THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case no: 770/2023

In matter between:
SOUTH AFRICAN LOCAL GOVERNMENT
BARGAINING COUNCIL FIRST APPELLANT
SOUTH AFRICAN LOCAL GOVERNMENT
ASSOCIATION SECOND APPELLANT
INDEPENDENT MUNICIPAL AND
ALLIED TRADE UNION THIRD APPELLANT
SOUTH AFRICAN MUNICIPAL WORKERS’ UNION FOURTH APPELLANT
MINISTER OF EMPLOYMENT AND LABOUR FIFTH APPELLANT
FINANCIAL SECTOR CONDUCT AUTHORITY SIXTH APPELLANT
and
MUNICIPAL WORKERS RETIREMENT FUND RESPONDENT
And
In the matter between:
SOUTH AFRICAN LOCAL GOVERNMENT
BARGAINING COUNCIL FIRST APPELLANT
SOUTH AFRICAN LOCAL GOVERNMENT
ASSOCIATION SECOND APPELLANT
INDEPENDENT MUNICIPAL AND
ALLIED TRADE UNION THIRD APPELLANT
SOUTH AFRICAN MUNICIPAL WORKERS’ UNION FOURTH APPELLANT

2

FINANCIAL SECTOR CONDUCT AUTHORITY FIFTH APPELLANT
and
MUNICIPAL EMPLOYEES’ PENSION FUND FIRST RESPONDENT
AKANI RETIREMENT FUND
ADMINISTRATORS (PTY) LTD SECOND RESPONDENT
KENNYATTA CHOMANE THIRD RESPONDENT
And
In the matter between:
SOUTH AFRICAN LOCAL GOVERNMENT
ASSOCIATION FIRST APPELLANT
SOUTH AFRICAN LOCAL GOVERNMENT
BARGAINING COUNCIL SECOND APPELLANT
INDEPENDENT MUNICIPAL AND ALLIED
TRADE UNION THIRD APPELLANT
SOUTH AFRICAN MUNICIPAL WORKERS’ UNION FOURTH APPELLANT
and
MUNICIPAL RETIREMENT ORGANISATION FIRST RESPONDENT
GERMISTON MUNICIPAL RETIREMENT FUND SECOND RESPONDENT
MUNICIPAL GRATUITY FUND THIRD RESPONDENT
PIETER JOHANNES VENTER FOURTH RESPONDENT

Neutral citation: South African Local Government Bargaining Council and Others v
Municipal Workers Retirement Fund and Others (770/2023) [2025]
ZASCA 120 (21 August 2025)
Coram: MOLEMELA P and MOCUMIE, SMITH and KEIGHTLEY JJA and
COPPIN AJA
Judgments: Molemela P : [1] to [132]
Keightley JA and Coppin AJA (dissenting): [133] to [202]
Heard: 8 November 2024
Delivered: 21 August 2025
Summary: Collective Agreements – lawfulness – pension emoluments – terms and
conditions of employment/matters of mutual interest – review – Promotion of

3

Administrative Justice Act 3 of 2000 (PAJA) and/or legality – whether the collective
agreement was a valid agreement in terms of the provisions of s 213 of the Labour
Relations Act 66 of 1995 (the LRA), and more particularly whether the accreditation
scheme provided for in the collective agreement rendered it unlawful as not being a valid
collective agreement in terms of the provisions of s 213 of the LRA and/or liable to be set
aside on review in terms of PAJA or on the basis of a legality review.

4


______________________________________________________________________
ORDER
______________________________________________________________________
On appeal from: Gauteng Division of the High Court, Pretoria (Miller, Van der Schyff and
Mbongwe JJ sitting as court of first instance):
The following order is granted:

1. The appeals are dismissed with costs, including the costs occasioned by the
employment of two counsel.
2. The cross-appeal is upheld with costs.
3. The order of the high court is set aside and replaced with the following:
‘3.1 The Retirement Fund Collective Agreement signed on 15 September 2021 is
reviewed and set aside on account of illegality.
3.2 The first to fourth respondents are ordered to pay the applicants ’ costs on the
scale as between party and party, which costs are to include the costs
occasioned by the employment of more than one counsel, where so employed.’

______________________________________________________________________

JUDGMENT
______________________________________________________________________
Molemela P (Mocumie and Smith JJA concurring):

Introduction
[1] Central in this matter is the validity of an agreement headed
‘the Retirement Fund Collective Agreement’ (the CA), which , inter alia, makes provision
for the transfer of members between retirement funds (funds)1 governed by the Pension
Funds Act 24 of 1956 (PFA). The CA was concluded in the South African Local

1 The term ‘retirement funds’ is used as a collective for pension, provident and hybrid funds.

5

Government Bargaining Council ( the Council) by an employers’ organisation kno wn as
the South African Local Government Association (SALGA),2 which represented
approximately 257 municipalities and two majority trade unions, being the Independent
Municipal and Allied Trade Union (IMATU) and the South African Municipal Workers
Union (SAMWU). Approximately 250 000 employees and an unknown number of retirees
in the local government sector stand to be directly affected by the terms of the CA.

[2] The legality of the CA was challenged in three court applications launched by
various retirement funds in the Gauteng Division of the High Court, Pretoria (the high
court). In the first application, launched under case number 2905/2022, the sole applicant
was the Municipal Workers Retirement Fund (the MWRF) (the first respondent in the three
appeals before us). The Council was cited as the first respondent (the first appellant in all
three appeals), SALGA as the second respondent ( the second appellant in all thre e
appeals), IMATU as the third respondent ( the third appellant in all three appeals),
SAMWU as the fourth respondent (the fourth appellant in all three appeals), the Minister
of Employment and Labour as the fifth respondent and the Financial Sector Conduct
Authority as the sixth respondent. As no relief was sought against the fifth and sixth
respondents, they did not participate in the applications and are similarly not participating
in the appeals in this Court. The MWRF’s application was in two parts: in part A the relief
sought was an interdict prohibiting the implement ation of the CA; the alternative relief
prayed for was an order affording the funds a three -month period within which to apply
for accreditation in terms of the CA. The relief prayed for in Part B was for the CA to be
reviewed and set aside in its entirety, save for clause 8 thereof.

[3] The second application was launched under case number 30396/2022 by three

[3] The second application was launched under case number 30396/2022 by three
applicants, namely the Municipal Employees Pension Fund ( the MEPF) (the first
applicant). The second applicant was Akani Retirement Fund Administrators (ARFA). The
third applicant was Kennyatta Chomane (the fourth appellant in the application).


2 The South African Local Government Association is recognised in terms of s 2(1) (a) of the Organised
Local Government Act 52 of 1997 as the national organisation representing municipalities.

