A+raw+deal,+Frans+Mahlangu+interviewed+by+Gill+Moodie,++Weekender

Business Day Weekender, Johannesburg, 2007/02/17 12:00:00 AM
=Stuck with a raw deal=

//Fidentia’s boss should be in jail, says the man who exposed the rot//

Frans Mahlangu, the principal officer of the Mineworkers’ Provident Fund who was suspended after raising the alarm about possible financial mismanagement of its pension fund by Fidentia, talks to **GILL MOODIE**


 * You must feel vindicated now?**

Yes, I started trying to convince the trustees that there was something very fishy about this company in 2004 (when Fidentia bought the firm administering the R800m Living Hands fund which holds money for the families of miners that die in service).

They seemed not to understand what I was saying. Some of them, I suspect, were actually getting something out of it, though I don’t have any evidence of this.


 * What are you doing now?**

I’m sitting at home doing nothing. (My suspension) is a disciplinary matter. Fortunately, I have the right to a legal representative and I have used this right, but now the National Union of Mineworkers (NUM) says I can’t use that firm of lawyers because it’s the company that I used to investigate Living Hands. The issue is dragging on as it has been taken to the Law Society. On the other hand, the NUM says it is going to proceed on Monday with the case with or without me. I don't have plans for the future as this thing caught me off guard. I need to sit down and do some planning.


 * Before you were suspended, a highly respected nominated trustee, Collyn Manzana, was redeployed by the NUM after being critical of Lekana, a service provider to the Mineworkers’ Provident Fund. To what extent does this, and the implosion of Fidentia, point to deeper troubles at the NUM?**

When I decided to investigate Living Hands, the board gave me the mandate to look for auditors.

I went back to the board and said the auditors would charge about R700000 and I felt that was too much. I had made arrangements with our lawyers that they would do the investigation and pick someone from their auditors, who was going to look at the auditing side of things. That was agreed to, and then all of a sudden, I was charged with using lawyers instead of auditors. Why should this be a charge?

The first charge was that I had protested when Manzana was expelled. It’s all nonsense. I have proof that all of the things they said I did, I did in consultation with them.

I did say to the NUM that dismissing Manzana was a terrible mistake and I still say it’s a terrible mistake. I’m not ashamed to say it.

But this is a bigger issue than Fidentia. The company that is administering the provident fund, Lekana, in which NUM has a 30% shareholding, was not performing and Manzana and I had said we must put the fund out to tender.

The other service provider is Old Mutual (which manages R6bn for the provident fund). The death benefits were also underwritten by Old Mutual. In 2003, it increased its fees abnormally and I decided we were not going to accept it and I put it out for tender. Metropolitan undercut (Old Mutual) by almost half, so I employed the services of Metropolitan.

Old Mutual was very bitter about the situation and each year came back to me begging me to put it out to tender again.


 * What is your view on being replaced as principal officer temporarily by a Lekana employee?**

It’s a serious conflict of interest. If he finds himself in the hot seat, is he going to tell any employee of Lekana that he or she needs to perform or else the provident fund is going to do something?

I think the Financial Services Board should investigate this matter further.

There are many things that are not right, but I’m worried about the Financial Services Board. In fact, it was me who phoned the board anonymously in March 2005 and said there was a rotten relationship between the provident fund and Fidentia, and that people were going to lose money. It only started investigating the matter in May 2006.


 * What were the main reasons behind you becoming suspicious of Fidentia’s management of Living Hands?**

The main reason was that I was getting complaints directly from widows and beneficiaries. The widows were saying they were getting less than before (for their monthly payments), or school fees were not being paid.

The children reaching 21 — our agreement was that they were given the portion allocated to them at 21 on termination of that trust — were not getting their portions.

It was getting to a stage where I couldn’t handle it all, which is why I then said to the trustees there was something wrong.

Also, Fidentia’s investment strategy was to invest the money with its own asset managers, who were not known to me. It should have put some money with other (asset management) companies to get the benefit of diversification.


 * Tell me about the 47000 beneficiaries of Living Hands?**

They are not confined to family members of miners killed in accidents, but any miner who has died in service.

There are members outside the country, in Mozambique, Swaziland, Lesotho and Botswana. In SA, the Eastern Cape has more members than any other province. Second is KwaZulu-Natal.

I’ve gone to many of the rural areas and met the beneficiaries to explain the idea of trusts when they were introduced in 2001 (prior to which lump-sum payments were made). In the Eastern Cape, they are mostly in the deep, rural areas — the Cofimvabas and the Calas. They are really poor people. If you say people with shacks in the townships are poor, that is an understatement.


 * The beneficiaries must be panicking by now?**

This week, I’ve had calls from about 100 beneficiaries who have not been paid. If that is the only money you have and now it’s fizzled into thin air, it’s really worrying for these people. It’s a very sad story.

The members get different (monthly) amounts depending on the miners’ wages and some of them were earning very little.

You might find that a miner had R36000 (on death) and he has four children. So monthly incomes range from about R200 to R700.

Very few were above the R700 mark.


 * What exactly was Fidentia tasked with doing when it came to Living Hands?**

Its role was to take the R800m, invest it prudently and pay beneficiaries and widows at the end of each month. It added up to about R10m a month.

Now it seems there’s only R8m left (in Living Hands).


 * When you blew the whistle, did you have any inkling that the problem at Fidentia was so large?**

I sensed there was something big that was wrong, but I never thought it was as bad as this.


 * Have you met J Arthur Brown, Fidentia’s founder and executive chairman?**

I met Brown in 2005. I was pestering (Fidentia) because I was concerned about it. He called me to Cape Town and said to me: “The money is safe. Look at our offices and our staff.”

I was a bit naughty. During the tour of the office I chatted to staff who could speak IsiXhosa — I speak about five languages — about whether they were working well and if things were going OK. It seemed to me that people did not know what they were doing. They were very complacent.

For instance, I went to administration and I asked a person to extract information for me from the system and he couldn’t do it.

I went to the company’s call centre, which Brown said catered for all languages, and I asked for someone who speaks the real Sesotho of Lesotho. The guy who raised his hand couldn’t understand a thing. Instead of taking comfort in the thought that Brown was doing a good job, I told him I was not very impressed.


 * What would you like to say to Brown now?**

I want to know how he is going to pay back the money. I think we are wasting time in this country not putting people like him in jail.


 * From: http://www.businessday.co.za/Articles/TarkArticle.aspx?ID=2560184**

1371 words