Post Office has not been paying into employees’ retirement fund for 3 years

Article originally published on GroundUp By Steve Kretzmann

• The Post Office has been deducting pension fund contributions from workers’ salaries, but the last time any money was paid over to the retirement fund was in April 2020.
• Authorities will not say how much is owed to the retirement fund, but it may be R1-billion.
• If the Post Office is liquidated, outstanding workers’ pension payments are low down on the list of creditors to pay, according to the retirement fund rules.

Each month, 7.5% of workers’ salaries are deducted by the Post Office as a contribution to the Post Office Retirement Fund.

The employer’s contribution is supposed to be 13.55% of each worker’s salary. But for three years, neither amount has been paid in by the South African Post Office (SAPO).

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The last time the workers’ contributions were paid into the Post Office Retirement Fund was at the end of April 2020.

This is despite a scathing Supreme Court of Appeal (SCA) judgment delivered on 31 December 2021 ordering SAPO to pay the retirement fund arrears, as well as 9.75% interest on the outstanding amount, within five days of the order.

“The contributions paid by SAPO to the Fund prior to May 2020 comprised of members’ contributions of 7.5% of each employee’s pensionable monthly salary, employer contributions of 13.55% of each employee’s pensionable monthly salary and an additional voluntary contribution. It is not in dispute that SAPO did not pay these contributions to the Fund at the end of May and June 2020. It ought to have paid a total contribution of R40 million in respect of each month. It would appear that SAPO has not paid any further contributions to the Fund since,” said the court.

Neither those outstanding contributions, nor contributions accumulated since, had been paid by the time the first of two provisional liquidation orders were granted against SAPO on 9 February.

THE COURT RULED IN SAPO’S FAVOUR, BUT THE RETIREMENT FUND APPEALED, AND WON IN THE SCA.

This is despite National Treasury having approved a R2.4-billion allocation to SAPO this year to help it implement a new turnaround plan.

The Post Office Retirement Fund, to which employees are obliged to contribute, is a defined contribution fund. This means that the contributions are set, not the benefits.

The money in the fund is invested and the amount employees get on retirement depends on their contributions, the employer’s contributions and the growth in the fund.

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The SCA judgment came after the retirement fund had taken SAPO to the North Gauteng High Court in July 2020, after the funds had not been paid over for two months in a row.

The court ruled in SAPO’s favour, but the retirement fund appealed, and won in the SCA.

Retirement Fund principal officer Mike Faasen said SAPO had appealed to the Constitutional Court following the SCA judgment, but its application had been refused.

“So we did what we had to do,” said Faasen, which was to write a letter of demand to SAPO.

He said discussions on how payment would be made had stopped in February when the provisional liquidation ruling was made by the North Gauteng High Court.

AMOUNT OWED

GroundUp tried to find out exactly how much is owed to the retirement fund by the Post Office.

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The spokesperson for the Department of Communications and Digital Technologies, Frans Mthombeni, told us our questions should be answered by SAPO.

SAPO spokesperson Suzie Khumalo said SAPO would not at this stage reveal any information about SAPO’s debt as “it will jeopardise court proceedings”. The first of two liquidation hearings is set for 1 June.

Faasen said he could not release the figure if SAPO would not.

Liquidator Anton Shaban from Kaap Vaal Trust said the pension fund did not fall under his remit.

Based on the SCA’s finding that SAPO owed the retirement fund R40-million a month in early 2020, over three years the shortfall would amount to R1.44-billion. But more than 3,000 staff have left since then.

There were 15,836 staff as of 31 March 2021, according to the latest annual report. In a 702 radio interview on 15 February chief executive Nomkhita Mona said there were then 12,513 permanent employees.

It seems likely that SAPO owes the Post Office Retirement Fund in the region of R1-billion.

The 2022 Annual Report lists a “retirement benefit obligation” of R876-million as at 31 March 2022.

For some time SAPO did not pay over Unemployment Insurance Fund or medical aid contributions either, as Parliament’s Public Enterprises and Communication Committee was told on 2 November last year.

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Communications and Digital Technologies Minister Mondli Gungubele said earlier this year in Parliament that SAPO owed R561.6-million in unpaid medical aid contributions, and medical aid had been suspended for periods over the last three years. But this suspension had been lifted, he said.

RISK TO WORKERS’ PENSIONS

The failure to pay over amounts deducted from worker’s salaries may mean workers’ pension benefits will be affected if SAPO is liquidated.

A manager at a Cape Town post office, who is not named as she is not authorised to speak to the press, said R1,050 was deducted from her salary for her pension every month.

Over three years, this amounts to R37,800 from her salary.

Combined with the employer’s pension fund contribution of 13.55%, she will have been short-changed R106,092 over the last three years, without taking into account any interest or growth in the pension fund.

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The Post Office Retirement Fund rules state that the fund beneficiaries are “deferred creditors”. In the case of liquidation, their claim “in their capacity as beneficiaries shall not be met until the claims of ordinary creditors have been paid,” state the rules.

The 2022 financial statements show SAPO’s total liabilities exceed total assets by R4-billion.

Among employees, the uncertainty is taking its toll. A post office worker in Cape Town said he and his colleagues were “going crazy”. “We don’t know where we are standing,” he said.

He said at the moment his medical aid had been sorted out but the pension fund was “standing still”, even as pension fund contributions were still deducted from his salary.

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No communication had been received from his employer as to whether pension fund payments would resume or how the matter would be resolved.

“At work, mentally, physically, we are totally exhausted.” As a breadwinner supporting four people, he said he was already struggling to pay all the bills due to salary cuts.

If the Post Office is liquidated he doesn’t know if he’ll get his pension fund contributions back. And he doesn’t know how or where he will find work.

“If a matriculant can’t get a job, how is a 45-year-old going to find work?” he asked.

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