The Government Employees Pension Fund (GEPF) is the largest in Africa, and among the top 10 globally. Newly appointed chair Frans Baleni is moving to iron out a big chink in its generally solid armour.
Assets under management are valued at R2.38-trillion. Baleni jokes that in its league, the GEPF is better placed than both Manchester United and Kaizer Chiefs. The GEPF maintains stable and resilient returns — impressive considering South Africa’s challenging economic environment.
Baleni has worn many hats, from mineworker and trade unionist to chairing the boards of the Development Bank of Southern Africa and PetroSA, and from member of the SACP central committee to board member of the Public Investment Corp (PIC).
Since his appointment to the GEPF by finance minister Enoch Godongwana in December, Baleni’s attention has been held captive by the fund with its 1.2-million active members and more than 500,000 pensioners and beneficiaries. It serves South Africa’s vast government employee pool including teachers, nurses, municipal workers, civil servants, police and the military. Their money is managed by the PIC, which invests in local and international markets on behalf of the GEPF.
The last audit showed assets under management at R2.38-trillion, but Baleni tells the FM the latest figures are closer to between R2.7-trillion and R2.9-trillion. The total would have surpassed R3-trillion were it not for global instability caused by US President Donald Trump’s second-term trade tariffs.
“If you look at the administrative highlights in the last financial year, we paid out R142bn, yet the contribution received was R92bn. So there’s a shortfall of R50bn. But we increased the investment portfolio by 3% and we got a return on investment of 4.9%, let’s say 5%, and the growth in the reserve over 10 years is 7.2%.
“That gives us R52bn in dividend income and R116bn net investment income. That is how we cover that shortfall.”
Baleni spoke to the FM as news broke of alleged corruption at the Government Pensions Administration Agency (GPAA); more than R1.2bn may have been misappropriated.
In effect, the GEPF holds the fund members’ money, sets policy and is governed by a board of trustees, of which Baleni is the chair. The GPAA, established in 2010, provides administrative support to the GEPF. It manages monthly contributions from employers across the government, processes benefit payments and maintains member records. It is the interface between fund members and the GEPF — yet it reports to the National Treasury and operates as a service provider to the GEPF.
News24 reported that the GPAA entered a fictitious agreement for just under R1bn to lease a building for its headquarters in Pretoria for the next 10 years. The story, written by former FM deputy editor Sikonathi Mantshantsha, is a jaw-dropper from start to finish.
Shula Developers, which won the tender, neither owns nor leases the property in question. The tender was awarded by GPAA officials on the strength of a letter in which Shula said it had made an offer to acquire the building. The GPAA reportedly spent more than R270m on refurbishments to the building, which it had no legal right to access.
Last month, Godongwana placed GPAA CEO Kedibone Madiehe on suspension over the allegations.
The GPAA is not under our control. We can’t assess them. We can’t evaluate them
— Frans Baleni
Baleni has since written to the Treasury to tighten the GPAA’s reporting lines. In the letter, he reportedly accused the GPAA of breaching its management contract with the GEPF, with unauthorised spending of more than R100m. He informed Godongwana that the board resolved to reconsider the agency’s access to GEPF bank accounts, to tighten controls around unauthorised payments. He urged the finance minister to place the GPAA under the GEPF to improve governance and rein in excesses.
“The GPAA is not under our control,” says Baleni. “We can’t assess them. We can’t evaluate them. The CEO is treated like a director-general. Even to effect the suspension, the minister had to get powers delegated to him by the presidency.”
The GEPF has submitted a proposal to the Treasury for the GPAA to fall under the GEPF in its entirety. Baleni explains it has no board and reports directly to the Treasury, yet the GEPF approves its budget and receives reports on payments.
“It’s a bit abnormal. There are certain areas where it would be uncomfortable for the GEPF to say, we don’t know the extent of the money flow on this side, has it reached all the beneficiaries? It’s something we still have to sort out so that we can have proper accounting for every cent that leaves the GEPF account.”
More broadly, says Baleni, there is room for improvement in certain operational areas at the GEPF, with challenges identified in its interaction with government departments, outdated infrastructure and the rising risk of cyber breaches. The GEPF has brought in a project manager from Japan to assist with modernising the institution.
Baleni says he has never been more energised, referring to discussions around strategy, and hails the level of talent in the institution and the professionalism he found there. It seems that after all the hats he has worn, the GEPF appears to be the best-fitting.
But he needs to make headway quickly in sorting out the relationship with the GPAA and what it has been up to. There can be no taint of suspicion about how pensioner money is being managed if there are flawed reporting lines and a lack of control. All of which raises serious questions about governance.
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