6

[4] The third application was launched under case number 4580/2022 by four
applicants, namely Municipal Retirement Organisation (M RO) which was the first
applicant (the first respondent on appeal). Germiston Municipal Retirement Fund (GMRF)
was cited as the second applicant (the second respondent on appeal). The third applicant
was Municipal Gratuity Fund (MGF) ( the third appellant o n appeal), and the fourth
applicant was Mr Pieter Johannes Venter (the fourth respondent on appeal). The Council,
SALGA, IMATU and SAMWU (together referred to as the appellants) opposed all the
applications.

[5] All the applicants averred that, in concluding and seeking to enforce the CA,
SALGA and the two unions were impermissibly seeking to regulate the governance of the
retirement funds in the local government sector and had acted ultra vires their respective
statutory rights. They also asserted that the contents of the CA did not concern terms and
conditions of employment; that they do not relate to matters of mutual interest between
employers and employees; and that the regulation of funds i s not within the parties’
powers.

Factual background
[6] It is well known that pension funds were created mainly to ensure that employees
remain provided for when they reach the end of their working lives, and to provide for their
dependents’ upon their death. They represent members’ interests at the commencement
of, and for the duration of their employment until retirement. A sizable percentage of the
workforce contributes to retirement funding. 3 Unsurprisingly, various stakeholders in the

3 See a discussion in the Retirement Fund Reform National Treasury Discussion Paper (2004). According
to this report, worldwide, there has been a shift from defined benefit funds to defined contribution funds. In
the former, the employer bears the risk of worse than expected investment returns or higher than 7 expected

expenses. In the latter, these risks, and the corresponding benefit of favourable returns, are effectively
transferred to the individual fund member. According to this report, applied to the South African context, the
following broad categories can be distinguished. Pillar 1 comprises the social old age grant. It is the main
source of income of over 75 per cent of women over the age of 60 and men over the age of 65, including
many people with many years of formal or informal employment behind them. The old age grant is a means-
tested payment of R740 per month (as at November 2004), administered mainly by payments contractors
on behalf of provincial Departments of Social Development. The means test lowers the benefit by 50 cents
for every R1 of other income, to a level of zero when other income exceeds R1480 per month. In practice,
the test is not effectively administered, creates a disincentive for low-income earners to save for retirement,
and contributes to a widespread preference for provident funds that pay lump -sum rather than annuity

7

retirement fund landscape espouse as objectives retirement funding arrangements that
are cost -efficient, prudently managed, transparent and fair; that standards of fund
governance are improved, including trustee knowledge and conduct; that fund members’
interests are protected, and that there is accountability and a free flow of material
information to members and contributors of pension funds regarding the expenditure of
the funds and the fees earned by the funds’ trustees.4

[7] It was against that background that in 1999 the Council expressed its intention to
introduce an accreditation regime for retirement funds in its circular to the industry. In
2013, SALGA, IMATU and SAMWU formed a Pension Fund Task Team within the
Council with a view to concluding a collective agreement relating to the accreditation of
retirement funds. Discussions in preparation for the CA apparently began late in 2014,
with the MEPF first being made aware of the consideration of the CA on 17 November
2014 when it was invited to meet with the Council’s working group established to
implement the process. After about a year of collective bargaining, the draft facilitator’s
proposal and report were circulated to the relevant funds to comment and make
submissions on the draft proposal by January 2016.

[8] During November 2015, the Council sent correspondence and a draft facilitator’s
report to various retirement funds. In 2016, sixteen retirement funds were invited by the
appellants to a workshop. During 2017, the Council sent a revised facilitator’s proposal to
various retirement funds. During September 2018, the Council circulated a draft CA
intended to be concluded by SALGA, IMATU and SAMWU.

[9] Upon receipt of the first draft of the CA on 27 September 2018, the MEPF, on
8 November 2018, made written submissions on the draft CA, raising numerous concerns
and queries. In their submissions, they asserted that the CA is unconstitutional, unlawful,

benefits. Under pillar 2 are the various pension and provident fund arrangements associated with formal
sector employment, in either the private or public sectors. Individuals under pillar 2 may have periods of
interrupted employment, though not for an extended period of time. Pillar 3 represents voluntary saving.
4 Ibid.

8

unreasonable, motivated by bias and ulterior motive and highly prejudicial. In February
2019, the Council responded to the MEPF, apologising for their delayed response.

[10] During November 2018, the MEPF sent a letter to the Council raising concerns
about the lawfulness and constitutionality of the draft CA. The letter, inter alia, pointed out
that the draft CA was prejudicial to the MEPF and was motivated by an ulterior purpose
as it was designed to benefit retirement funds aligned to SALGA and trade unions, one
of which was embroiled in litigation with the MEPF.

[11] In the same letter, the MEPF further pointed out that, given the fact that its
membership was limited to employees within the local government sector, the
implementation of the draft CA would preclude it from retaining its existing members and
from acquiring new ones. It stated that the effect of the draft CA was unlawful coercion to
amend its rules on pain of non-accreditation. It was also submitted on behalf of the MEPF
that all stakeholders, including local authorities, had to be given an opportunity to make
submissions, given the implications of the draft CA, which had far-reaching consequences
and serious implications for local authorities.

[12] During March 2019, a revised draft CA was circulated. Between 2019 and 2020,
comments on the revised draft CA were submitted. A summary of all comments that were
submitted was circulated in June 2020. On 17 September 2021, the Council sent out a
circular advising that the CA had been concluded on 15 September 2021. The parties to
that agreement were SALGA and the two majority trade unions, IMATU and SAMWU.

[13] On 21 December 2021, the Council addressed correspondence to various pension
funds, to which an application for accreditation was attached. On 23 March 2022, the
Council addressed correspondence to the MEPF requesting the application form to be
completed by 25 April 2022. On 12 May 2022, the C ouncil sent a circular to various

completed by 25 April 2022. On 12 May 2022, the C ouncil sent a circular to various
managers of participatin g municipalities detailing a list of accredited funds. On
7 June 2022, the MEPF respondents launched an application in the high court. By then,
several retirement funds had jointly launched applications in the same court. The rule 53

9

record reveals that almost every response received by the C ouncil from pensions funds
included issues in relation to the ‘ability of an employee to choose a fund and have [an]
election to move between funds from time to time’. In other words, a major concern voiced
in the responses was the transfer provisions under the CA. The challenges that were
identified include d the fact that permitting free transfer of members’ interests at the
election of in -service members would pose difficulties for long -term financial stability of
retirement funds. It was asserted that the reason for this is because retirement funds are
long-term vehicles where assets and liabilities have to be mapped long into the future and
that permitting free transfer makes financial management difficult.

