Friday, October 30, 2020

African Alliance loses big at the Lobatse High Court

In a development that could prove very costly to pension fund administrators, two former employees of African Alliance have won a court case through which they sought to recoup money they had been paying into the company’s pension fund. 

One is Don Gaetsaloe who worked as CEO and Moarabi Mariri who worked as Senior Sales Executive. By virtue of being African Alliance employees, both men were also members of the company’s Sentlhaga Pension Fund (SPF) to which each made a monthly contribution of 9 percent from their salaries. After they left the company (Mariri first), they learnt that they couldn’t get back the money they had been paying into the Fund. Determined to get back what they believed rightly belonged to them, they went down the legal route, each getting his own lawyer. When the case started, Gaetsaloe was represented by Sikhumbuzo Masuku of Bayford & Associates, Mariri by Merapelo Mariri of S. G. Mariri Attorneys. (The explanation for the similar names is that they are siblings.) African Alliance was represented by Advocate Dick Mahon from South Africa, who was instructed by Simon Bathusi of Armstrongs.

Gaetsaloe’s case was before Justice Abednico Tafa and Mariri’s was before Acting Justice Jennifer Dube who was presiding in Justice Modiri Letsididi’s stead. Alongside four other judges, Letsididi had been suspended. Having adjudged the two cases to be similar, Armstrongs proposed that they be consolidated and dealt with by one judge.

“We are concerned of the possibility of having two conflicting decisions emanating from two High Court judges and we believe this risk may be managed by consolidating the two actions,” wrote Simon Bathusi of Armstrongs to S. G. Mariri Attorneys and Bayford & Associates.

And indeed the cases were consolidated under Letsididi whose suspension was lifted last year. Such development prevented conflicting decisions and the one that Letsididi handed down on Tuesday favoured the applicants. The full judgement will be released later this month.

The bone of contention is a less known remuneration structure called cost-to-company (CTC). SPF rules state that it is a condition of employment for all African Alliance employees to become members of the Fund. While the company doesn’t contribute to the Fund, employees do: 9 percent of pensionable salary on a monthly basis. Before joining the company in 2014, Mariri received an offer letter of employment from Gaetsaloe that stated the following: “You are obliged to join Sentlhaga Pension Fund. Details of the scheme are available on request. A level of 9 percent of your total cost to company contribution will be paid on your behalf by the company, and the administrative costs (payable to AON) are set at 0.95 percent (ninety-five basis points).” Such rules applied to Gaetsaloe himself.

When Gaetsaloe and Mariri tried to recoup their SPF contributions post-service, the company refused, referring the pair to its CTC remuneration structure. CTC (or “cafeteria”) refers to the total amount that an employer will cost the company in a year and includes all benefits. Some components of CTC pay may not translate into actual take-home cash. Largely an innovation of Indian and South African origins, CTC was motivated by desire (on the part of employers) to structure pay packages in a tax-efficient manner. In the case in question, the applicants questioned the legal standing of CTC in Botswana.

Sunday Standard’s information is that other pension fund administrators have also adopted CTC. While Letsididi’s judgement spells trouble for these administrators, there is still the option of African Alliance going to the Court of Appeal to have the judgement overturned. If the appeal fails, continual waves of windfall will sweep through Fairgrounds Financial Centre and more than a handful people will be smiling all the way to the bank with each wave.

African Alliance is an investment banking group operating in certain parts of Africa and among its services is pension fund administration.

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