South Africa: Government Denies Pension Fund Liability

back

Want to support Global Action on Aging?

Click below:

Thanks!

South Africa: Government Denies Pension Fund Liability

By Bruce Whitfield, All Africa

June 8, 2003

Johannesburg - The National Treasury was at pains this weekend to stress recent revisions to consumer price inflation (CPIX) data were not fundamental, but technical changes. It said in a brief statement on Friday that the miscalculation in CPIX and the revision of the figures in late May was a technical shift under the terms and conditions of the issuing of its inflation-linked bonds.

"The National Treasury regards the CPI changes as technical and corrective changes to improve the accuracy of the measure of CPI and not fundamental changes," it said.

The difference between a fundamental and technical change is critical, investment specialists tell Moneyweb. And Stanlib Asset Management has said it will seek a meeting with the Treasury after it consults its legal advisers amid concerns that pension funds are having to bear a loss of about R700m as a direct result of the revision.

"The issue arose when National Treasury decided to use the recently revised inflation rate to make a backdated adjustment to the capital value of the CPI-linked bonds," head of Stanlib Asset Management Alan Miller said.

"If the fundamental yardstick had been used as the basis of the recalculation, the Treasury would have ensured capital values were unaffected, thereby absorbing the loss. A revision on a technical basis, however, leaves pension funds with the loss," he said.

Stanlib is the first Asset management company to come forward with its concerns, but it appears whistleblowers Investec Asset Management which initially pointed out that the rental component of CPIX has been significantly overstated, is more sanguine, saying it is likely the revision is technical in nature and in line with alterations that have taken place elsewhere in the world.

"We're actually quite happy with the outcome which we've seen so far. And again, we think that they've done the honourable thing because, if one does find that there are errors, one should just correct the mistakes and move on.

And we think that the stance they've taken is pretty good," said Investec Asset Management portfolio manager Clyde Roussouw.