The salient terms of the CA
[14] Central to the achievement of the stated objectives of the CA was an accreditation
regime in terms of which all pension funds wishing to operate within the local government
sector were to be accredited. It is evident from clause 1.1 that the CA was intende d to
apply to the entire workforce in the sector with the exception of managerial employees. It
states that:
‘1.1 This agreement will apply to all employees and all employers who fall within the registered
scope of the Council, subject to clause 1.2.
1.2 This agreement will not apply to Municipal Managers and those employees appointed as
managers directly accountable to Municipal Managers. . .’
The objectives of the CA were set out as follows:
‘2.1 Establish a uniform approach to the provision of retirement fund benefits to employees in the
sector.
2.2 Provide equitable access to retirement fund benefits for employees in the sector.
2.3 Provide uniform rates of contribution to retirement funding for employees in the sector subject
to preserving the accrued rights of employees in existing defined benefit arrangements.
2.4 Improve overall efficiency and governance of funds.

2.4 Improve overall efficiency and governance of funds.
2.5 Give employees an opportunity to exercise an election to move from one local, regional or
national fund in which their employer parti cipates to another, within parameters established by
this agreement.’

10

[15] The following key terms pertaining to accreditation were set out in an ‘Annexure A’
to the CA:
‘3.1 The fund must be registered in terms of the Pension Funds Act. The criteria for accreditation
must be satisfied, where applicable, by the terms of the registered rules of the fund or the board
of the fund must have adopted a resolution approving amendment to the rules of the fund to bring
these rules into compliance with the provisions below.
Requirements of the rules
3.2 The rules of the fund
3.2.1 must permit the transfer of members to another accredited fund as contemplated in clauses
7 and 9.3 of the collective agreement, in which case the members shall cease to contribute to the
fund from the effective date of transfer and those members may choose either to leave their
interests in the fund on a “paid up” basis or to transfer their interests in the fund to that other fund
in terms of section 14 of the Pension Funds Act;
3.2.2 must permit members, employed by an employer who participates in the fund and who have
elected or been required to transfer into the fund as contemplated in clauses 7 and 9.3 of the
collective agreement, to join the fund with effect from the transfer date. In such a case, those
members and their employer shall start contributing to the fund from that date in respect of service
after the transfer date and those members may elect to transfer their interest in the fund from
which they are transferring to the fund in terms of section 14 of the Pension Funds Act;
3.2.3 must provide that, where a member changes employment from one participating employer
(“the old employer”) to another participating employer (“the new employer”), both of which
participate in the same fund, the member does not become entitled to a benefit from the fund, but
rather continues membership as an employee of the new employer with the same service,
contributions and pensionable remuneration, up to the effective date of transfer between

contributions and pensionable remuneration, up to the effective date of transfer between
employers, as the employee enjoyed under the old employer; where relevant, corresponding
assets must be transferred between any sub-fund or the old employer to that of the new employer;
3.2.4 must permit the withdrawal or termination of participation in the fun d by an employer or
employers, after giving due notice, in which case
(a) the members employed by that employer may elect to leave their interest in the fund on a “paid
up” basis or may elect to transfer their members’ interests in the fund to another accredited fund
in terms of clause 3.2.1 above;
(b) contributions by members and the employer will cease, except for any amounts required to
address a shortfall;

11

(c) the employer or employees, as the case may be, will assume responsibility for funding any
shortfall applicable immediately prior to the transfer multiplied by the transfer ratio less any part
of that shortfall transferred to another fund with the transferring members’ interests;
3.2.5 may restrict membership to employees of a particular municipality or region;
3.2.6 must provide that no amount will be paid to an investment or other professional adviser
except for services rendered to it to the fund in the ordinary course of the governance,
management, investment or administration of the fund; provided that, in the case of members of
a defined contribution category or members participating in a living annuity provided from a fund,
the member or members may request that a professional adviser receive a fee, as approved by
the member or members in writing, for the provision of investment advice to them, and deducted
from the member’s or members’ amounts.
Reporting obligations
3.3. A fund must report to the Council full and transparently, annual by a date determined by the
Council –
. . .
3.4 Information referred to in clause 3.3 may be published by the Council in full or in a summarized
form to members and employers in the sector.’
It is clear from the text of these clauses, read in context, that the requirement that the
rules ‘must permit the transfer of members to another accredited fund’ and ‘ must permit
the withdrawal or termination of participation in the fund by an employer or employers’
and that the fund ‘ must restrict membership to employees of a particular municipality or
region’ are applicable to both the current and future membership of the funds, both in
terms of currently employed members and retired members.

[16] In relation to non-parties, clause 4.2 provides:
‘4.2 This Agreement shall come into operation in respect of non-parties (which include but are not
limited to municipal entities as defined in the Municipal Systems Act 32 of 2000) who fall within

the registered scope of the Council on a date to be determined by the Minister of Employment
and Labour and shall remain in operation until 30 June 2027 and thereafter for such further period
as may be determined by the Minister of Employment and Labour at the request of the Parties.’

12

Litigation history
[17] The retirement funds which are cited as respondents in this matter were aggrieved
by the stance adopted by the parties in concluding the CA. As a result, they took issue
with the CA and individually launched applications in the high court seeking order s
reviewing and setting it aside. They contended that the conclusion of the agreement itself
is impeachable because the matters which it seeks to regulate are inherently not matters
which can form the subject of collective bargaining contemplated in the Labour Relations
Act 66 of 1995 (the LRA). It was contended that pension-related issues do not fall under
the category of ‘matters of mutual interest’.

[18] It was also argued by the respondents that the accreditation scheme introduced
by the CA is unlawful and was a mechanism for eradication of various retirement funds in
the local government sector. Its effect was to impose, upon the trustees of the funds, an
obligation to adopt rules which are not in the best interests of the funds or their active and
retired members, so it was contended. Furthermore, the respondents asserted that the
terms of the CA were not within the domain of the respondents because it sought to
impose conditions for the continued operation of the retirement funds by coercive force;
that it disregarded the autonomy of the affected pension funds and the obligations of the
boards of trustees of those pension funds; that it impermissibly imposed upon the trustees
the obligation to adopt rules which are not in the best interests of the funds or their active
and retired members , thereby fettering the discretion of the trustees and usurping the
independence of the boards.

[19] The respondents further argued that the terms of the agreement intrude upon a
domain not permitted by the terms of reference governing the bargaining council. They
asserted that the CA purports to regulate pension funds, which is impermissible as it

asserted that the CA purports to regulate pension funds, which is impermissible as it
subverts the legislated pension regulatory scheme. In the alternative, the MRO sought an
order declaring the agreement unconstitutional and invalid on the basis that the
agreement violated the employees’ rights to freedom of association under s 18 of the
Constitution of the Republic of South Africa (the Constitution) and pensions funds’

13

freedom of trade. Allied to this was an assertion that the CA was contrary to public policy
and thus fell to be declared invalid, alternatively unenforceable on this additional basis.

