The last thing needed by the burgeoning responsible investment movement in South Africa is controversy over governance of the Government Employees Pension Fund (GEPF). Yet this is exactly what’s happened with the suspension of GEPF principal executive officer John Oliphant, pending a disciplinary inquiry relating to an advertising tender.
Not only is the GEPF one of the largest pension funds in the world, with assets of over ZAR1.3trn (€86bn) for some 1.5m members and pensioners, but it’s also a founding signatory of the Principles for Responsible Investment, where Oliphant is on the Advisory Council. More than this, under the internationally recognised leadership of Oliphant himself, the GEPF has been in the forefront of introducing the Code For Responsible Investing in South Africa (CRISA) to which the major asset managers have committed themselves.
Thus the GEPF is supposed to lead by example. Oliphant’s suspension puts its example to the test.
So much turns on the outcome of the internal inquiry: critically, whether the GEPF is itself the model of good pension-fund governance that it publicly propounds; additionally, whether CRISA will lose momentum without Oliphant in the driver’s seat.
By a majority rather than unanimous vote, the GEPF board suspended Oliphant last October. But this board’s four-year term of office had expired a fortnight previously. It’s uncertain that the statute governing the GEPF allows for such an extension.
Be that as it may, it’s now beyond dispute that the old board’s term had definitely expired at the end of last month. Two months earlier, last December, Minister of Finance Pravin Gordhan announced a set of new trustees to represent government as the employer (the balance of the 16-member board representing employees) on the GEPF board. Of the eight employer representatives, only two have been reappointed.Not reappointed is Arthur Moloto, an African National Congress (ANC) member of parliament who chaired the old board. This is significant in promoting the GEPF as “depoliticised”, eliminating a basis to suspect that it can be abused as a favour-doer for friends of the ruling political party.
It can also be significant if it ultimately emerges that Moloto pushed the action against Oliphant who, coincidentally or otherwise, is thought to have opposed certain investments that made more sense politically than prudentially. Amongst these is the ZAR500m investment of the GEPF in the purchase of Independent News & Media, which owns a stable of metropolitan newspapers, by a proclaimed supporter of the ANC.
The new board, devoid of ANC officials, is due for inauguration later this month. It will presumably review the position with regard to Oliphant, although it is perhaps too late to prevent the disciplinary inquiry from proceeding.
The inquiry is based on a “forensic” report by auditing firm PricewaterhouseCoopers into supply-chain management at the GEPF. To date, the GEPF has refused to release this report into the public domain.
Media leaks – for instance, thinly disguised this past weekend in the Sunday Independent as coming from a GEPF source — suggest no attempt by Oliphant to enrich himself or even that the GEPF had suffered prejudice. At worst, on a reading of these intimations, there were procedural irregularities in the consideration of the tender.
Whether or not the inquiry will exonerate Oliphant remains to be seen. Either way, the release of the report is fundamental for Oliphant to clear his name – a name, hitherto highly respected in the pension-fund industry.
Much will turn on this. First, for an assessment of how the GEPF is, or has been, governed.
Second, given the costs incurred by the GEPF for the investigation and inquiry relative to the amount of money supposedly involved in the alleged offence, on the accountability of the old board’s trustees. Third, assuming Oliphant doesn’t return to the GEPF either because of dismissal or of his own volition, where does he go from here? Fourth, who’ll drive CRISA in his absence?
There’s a scenario that would be ideal, and perhaps not too idealistic. It’s that the inquiry clears Oliphant of wrongdoing, that he can publicly respond to the PwC report, that the new board invites him to return and that it facilitates his acceptance of the invitation.That, at any rate, is what the large band of Oliphant supporters will be hoping. And it isn’t only for his sake personally. It’s also for the sake of the GEPF, an institution simply too important in the life of South Africa to be headed by a lesser functionary.
Allan Greenblo is Editorial Director at Today’s Trustee.