Analysis of South African pension fund conversions: 1980-2006; developing a model for dealing with environmental change

Abstract

Between 1980-2006, thousands of South African pension funds converted members from defined benefit to defined contribution structures. This research set out to answer the questions of why this phenomenon occurred and whether peculiar environmental circumstances influenced the outcome.

The research framework identified various stakeholders in the retirement fund industry - government; regulator; pension fund adjudicator; ombudsman for long term insurance; trade unions; members; trustees; business; employers and service providers - and isolated the elements to be considered in the research. Industry experts were interviewed to obtain a macro view of the phenomenon and specific manifestations of the phenomenon were also considered in case studies.

The purpose of the research was to develop a model for managers to assist them in dealing with environmental change. Qualitative research methodology was utilised and feedback from semi-structured interviews was categorised into several emergent themes. Within-case and cross-case analyses were conducted.

Research results indicate that the conversion phenomenon occurred in two waves - one initiated in the 1980s and driven by the trade unions and a second in the 1990s, driven by employers, often at the advice of their consultants. Evidence of the start of a third wave also emerged. Results indicate that an environmental shock exerted a substantial influence on the course of events. Under these:  Various factors combined to drive organisational evolution (i.e. adaptation to the environment).  Adaptation speed was inappropriate and exceeded that which was required for sufficient thought.  Uncertainty and vacuum circumstances arose leading to consequences that require redress.  The power of the relative stakeholders changed and influenced the strategic outcome.  An imbalance in stakeholder interests arose and ethical factors became consequential.  Business acted to restore certainty for itself.

Existing literature explained organisational behaviour in environments of competitive shock and high turbulence, but not in circumstances of environmental shock. A model emerged to assist managers to deal with environmental change, which was applied to an analysis of pension fund reform. It was also applied to the pension fund perspective on Broad-Based Black Economic Empowerment. This model may also be applied in analysis of land redistribution, sanctions and constitutional development.