[20] The primary position adopted by the MRO was that it was entitled to a declaratory
order that the CA was of no force and effect in relation to its members, who include active
members and pensioners. The prayer for the declaratory order was premised on the
notion that the CA cannot be binding on non-parties to that agreement (such as the fund
members of the MRO); that s 31 of the LRA does not assist the appellants because the
subject-matter of the CA does not address either the ‘terms and conditions of
employment’ or ‘the conduct of employers in relation to their employees or the conduct of
employees in relation to their employers’; and that s 32 of the LRA cannot be relied upon
to ‘extend’ the agreements to non-parties such as the applicants.

[21] The appellants, who were the respondents in the high court, institu ted a counter-
application seeking an order declaring the CA to be enforceable. Since the same issues
were raised in these three applications, they were heard together by a panel of three
judges sitting as a court of first instance.

[22] The high court considered whether the accreditation requirement stipulated in the
CA was binding upon the funds , whether its implementation would fetter the decision -
making discretion of trustees of various pension funds , and whether its effect was to
render pension funds in the sector financially unviable. 5 On 20 February 2023, the high
court gave one composite judgment in all three applications. It found that the CA was
prejudicial to the independence of the board of trustees of pension funds and that the rule
changes, set as prerequisites for accreditation, were inconsistent with some provisions of
the PFA. It also found that the re was no evidence of compliance with the provisions of

the PFA. It also found that the re was no evidence of compliance with the provisions of
s 71 of the Municipal Systems Act 32 of 2000 (MSA), which, inter alia, aim to provide for

5 In terms of s 4(4) of the Pension Funds Act 24 of 1956 (PFA), the registr ar may register a pension fund
only if they are satisfied that that the fund is in a financially sound condition or that adequate arrangements
have been made to bring it into a financially sound condition within a period which the registrar considers
satisfactory.

14

the manner in which municipal powers are exercised and performed, as well as resource
allocation that underpins the notion of developmental local government. It said:6
‘Whether it is practicable for employers to simply assume liability for funding shortfalls as and
when these arise is uncertain. Section 71 of the Local Government: Municipal Systems Act (MSA)
provides that:
“(1) Organised local government must, before embarking on any negotiations with parties in the
bargaining council established for municipalities, consult the –
(a) Financial and Fiscal Commission established in terms of s 220 of the Constitution;
(b) Minister;
(c) Any other parties as may be prescribed.
(2) Organised local government must, in concluding any collective agreement resulting from
negotiations contemplated in subsection (1), take into account
(a) the budgets of municipalities
(b) the fiscal capacity and efficiency of municipalities and
(c) national economic policies.
(3) Municipalities must comply with any collective agreements concluded by organised local
government within its mandate on behalf of local government in the bargaining council established
for municipalities.”
There is nothing placed before this court by the respondents which indicates whether the
employer parties to the [collective agreement], in concluding the agreement, considered either
the budgets of the municipalities or their fiscal capacity and efficiency. The [collective agreement]
is silent on this aspect. The only reference in it to the MSA in th e [collective agreement] is in
clause 4.2 – dealing with the date it would become operable for non -parties. Put differently,
without knowing how many employee members would transfer from one fund to another, the
identity of the specific funds and what the specific shortfall would be, it is simply not possible for
the employer parties to the [collective agreement] to have properly considered its impact upon

the employer parties to the [collective agreement] to have properly considered its impact upon
the budgets of the municipalities. That the requirement to do so is peremptory is apparent from
the wording of the section.’

[23] Furthermore, the high court found that the powers given to the Accreditation
Committee in terms of the CA, in essence, permitted it to change the rules of pension

6 Judgment of the high court reported sub nom Municipal Workers Retirement Fund v South African Local
Government Bargaining Council and Others and Other Related Matters [2023] ZAGPPHC 98 (High court
judgment) paras 49-50.

15

funds, thereby impermissibly coercing the adoption of those new rules, and undermining
the authority of the entire pension regulatory scheme of the PFA by imposing a parallel
supervisory regime.7 The high court set aside the entire agreement, save for clause 8
thereof. It stated as follows:
‘. . . [T]he very fact that pension funds, in order to ensure their continued existence within the
sector would have to bind themselves to such [an accreditation] scheme [as prescribed in the
agreement] is constative and inimical to the independence of the boar d, purpose for which the
funds were established and to the statutory regime of the PFA. This has been held by our Courts
to be so.’8

[24] The high court also reasoned that the construction of the accreditation regime was
inimical to the separation of iden tity and interests between employers and the pension
funds and ‘fundamentally amounts to a rule -based intrusion on the statutorily protected
independence of the trustees of pension funds’. 9 Notwithstanding its criticism of the
accreditation process, it reviewed the CA and set it aside but preserved clause 8 thereof.
Its order was couched as follows:
‘75.1 The Retirement Fund Collective Agreement signed on 15 September 2021 is reviewed and
set aside save in respect of clause 8 thereof.
75.2 The first to fourth respondents are ordered to pay the applicants costs on the scale as
between party and party which costs are to include the costs consequent upon the employment
of more than one counsel, where apposite. . . .’

[25] Discontented with the orders granted by the high court, the appellants sought and
were granted leave to appeal to this Court against para 75.1 of the order, while the MEPF,
which was an applicant in case no 30396/ 2022, was granted leave to cross -appeal
against para 75.2 of the order.




7 High court judgment para 62.
8 Ibid para 55.
9 Ibid para 63.

16

In this Court
[26] Before us, the same arguments raised in the high court were reiterated on behalf
of the appellants and the respondents. The parties persist in the relief they sought in the
high court, with the appellants seeking an order that the appeal be upheld in their favour,
while the respondents seek an order that the appeal be dismissed. The MEPF further
seeks an order upholding its cross-appeal.

Issues in the appeal
[27] The issues for determination are the following:
(a) whether the CA constitutes a ‘collective agreement’ in terms of ss 23 and 213 of the
LRA;
(b) whether the main agreement mandates the conclusion of the CA, and whether IMATU
had a mandate to be a party to the CA, or whether it was ultra vires on account of the
absence of such a mandate;
(c) whether the agreement is reviewable under the Promotion of Administrative Justice
Act 3 of 2000 (PAJA) or whether legality review applies; and
(d) whether the agreement is valid and enforceable, as contended for by the appellant, or
whether its effect is impermissibly to fetter the independence of trustees of funds thereby
rendering it unlawful.

