South Africa. The Eskom Pension and Provident Fund overpays for underperformance at the expense of Eskom employees
The Eskom Pension and Provident Fund (EPPF) is South Africa’s second-largest retirement provider of defined benefits. Most investors are focused on its solvency ratios and metrics of material costs, and less so on operational costs because of the proportion of the assets under management.
A few percentage point changes in the operation costs has never been much of a cause for concern. But when operational costs become a significant financial burden, pensions should take notice.
The CEO and principal officer of the EPPF, Linda Mateza told Business Maverick the justification for self-administration, as opposed to outsourcing the administration, is that it keeps operational costs down. However, a Business Maverick analysis finds that what EPPF employees earn is excessive and totally out of touch with industry norms, but strangely enough, this has never been scrutinised or explained.
Unpacking the numbers in the EPPF’s annual financial statements of the last few years is shockingly revealing. It shows that the monthly cost-per-member at the EPPF is five times higher than comparable private-administered retirement funds, or even the Government Employee Pension Fund (GEPF). And there seems to be no stopping the spending spree.
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