Transnet sheds pension fund shackles

TRANSNET HAS shed the R1,4billion annual interest payment on its pension fund bonds with a restructuring process which has allowed it to cancel its R8billion of bonds involved.
The government parastatal took on the huge debt burden a decade ago to meet the shortfall in its pension fund, which dragged it into the red last year, and which limited its ability to invest in new infrastructure.
According to chief executive Mafika Mkwanazi the group had requested R6,3billion capital to allow investment which has been made possible through the pension fund resolution .
Restructuring has cut the Transnet financial operations by 15% from the previous 72% outlay of income to R57%. The pension fund, at the same time, has been split into three separate sections, one to handle retirement funds and the other two involving a defined benefit and a defined contribution fund for active employees. This is the first time in South Africa that pensioners have been separated from the same fund as active employees.
Because of the age make-up the pensioners' fund is expected to see more than 60% of its liabilities fall away within the next five years. As a result the fund has sealed a portion of its assets, investing them in bonds to ensure it can cover the cash flows required in the next five years. This required an R8 billion equity-for-bonds swop with the Public Investment Commission.