The appellants’ submissions
[28] The appellants submitted before us that employers and employees have been
frustrated by disparate treatment shown to certain categories of employees by some
retirement funds, their inefficiency, their lack of transparency , poor communication with
members and the reality that inefficiency and unnecessary high administration costs
reduce the value of accrual pension savings. The appellants’ contentions regarding the
legitimacy of the CA were that the power to conclude a collective agreement is found ed
in the Constitution and the LRA; that the subject matter of the CA falls within the ambit of
a ‘term and condition of employment’ or ‘a matter of mutual interest’ for the purposes of
the definition of collective agreement in the LRA ; that c ourts have de fined a ‘matter of

the definition of collective agreement in the LRA ; that c ourts have de fined a ‘matter of
mutual interest’ in wide terms and liberally to mean ‘any issue concerning employment’ ;

17

that courts have held that pension funds should be considered contextually as being part
of the employment relationship ; that courts have also accepted that pension benefits
constitute remuneration (as a form of deferred remuneration), as opposed to gratuities or
benefits afforded to the employe es, and that such arrangements do not breach any
provision of the PFA or usurp the Financial Sector Conduct Authority’s (FSCA) functions.
They contended that the CA falls within the ambit of the definition of ‘collective agreement’
in s 213 of the LRA.

[29] As regards the prayer for the review of the CA, the appellants contended that the
high court had err ed in setting it aside. They maintained that the CA was not
‘administrative action’ and hence not subject to PAJA review. They argued that the CA is
also not capable of a review under the principle of legality, except for the question of vires,
for which no case was made.

The respondents’ submissions
[30] Before us, the respondents submitted that the CA seeks to introduce a radical new
accreditation regime and a new layer of regulation on all pension funds in the local
government sector. They argued that the accreditation scheme imposed by the
agreement is unlawful and constitutes a mechanism for the eradication of various
retirement funds in the municipal sector, to the detriment of the funds in question, as well
as the members and pensioners of those funds. In such circumstances, so it was argued,
the inevitable outcome is that an unaccredited fund will not have any active members and
will be left with pensioner members only, ultimately resulting in the financial demise of the
fund. If the appellants are dissatisfied with the governance of funds, or their efficiencies ,
they cannot seek to address their problems by developing a parallel system of regulation
of funds by the simple expedient of concluding the agreement, so the argument went.

[31] In addition to the above, the respondents averred that the central feature of the CA

[31] In addition to the above, the respondents averred that the central feature of the CA
is that the C ouncil has arrogated to itself the power to determine the eligibility of funds
which will service the employees in the local government sector. This, the Council does,
unilaterally by introducing an accreditation regime in terms of which the eligibility of funds

18

to participate is determined exclusively by the Council. The respondents’ contention was
that the CA unlawfully provides that municipalities must pay over contribution s only to
accredited retirement funds with effect from a determined date (currently suspended) ,
even in respect of members who are still in active service and who are still bound by the
rules of such funds.

[32] The respondent s argued that the CA unlawfully grants in -service members an
election, contrary to the binding rules of their funds, to transfer their membership to
accredited funds. They maintained that the appellants had impermissibly arrogated to
themselves the authority to amend the requirements for eligibility to qualify for
accreditation, and to reduce the number of accredited funds in the future. The CA
impermissibly purports to authorise municipalities to give notice of termination of
membership to unaccredited retirement funds. The respondent s further contended that
the entire agreement, except the contribution percentage to be paid to the pension funds
in terms of clause 8.2 and 8.3, plainly encourages a breach of the provisions of ss 13 and
13A of the PFA.

[33] Another contention made on behalf of the respondents is that the parties to the CA
had failed to apply their minds to the effects and harm that the implementation of the CA
will have, not only on pension funds, but also on fund members. It was averred that, as a
result of the far-reaching provisions of the CA, pension funds are faced with the possibility
of non-accreditation and large-scale transfers of membership. In such circumstances, so
it was argued, non-accreditation would result in funds losing all its in-service members in
the sector , and that would have a devastating effect on some funds and affect their
viability adversely. Significantly, it would impact on the ability of the funds to continue to
honour the financial obligations towards those members who retire and those who remain

honour the financial obligations towards those members who retire and those who remain
in the fund after the large-scale transfer of members. As a result, so the argument went,
those funds would be unable to invest funds with a long -term investment strateg y and
returns in mind, which , according to the respondents, is the very essence of retirement
savings.

19

[34] According to the respondents, the requirements that funds must provide for
effective in -service transfers, even when the trustees in the exercise of their fiduciary
duties, do not believe that such transfers are in the best interest of the pension fund, is
an example of the degree and extent of the appellants’ attempt unlawfully to regulate the
pension funds operations. With specific reference to th e MWRF, the MWRF’s rule 3.2
expressly prohibits such effective in -service transfers. The board of the MWRF passed
this rule in the exercise of its fiduciary duties and successfully defended the lawfulness
and constitutionality of this rule before this Cour t in Municipal Employees Pension Fund
and Another v SAMWU National Provident Fund and Another (MEPF v SAMWUNPF) .10
This Court held that in-service members have no entitlement to change membership while
in service. It was argued that, since the PFA protects the board’s right to fashion the rules
of the respective funds in accordance with the mandates of those funds, the
encroachment embodied in the CA, insofar as it stipulates that contributions to
unaccredited funds will be stopped, and that in-service members may elect to transfer to
other funds notwithstanding the provisions of the rules of their funds, illustrates how the
appellants have, through the CA, arrogated to themselves the right to interfere with policy
issues which are of importance to the financial stability of the funds.

[35] As regards their prayer for a review of the CA, the respondents submitted that,
when an administrative decision is made without the consideration of relevant
circumstances or where the administrator has failed properly to apply its mind, the
decision is subject to review. They argued that a failure to consider, investigate and
assess these concerns constitutes a failure to take account of the relevant considerations
and is unconstitutional. It was argued that the appellants took account of and based their

and is unconstitutional. It was argued that the appellants took account of and based their
decision on unsubstantiated allegations, such as widely varying contribution rates ,
administration costs and risk to employers and employees, which allegations were
unsupported by any information, research or analysis. They argued that the appellants
had made a bald allegation that ‘the bargaining partners were meticulous about obtaining
expert advice on best practice and governance insofar as pension matters are concerned’

10 Municipal Employees Pension Fund and Another v SAMWU National Provident Fund and Another [2019]
ZASCA 42 (MEPF v SAMWUNPF).

20

but failed to furnish any documents to support such allegations. Taking unsubstantiated
allegations into account boiled down to consideration of irrelevant considerat ions which
was reviewable on the basis of irrationality, so it was contended.

