By Mathias Haufiku and Tileni Mongudhi | 1 November 2019
JUSTICE minister Sacky Shanghala is facing resistance over plans to have greater control of the N$1,8 billion state-run Guardian Fund, and to have oversight on inheritance money under private care.
Despite the amendments appearing well-intended to improve the governance of the Guardian Fund, suspicions about Shanghala’s motives have emerged, especially within the legal and financial sectors.
People administering inheritance funds on behalf of minor children have complained that Shanghala imposed changes to the Administration of Estates Law on 31 December 2018 without consulting them.
They say further amendments are envisaged to reach parliament before it is dissolved next year, to give the minister powers to control the investment of inheritance money, which until now was under private administration.
The N$1,8 billion Guardian Fund is administered by the master of the High Court, who appears to have full powers and discretion on how to handle the money.
The fund consists of money belonging to minor children, bequeathed to them without a will and testament by the deceased giver, or money that was not specified in the will and testament.
Shanghala’s proposed reforms will widen the jurisdiction of the Guardian Fund to also include money where deceased parents left a will and testament, as well as inheritance money administered privately.
The reforms are furthermore aimed at creating governance structures at the fund, and giving the justice minister greater control in the running of the fund through choosing people to direct the master of the High Court on how to use the money.
Shanghala refused to comment, referring questions to the master of the High Court, Elsie Beukes, and the ministry’s deputy executive director, Gladice Pickering, as the people dealing with the reforms directly.
Beukes told The Namibian on Wednesday that the proposed changes are purely aimed at protecting beneficiaries of the Guardian Fund by strengthening the administrative structure and systems.
The changes to the Administration of Estates Act 66 of 1965 come after the Childcare Protection Act changed the age of majority from 21 years to 18 in 2018. This created the need to change the system to ensure that beneficiaries also have money left by the time they turn 21.
The current system works in such a way that beneficiaries get their full inheritance when they turn 21 because that used to be the age of majority.
“Widening the jurisdiction comes from the clients,” said Beukes, who added that she has received public complaints about the misuse of privately administered funds for orphans. Some of these funds are not registered with the Namibia Financial Institutions Supervisory Authority (Namfisa), she added.
However, private administrators of private funds for minors are unhappy that the proposed changes to the law give the Guardian Fund power to incorporate all inheritance money for minors. Those would then include long-term insurance policies; death benefits from pension funds which do not administer payments to dependants; retirement funds; preservation funds; provident funds; retirement annuities; all capital amounts underlying monthly annuities; and other inheritances in a deceased’s estate.
As long as the beneficiary of the money is an orphaned minor, such money will be made part of the state-run Guardian Fund.
Also included in the proposed law is a provision for the Guardian Fund to draw in all insurance policies and pension fund money, where the deceased had not listed a beneficiary.
Legal and financial industry players believe this is a ploy to shore up the Guardian Fund, giving huge investment muscle to whoever controls it, and investment management firms which will be given portions to run it, similar to the Government Institutions Pension Fund (GIPF).
Financial sector sources argue that whoever the minister appoints to take decisions on how the Guardian Fund money will be invested can easily favour specific asset management companies, some of which are run by close friends.
Beukes shot down suggestions that Shanghala would control the fund. She said the minister’s powers are of an oversight nature, and not administrative.
The minister’s role will be to appoint two independent members, to join the master of the High Court, on a three-person investment committee. The justice minister’s appointees will be chosen in consultation with the finance minister.
Beukes said the Administration of Estates Act was changed on 31 December 2018 to establish a new governance structure. However, industry players said the changes were made without consultation.
She also assured interested parties that the justice minister will not have sweeping powers, as feared. “The minister cannot override the investment committee’s decisions,” she noted.
Beukes claimed that currently, some of the private funds charge orphans exorbitant fees [acceptance fees, annual administration fees and termination fees], to a point where their inheritance is significantly reduced. She added that interest accrued on the funds is also not always fully passed on to the beneficiaries.
The bill was expected to be tabled in the National Assembly by February next year.
People in the industry are confused that similar amendments to the Administration of Estates Act, which are the main focus of the current bill, had already been published into law on 31 December 2018.
The 31 December 2018 amendment law has three key points.
• Empowering the justice minister to appoint an investment committee tasked with the responsibility of making investment decisions for the Guardian Fund. Appointments must be done in consultation with the finance minister.
• Empowering the auditor general to audit the Office of the Master of the High Court and the Guardian Fund.
• Widening the jurisdiction of the Guardian Fund to include orphans’ money currently administered privately.
The draft bill, however, has given more detail as to what the justice minister’s powers will entail when it comes to the Guardian Fund. The justice minister will be responsible for:
• The investment of funds which are not required for immediate use;
• The business continuity, disaster recovery and financial administration of the Guardian Fund;
• The establishment of committees and provision of their constitution, powers and functions and term of office;
• Any other matters necessary to achieve the objectives of the governance framework not inconsistent with the powers of the minister.