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NO DIVIDENDS FROM E500M PSPF

15/03/2021 15:08:00 Stanley Khumalo

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MANZINI – The E500 million investment by civil servants and the civil service pensioners in the Hilton Garden Inn, has not yet yielded any dividends.

Civil servants and the civil service pensioners invested in the Hilton Garden Inn in Mbabane through their pension fund – Public Service Pensions Fund (PSPF). The PSPF is a public organisation that was established in 1993 for the management and administration of pensions for government (public sector) employees. The scheme is run as a Defined Benefit (DB) pension and the fund had 42 130 active (contributing) members, 25 253 retired pensioners and other dependants as of March 31, 2020. According to the PSPF website, it is fully administered in-house and financed through employer and employee contributions of 15 per cent and five per cent of basic monthly salaries respectively.

Establishing

The PSPF Director of Corporate Services, Elkan Makhanya, was sought to assist in establishing how much was invested by the PSPF in Hilton Garden Inn and if since the investment was made, had there been any dividends declared. Makhanya, in his response, said the investment in the hotel was E500 million. He explained that the hotel started operating in May 2019 and closed in March 2020. This means that it only operated for nine months. Its closure was due to the COVID-19 lockdown, which affected all similar establishments. “It is common in business that you do not get dividends within nine months of starting to operate any business, worse so, the hospitality business where there are marketing expenses to help attract customers. We do confirm that we have not taken any dividend from Hilton as one would expect in the time period the business has operated.” The questions were forwarded to the PSPF following an outcry that the Hilton Garden Inn dividends did not appear in the Public Service Pensions Fund (PSPF) annual report which had raised eyebrows among civil service pensioners.

The Secretary General of the Mbabane civil service pensioners, Sibongile Mazibuko, said they had scrutinised the report seeking to establish how much dividends were yielded by the hotel, but found nothing. She said it could be possible that the PSPF had a better understanding and or had listed it differently. Mazibuko said in her understanding, the hotel should be listed under the subheading of investment property in the report. However, she said this was not the case; instead they found that it was listed that the investment property comprised portions 931, 932, 933, 935, 947 and portion 948 of Farm No. 2 situated in the Mbabane Urban area in the Hhohho Region with improvements thereon; remaining extent of portion 2 and 4 of Farm No. 73 situated in the Hhohho District, Eswatini with improvement thereon. She said what was worrying them was that the expenditure on the hotel, which in the annual report was listed as hotel instruction, was listed, but there was no mention of the dividends yielded.

“The fund in 2019 approved a further investment plan for the development of Hilton Garden Inn conference room worth E12 million. The project will be financed from the fund’s resources and was still in progress during the 2020 financial year. The development will be completed in 2020,” reads the annual report. On the other hand, Makhanya was also questioned on what was the agreement endorsed by PSPF and Hilton Garden Inn to be the hoteliers utilising their structure and how much was the hotelier fee remitted to the Hilton Garden Inn annually.

These questions sought to establish if the hotelier fee was based on profit margins and or it was standard regardless of the turnover accrued in each financial year. Furthermore, he was asked what was the business case motivating the investment in the hotel. In response, he said the legal agreement between PSPF and Hilton, as with other businesses generally, had a confidentiality clause for certain internal operational issues. “We can, however, say it is in line with what is charged in the industry for similar services.” He said this agreement was a three-tier structure, portion paid on turnover and a percentage on profit. Makhanya also claimed that the decision to build the hotel was made after a full business case assessment.