[36] As regards the MEPF’s cross-appeal, it was contended that the high court ought
to have similarly set aside clause 8 as it was inextricably dependent on the accreditation
regime and ha d no existence without the remainder of the CA. Even if it were to be
regarded as permissible for a collective agreement to stipulate terms on which employees
must join the fund at the commencement of employment, it is not permissible for it to
determine that in-service employees must join accredited funds. Clause 8 fundamentally
relies upon the accreditation of funds, the imposition of which has been found by the high
court to be unlawful. The interconnectedness between the remainder of the C A
(particularly the accreditation regime) and clause 8 does not permit clause 8 to be carved
out from the remainder of an agreement that has been set aside. As a natural
consequence, clause 8 must also be found to be unlawful in its terms and therefore be
set aside.

Legislative and regulatory framework
[37] Section 23 (5) of the Constitution enshrines the right to collective bargaining. It
provides that every union, employers’ organisation and employer has the right to engage
in collective bargaining. This is the constitutional provision in terms of which the LRA was
enacted for purposes of regulating collective bargaining. It seeks to promote economic
growth, instil justice in society and entrench democracy in the workplace. It achieves this
by providi ng a framework for engagement in and promotion of orderly collective
bargaining, the development of industrial policy by employers, employees and their
respective organisations and unions , and to promote effective resolution of labour
disputes.

disputes.

[38] Employers in the local government sector, whether represented in the bargaining
council or not, are required to adhere to and comply with several other legislation, plans
and policies that affect labour relations in local government. As far as the retireme nt

21

funding landscape is concerned, the PFA remains the driving legislation. Not only have
there been several amendments to that statute, but a number of South African
commissions have, over the years, investigated the intricacies of retirement funding and
provided their assessment, resulting in further amendments of the PFA. Section 1 of the
PFA defines ‘stakeholder’ as meaning ‘a current member, including a pensioner and a
deferred pensioner, a former member and an employer participating in the fund’. ‘Pension
fund’ is defined in s 1 of the PFA as ‘a pension fund organization’ ,11 which has been
substituted by s 1 (e) of the Pension Funds Amendment Ac t 31 of 2024 with effect from
1 September 2024. Nothing turns on this definition.

[39] In terms of s 7C( 1) of the PFA, the board of trustees is the managing and
controlling body of the fund and oversees the fund’s operations. In its oversight role, the
board should operate independently of the employer, members and other stakeholders
of the fund and is dutybound to act in the best interests of the members of that fund. It is
evident from the provisions of s 7C(2) (a) of the PFA that the board must take all
reasonable steps to ensure that the interests of members of the fund and the provisions
of the PFA are pr otected at all times, especially in the event of an amalgamation or

11 ‘Pension fund organisation ’ is defined in s 1 (e) of the Pension Funds Amendment Act 31 of 2024 as
follows:
‘. . .
(a) any association of persons established with the object of providing annuities, including living annuities,
or lump sum payments for members or former members of such association upon their reaching retirement
dates, or for the dependants of such members or former members upon the d eath of such members; or
(b) any business carried on under a scheme or arrangement established with the object of providing

annuities, including living annuities, or lump sum payments for persons who belong or belonged to the class
of persons for whose ben efit that scheme or arrangement has been established, when they reach their
retirement dates or for dependants of such persons upon the death of those persons; or
(c) any association of persons or business carried on under a scheme or arrangement established with the
object of receiving, administering, investing and paying benefits that became payable in terms of the
employment of a member on behalf of beneficiaries, payable on the death of more than one member of one
or more pension funds; or
(d) any association of persons or business carried on under a scheme or arrangement established with the
object of making payments in respect of arrear and future maintenance orders payable in terms of a court
order issued against a fund on behalf of beneficiaries,
and includes any such association or business which in addition to carrying on business in connection with
any of the objects specified in paragraph (a), (b), (c) or (d) also carries on business in connection with any
of the objects for which a friendly socie ty may be established, as specified in section 2 of the Friendly
Societies Act, 1956, or which is or may become liable for the payment of any benefits provided for in its
rules, whether or not it continues to admit, or collect contributions from or on beha lf, of members.’

22

transfer of any business contemplated in s 14, splitting of a fund, termination or reduction
of contributions to a fund by an employer, increase of contributions of members and
withdrawal of an employer who participates in a fund. In terms of s 7C(2) (d) of the PFA,
the board of trustees is enjoined to act with impartiality in respect of all members and
beneficiaries. To my mind, retired employees continue to be members of a fund beyond
their retirement and are thus entitled to receive continued protection during their
retirement.

[40] Clauses 8.1, 8.2 and 8.3 respectively provide:
‘8.1 Each new employee in the sector will be required and permitted to become a member only
of a defined contribution retirement fund in which his or her employer participates, and which is
accredited as contemplated in this agreement.
8.2 The employer contribution rate to an accredited defined contribution retirement fund will be
18% of pensionable salary, subject to clause 8.3
8.3 If an employer is, as at the date of signature of this agreement, paying a higher contribution
rate than the rate referred to in clause 8.2 on behalf of a member of a defined contribution fund,
the employer will, unless otherwise agreed by collective agreement, and for so long as the fund
is accredited and the employee remains a member, continue to pay the higher contribution rate
in respect of that employee.’

[41] Section 30(3) of the PFA provides that:
‘If a registered fund which has not been exempted from actuarial valuation in terms of
section 2(3)(a) is liquidated in terms of section 28 or 29 after the date from which minimum
individual reserves are payable on cessation of membership, and the fair value of the assets of
the fun d, less any current liabilities, is less than the sum of the minimum individual reserves
payable in respect of the existing members and former members who may participate in the
distribution of the assets (with appropriate adjustment for benefits previousl y paid in the case of

former members) and the cost of annuity policies which will provide equivalent pensions for the
existing pensioners and deferred pensioners, the shortfall shall represent a debt payable by the
employer to the fund: Provided that, where more than one employer participates in the fund, the
shortfall shall be distributed amongst such employers in a manner deemed reasonable by the
liquidator.’

23

The Retirement Fund Reform National Treasury Discussion Paper notes that this
provision is designed to protect members upon the winding up of a fund. It is posited that
members of funds which are formally wound up are treated as deferred creditors, which
means that if a fund is unable to compel an employer like a municipality to fund any
shortfall in the assets available to fund minimum benefits , they might suffer a loss as
preference would be given to creditors who rank higher in priority.

[42] Section 13A imposes a statutory duty on participating employers to pay
contributions to funds in terms of the fund’s rules ; these contributions must be paid not
later than seven days after the end of the month. Section 13A(5) provides:
‘When a person who, for any reason except a reason contemplated in section 14, 28 or 29, has
ceased to be a member of a fund (in this subsection called the first fund), is in terms of the rules
of another fund admitted as a member of the other fund and allowed to transfer to that other fund
any benefit or any right to any benefit to which such person had become entitled in terms of the
rules of the first fund, the first fund shall, within 60 days of the date of such person’s written request
to it, or, if applicable, within any longer period determined by the registrar on application by the
first fund, transfer that benefi t or right to the other fund in full. The transfer shall be subject to
deductions in terms of section 37D and to the rules of the first fund.’

