PENSION LAWYERS ASSOCIATION BREAKFAST SEMINAR October 2019 TRANSFORMATION AND RETIREMENT FUNDS WHAT DOES THE LAW REQUIRE Speakers Lister Saungweme and Mark Davids Facilitator Carlyle Field ID: 768947
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PENSION LAWYERS ASSOCIATION BREAKFAST SEMINAR – October 2019 “TRANSFORMATION AND RETIREMENT FUNDS - WHAT DOES THE LAW REQUIRE?” Speakers: Lister Saungweme and Mark Davids Facilitator: Carlyle Field
Retirement Fund B-BBEE Scorecard: A Practical Guide Presented by Lister Saungweme
CONTENTS Retirement Funds: B-BBEE Reporting Requirements Retirement and Umbrella Fund Scorecard What Does This Mean in Practice Practical example Q&A
Reporting Requirements Amended FSC provides for a “Voluntary Dispensation” for Top 100 Retirement Funds (incl. Umbrella Funds) to report on B-BBEE annually ( FSC : DTI as per the BBBEE Act of 2003) “If sufficient disclosure by pension funds does not materialise then consideration will be given to revising this dispensation” B-BBEE annual reporting should include a narrative on the B-BBEE score achieved and plans for improving the score The Financial Sector Transformation Council (FSTC) will measure transformation on an annual basis – may include relying on surveys ( FSC : DTI as per the BBBEE Act of 2003) Amended FSC codes : 1 December 2017
Reporting Requirements Amended FSC provides for a “Voluntary Dispensation” for Top 100 Retirement Funds (incl. Umbrella Funds) to report on B-BBEE annually “If sufficient disclosure by pension funds does not materialise then consideration will be given to revising this dispensation” B-BBEE annual reporting should include a narrative on the B-BBEE score achieved and plans for improving the score The Financial Sector Transformation Council (FSTC) will measure transformation on an annual basis – may include relying on surveys
Reporting Requirements
Reporting Requirements
Retirement and Umbrella Fund Scorecard
B-BBEE Status Level and Procurement Recognition
Fund Liabilities (“Ownership”) Report annually on proportion of fund liabilities attributable to black male and female members; Apply measurement principles enshrined in FS Code 100 (Ownership) – Independent Competent Person’s Report for Mandated Investments
Management Control Scorecard
Skills Development Annually disclose details of accredited SAQA-approved training for Trustees Executive Managers Principal Officers Other Staff Disclose value, average training per staff member, number of staff trained, examples of key interventions Member education initiatives Number of members trained Amount spent relative to size of membership (Rand per member)
Preferential Procurement Scorecard
What Does This Mean In Practice
Managing the B-BBEE Cycle
Scorecard Preparation – Management Control Management Control Information related to demographics of Board and staff members; Distinguish on Black People and White People.
Who Qualifies As Black People?
Scorecard Preparation – Preferential Procurement Preferential Procurement Keep record of spend per supplier; B-BBEE Certificates of each supplier (there is procurement software that can manage this, alternatively in-house); Distinguish between Large, QSEs and EMEs; Also 51% Black Owned – and 30% Black Women Owned suppliers; Determine the base target requirement (also called “Total Measured Procurement Spend” – see slide below).
Key Definitions – B-BBEE Procurement Spend
Key Definitions – Total Measured Procurement Spend
Compliance Categories
Calculation Example
GN 1 – 2019 (PFA) “Sustainability of Investments and assets in the context of a Retirement Fund’s IPS” Mark Davids
The SA Investment Industry - # TheUsualSuspects 2000 2008 2014 2018 Buy List Buy List Buy List Buy List African Harvest Allan Gray Allan Gray Allan Gray BOE Coronation Coronation Coronation Allan Gray Foord Foord Foord Coronation Investec Investec Investec Investec Prudential Prudential Prudential Old Mutual Peregrine
The SA Investment Industry
The SA Investment Industry – 20 Years ago 2000 2003 2018 Source: Alexander Forbes Annual Retirement Fund Survey. Figures in Rand millions
The SA Investment Industry – 20 Years ago
How do we move the dial for transformed asset managers
Barriers to true competition Fear Of Change Comfort with the status quo
Transformed asset manager landscape Emerging manager Mainstream manager Start-up Ramp-up Expansion Maturity Acanthin Lodestar Afena Aeon Taquanta Balondolozi Makalani All Weather Mazi Aluwani Cachalia Motheo Property Benguela Global Kagiso Cartesian MSM Property First Avenue Oasis Capital Link Ngwedi Mianzo Argon Cloud Atlas PAM Prowess Mergence Differential Sana Capital Perpetua Excelsia Seriti Sesfikile Effectus Satori Meago Independent Alt Terebinth Sentio JoPhi Umthombo Vunani Legacy Africa Lima Mbeu R0 – R5 Billion 24 Managers R5 Billion – R10 Billion 6 Managers R10 Billion – R50 Billion 11 Managers + R50 Billion 2 Managers
Challenges facing emerging managers
Innovative manager research Using a different LENS to assess managers People Philosophy Risk Organisation
Specialist Equity performance
Specialist Bond performance
Higher Purpose Financial Sector Charter commits all participants to actively promote a transformed and competitive financial sector that reflects the demographics of South Africa which contributes to the establishment of an equitable society
GN 1 – 2019 (PFA) “Sustainability of Investments and assets in the context of a Retirement Fund’s IPS”
How do funds currently “consider” ESG Annexure B to Circular PF130 – issued in 2007 Most IPS are based on this blue print
What does it say about ESG Essential Elements of IPS Primary objective is to provide optimum return for beneficiaries – then look at SRI Active shareholder Proxy Voting All points are made with the basis of the primary objective
Portfolios construction
What does it mean for a BoT to consider ESG Reg28(2)(b) Reg28 (2)(c)(ix) IPS ESG How does the seek to ensure Sustainability of Assets What is the philosophy of the Fund – not of the asset manager we select Investment Philosophy Objective
What does it mean for a BoT to consider ESG When thinking about Investing Sustainability what is important to us Are we a mining retirement fund Are we a financial sector fund Are we a industrial sector fund What are the priorities of my members Fair wage/environmental rehabilitation/gender equality BBBEE / Quality Education / Good Health Decent Work / Clean water / reducing inequality
What does it mean for a BoT to consider ESG South Africa’s National Development Plan Eradicate Poverty, Eliminate inequality and secure decent std of living Guidance from the UN SDG Start thinking about the funds philosophy
“Consider” ESG should be read as Embed ESG
How does an Asset Manager Consider ESG Knowing what our ESG Philosophy is – empowers us Informs our conversation with asset managers How does an AM embed ESG into their process Does it resonate with the fund
How does an Asset Manager Consider ESG Shoprite Holdings example Board Independence Not employed by Co., Not on Board for more than 10 Yrs Not > 5% share holding Source: https://www.unpri.org/
Disclosure and Reporting Disclosure becomes easier when we have a base to work from Report to Regulator and Members The extent to which ESG has been integrated Sustainable reporting practices IPS is enriched with ESG factors Philosophy is summarised in IPS but a full document made available Financial Statements reporting - by Note: Assets in compliance Class and value
QUESTIONS?