacity which will helps us deliver proactive and disruptive prosecution strategies that target illicit markets and criminal networks where we will be most effective at disabling organised crime and repairing the ecosystems in which it flourishes today.
We also played a constructive role in the development of the United Nations Convention Against Transnational Organised Crime. This is indicative of the inherent capacity in we have.
A country with a strong rule of law means swifter enforcement interventions that are objective and can protect beneficiaries, members, children and pensioners who are generally have a higher need of institutional protection.
It can be understood from the Constitutional Court case of Municipal Employees Pension Fund and another v Mongwaketse, that the rule of law finds expression in the context of pension funds.
The application of the ultra vires doctrine to pension funds is consistent with the constitutional principle of legality, Pension funds are bound by empowering legislation and the Rules of the respective funds, any action not in accordance with the law and the rules is not valid and all parties wishing to raise grievances with funds are to do so within the confines of the empowering legislation and Rules.
Section 5(1)(a) states that the effect of the registration of a pension fund is that it becomes a body corporate capable of suing and being sued in its corporate name and of doing all such things “as may be necessary for or incidental to the exercise of its powers or the performance of its functions in terms of its rules”.
Both the country and pension funds therein have a significant interest in the rule of law which respects the principle of legality. The above means that authority ought to be exercised in accordance with the law and within the boundaries set by the law.
Transformation in the legal sector
Whilst I am aware that this is a conference with international attendance, firmly believe that transformation is an issue throughout the world, in other jurisdictions falling under the broader banner of diversity and inclusion.
Cognisance must be taken of the fact that there are some industries, for various reasons, which have been slower to change.
Transformation in the legal sector calls not just for people of colour to occupy spaces but for people of colour to be fully capable of rendering legal services within a space.
Public policy and morality must require us to ensure that society is in a position to deliver services to its most vulnerable. It is thus not sufficient that skill sets such as an understanding of pension law are only available to very few.
I encourage you within your organisations, especially the pension lawyers, association, to consider how best you are seeking to ensure skills transfer to all levels of the legal sectors, how are you ensuring access to justice within your environment .
Access to court
A trend that has been noted is the number of deficient divorce and maintenance orders which have emanated from the court systems. You would appreciate that it is not in anyone’s interest for a court order to be incorrect.
There are a number of reasons for this, importantly, lawyers seeking the orders do not have a grasp for pension law (as per point above) and secondly judges are not properly capacitated to understand the nuances associated with pension interest.
It is incumbent of funds and their boards to communicate with their members, advise them of their rights and obligations. This must extend to making it clear of their rights or that of their spouse, in the event of a divorce or a maintenance claim.
I am advised that this association has previously drafted a template divorce order with a view to seeking to assist, that is a noble effort.
IPEBLA Journey
I would like to congratulate IPEBLA from having grown significantly from that initial informal gathering in London in 1987.I would also like to thank all South Africans who have played a significant role in profiling South Africa and being part of the IPEBLA journey in participating in its Steering Committees and other Committees.
A special word of thanks to Mr Jonathan Mort, Ms. Michelle David of Norton Rose, Advocate Makhubalo Ndaba and Mr Emmanual Lekgau from Government Employees Pension Fund for having lifting the South African banner sky-high in the international village.
I am informed that IPEBLA has always been keen to come to South Africa and for circumstances beyond the control of the organisers it couldn’t. In 2020 I was scheduled to speak at your conference in Cape Town and it was postponed at the advent of Covid- 19.