[43] Section 14(1), under the heading ‘Amalgamations and transfers’, provides that:
‘Subject to subsection (8), no transaction involving the amalgamation of any business carried on
by a registered fund with any business carried on by any other person (irrespective of whether
that other person is or is not a registered fund), or the transfer of any business from a registered
fund to any other person, or the transfer of any business from any other person to a registered

fund, shall be of any force or effect . . . .’

Discussion
[44] The dispute that gave rise to the appeals throws a spotlight on the intersection
between labour laws and pension laws in South Africa. The emphasis of the LRA is on
‘co-operation and constructive engagement between labour and its management ’, with

24

collective bargaining being the focus of attention in achieving these objectives.12 Pension
funds are regulated in terms of their own statute and by a financial services regulator in
the form of the Financial Sector Conduct Authority (FSCA).13

Whether the CA constitutes a ‘collective agreement’ in terms of ss 23 and 213 of
the LRA
[45] As mentioned earlier, the respondents contended that matters which the CA
sought to regulate extended far beyond the scope of regulating terms and conditions of
employment, or the conduct of employers or employees in relation to one another as
envisaged in s 31 of the LRA. They contended that the constitutional right to collective
bargaining did not entitle a trade union to engage in collective bargaining on just about
any issue. Section 23(5) of the Constitution provides that ‘every trade union, employers’
organisation and employer has the right to engage in collective bargaining’. The LRA
provides a framework that is conducive to collective bargaining .14 Chapter 3 of the LRA
sets forth an o rderly collective bargaining system with an emphasis on centralised
bargaining forums representing all sectors. While the CA did not purport to establish a
pension fund, the fact that a bargaining council has the power to administer pension
funds, among other things, speaks to the legitimacy of pension arrangements being a
subject of collective bargaining in appropriate circumstances.15

[46] In circumstances where a contract of employment requires an employee to belong
to a pension fund, thereby making the joining of a retirement fund mandatory, there ought
to be no quarrel with the legitimacy of any trade union negotiating favourable options to
ensure good pension returns for its members, who, through the sweat of their brow,
diligently contributed to the retirement funds during their active service. The provision for
pension arrangements in a collective agreement is nothing new.16 The suggestion that a

pension arrangements in a collective agreement is nothing new.16 The suggestion that a

12 J V du Plessis and M A Fouché A Practical Guide to Labour Law in South Africa 8 ed (2014) (A Practical
Guide to Labour Law) at 249.
13 Section 43 of the PFA stipulates that they must be registered with the Financial Sector Conduct Authority
(FSCA).
14 J Grogan Workplace Law 13 ed (2020) at 372 and 375'.
15 SACTWU v Garlick Stores (1922) (Pty) Ltd [1996] 3 BLLR 362 (IC).
16 Johannesburg Municipal Pension Fund and Others v City of Johannesburg and Others 2005 (6) SA 273
(W); (2006) 27 ILJ 523 (W) (Johannesburg Municipal Pension Fund).

25

collective agreement may not, under any circumstances whatsoever, deal with pension
related matters is not supported by any authorities. The respondents’ contention that the
CA falls beyond the scope of a collective agreement because pension benefits are not
inherently suited for collective bargaining is without merit, in my view.

[47] Equally meritless, is the contention that pension matters do not relate to ‘matters
of mutual interest’. An unresolved dispute pertaining to an employer’s refusal to consider
an employee’s demands regarding pension has, historically, been considered to fall within
the category of a typical dispute of mutual interest which would justify industrial action in
the form of a strike or lock-out.17

[48] The appellants argued that funds do not have a right to exist in perpetuity. I agree
that the retirement fund statutory scheme does not guarantee the continued existence of
any fund in perpetuity. In my view, to do so would be to border on creating a nanny state
in which third parties are obliged to, at all costs, ensure the sustainability of an
organisation. That said, sight must not be lost of the rationale for the existence of
retirement funds, why their viability is crucial, and why the interests of the broader
retirement fund stakeholders must be considered.

[49] While there is nothing conceptually wrong with trade unions advocating for flexible
retirement funds that permit transfer of members from one fund to another (case law
shows that some fund rules permit this), existing funds, whose rules do not permit such
transfers, ought not to be dislodged from participating in the local government sector in
terms of a collective agreement. In lobbying for voluntary rule amendments by boards of
pension funds, proper bargaining processes geared towards the conclusion of collective
agreements must be followed, instead of attempting to force the funds’ hand by a veiled

agreements must be followed, instead of attempting to force the funds’ hand by a veiled
threat of an accreditation regime that is conditional on a policy change that may impact
on the viability of the fund, to the detriment of members. In relation to the processes that

17 W Field ‘Employees' Pension and Provident Fund Rights: A Renewed Interest Develops ’ (1991) 12
Industrial Law Journal 965 at 974.

26

need to be followed, I cannot think of a more apt expression than the age-old phrase: ‘the
devil lies in the details’.

[50] What remains a settled principle, is that rules of a fund are binding on all fund
members. Of significance in th e present matter is that pension funds always remain
separate and distinct entities from both the employers and their employees. 18 Rules of a
pension fund provide the guiding principles upon which its trustees are required to
operate; they form part of its constitution and must be interpreted in the same way as all
documents. Notably, the same rules also govern the rights and obligations of members.19
This has been confirmed in a plethora of judgments of this Court , an aspect that will be
examined in more detail presently.

Whether the conclusion of the CA was sanctioned by the Main Agreement
[51] It is well-established that a court interpreting a contract must consider not only the
factual matrix, which is the body of facts reasonably available to both parties when they
concluded the contract ,20 but also the purpose of the contract and the circumstances
leading to its conclusion. It is common cause that collective bargaining in the local
government sphere takes place in the bargaining committee at either divisional or national
level, and that matters identified for bargaining at the various levels are specified in
section C, clause 1 of the Main Collective Agreement (the Main Agreement). 21 It bears
emphasis that the original text of s 71 of the MSA, which was in force before and after the
conclusion of the CA, provides that m unicipalities must comply with any collective
agreement concluded by organised local government ‘within its mandate ’ on behalf of
local government in the bargaining council . Organised local government is a term that

18 Section 5(1)(a) and (b) of the PFA.
19 Sasol Limited v Chemical Industries N ational Provident Fund (20612/2014) [2015] ZASCA 113 (7

September 2015) para 13.
20 Investors Compensation Scheme Ltd v West Bromwich Building Society Armitage v West Bromwich
Building Society Alford v West Bromwich Building Society Investors Compensation Scheme Ltd v Hopkin
& Sons [1998] 1 WLR 896; [1998] 1 All E.R. 98; [1997] 6 WLUK 340.
21 The Main Collective Agreement is a comprehensive agreement negotiated and concluded at the
bargaining council by and between SALGA, IMATU and SAMWU from time to time, w hose objectives are,
inter alia, to establish common and uniform procedures for resolving disputes between employers and
employees covered by the agreement; to provide a platform for establishing common and uniform
conditions of service for the employees in the local government sector and to determine substantive matters
that the parties to the agreement may bargain on.

27

refers to the associations that represent local government in South Africa. In the context
of this case, organised local government refers to SALGA, which means that the mandate
referred to in s 71 is that of the municipalities . Among the contentions embodied in th e
respondents’ founding affidavit was an assertion that the Main Agreement establishing
the Council did not mandate the parties to the CA to deal with retirement funds, at any
rate not to the extent to which the CA purported to do. This was because section B of the
Main Agreement, which deals with substantive matters which parties can bargain over,
makes no mention of participation in retiremen t funds whatsoever, so it was contended .
The appellants’ response on this aspect was that section C of the Main Agreement
‘specifically lists retirement funds as one of the matters subject to collective bargaining at
national level only’.

[52] Save for remarking that the terms of reference in section C of the Main Agreement
specified that the retirement funds shall be the subject of collective bargaining at national
level, the high court considered the determination of this specific issue to be ‘peripheral’.
It considered the substantive issue to be whether the conclusion of the CA, which includes
terms relating to the imposition of the requirement for accreditation and the stipulated
accreditation terms fell within the ambit of collective agreement contemplated in the LRA.

[53] The issue of whether negotiations preceding the conclusion of a collective
agreement affecting the regime of pension funds fell within the municipal or national level
of the collective bargaining process was raised for consideration in the context of an
urgent application in Johannesburg Municipal Pension Fund .22 In that matter , the
employer municipality had issued notices of cessation of participation , disclosed its
intention to cease paying contributions to the two funds, and unilaterally decreed that all

intention to cease paying contributions to the two funds, and unilaterally decreed that all
its employees would participate in a newly created fund. The funds approached the
Gauteng Division of the High Court seeking an interim interdict prohibiting the municipality
from implementing its decision and compelling it to continue with contributions pending
the finalisation of a r eview of the municipality’s decision . It was contended that the
municipality’s decision to introduce a new pension fund regime was in breach of its

22 Op cit fn 16.

28

collectively bargained obligation first to exhaust co llective bargaining procedures at
national level under the Council.

[54] Although said in the context of considering an application for an interim interdict,
the high court seemed to have accepted that issues pertaining to the regime of the fund,
such as whether there should be one or more funds , the nature of the fund, the number
of trustees each party would be entitled to, what the percentages of contributions would
be, fell within the scope of collective bargaining at the national level. It explained that the
evidence showed that the collective bargaining at a national level had not taken place or
been exhausted. It also observed that the failure of the municipality to pay the employer
contributions and other amounts due to the f unds would cause the funds financial
prejudice. It held that the failure to engage the funds meaningfully before withdrawing
from the prevailing arrangement was irreconcilable with the provisions of subsections
23(1) and 23(5) of the Constitution. On that basis, it held that the funds had established
a prima facie case for the granting of a review or a declarator.

[55] In the present matter, it is indisputable, as will be shown later, that the CA had far-
reaching consequences. As correctly observed by the high court,23 the CA is silent as to
whether the appellants, as the parties to the CA, considered either the budgets of the
municipalities or their fiscal capacity and efficiency. The appellants furnished no
countervailing evidence to counter the respondents’ assertion that these aspects were
not considered prior to the negotiation process that preceded the conclusion of the CA .
On the appellants’ own version, the negotiations started in earnest in 2014 , by which
stage the 2011 Amendment Act (which introduced the peremptory stipulations of s s 71
(1) and (2)) had already come into operation. The appellants, however, consider

(1) and (2)) had already come into operation. The appellants, however, consider
themselves not to have been under any obligation to comply with s 71(1) and (2) of the
MSA because it was declared unconstitutional with effect from March 2019 and the
conclusion of the CA (in September 2021) predated the reinstatement of that provision in
the same terms in 2022.


23 See para 23 of this judgment.

29

[56] For present purposes, it bears noting that no evidence was provided to show that
the conclusion of the CA, which practically introduced a new pension fund regime by
specifying prerequisites for the accreditation of funds , was sanctioned by the Main
Agreement. The appellants’ response on this aspect appears to be a rather laconic and
unsatisfactory response on a very serious aspect which fell purely within the knowledge
of the appellants.24 An ancillary issue squarely raised by the respondents on the issue of
the mandate to conclude the CA, pertained to whether IMATU was mandated by its
members to conclude the CA. The issue seems to have been triggered by the fact that
IMATU members had , during 2018, signed a petition criticising the draft CA that had
proposed to r estructure the pension fund regime. In response to this averment , t he
appellants stated that the respondents had failed to consider that the petition was signed
long before the CA was concluded; they maintained that IMATU concluded the CA based
on a mandate from its members.

[57] I am of the view that the determination of whether the CA was within the scope of
substantive issues delineated by the Main Agreement or not makes it necessary first to
scrutinise the provisions of the CA. This exercise will establish whether the substantive
terms of the CA were , in the final analysis, tainted by unlawfulness which rendered the
conclusion thereof ultra vires, thereby making it liable to be set aside on review. It is to
that aspect that I now turn.

Whether the CA is valid and enforceable, as contended for by the appellants, or
whether it is unlawful, as contended for by the respondents
[58] In my view, it is unnecessary to deal in any depth with the principles applicable to
the interpretation of contracts because t hey must now be regarded as well settled,
particularly in the light of the fairly recent judgments of the Constitutional Court.25 Suffice

it to reiterate that the interpretation of documents is a unitary exercise, which means that

24 Wightman t/a J W Construction v Headfour (Pty) Ltd and Another [2008] ZASCA 6; [2008] 2 All SA 512
(SCA); 2008 (3) SA (371 (SCA) para 13; Malan v City of Cape Town [2014] ZACC 25; 2014 (6) SA 315
(CC); 2014 (11) BCLR 1265 (CC) para 73.
25 Natal Joint Municipal Pension Fund v Endumeni [2012] ZASCA 13; [2012] 2 All SA 262 (SCA); 2012 (4)
SA 593 (SCA) para 18.

30

the interpretation is to be approached holistically: simultaneously considering the text,
context and purpose of the document in question.26 In the context of this matter, the focus
is on the contractual requirement of legality. I consider next the various provisions of the
CA with a view to assessing whether the high court was correct in concluding that the
terms thereof are unlawful.

[59] Determining whether a contract is in conflict with legislation requires one to analyse
the relevant provision as well as the ambit of the relevant agreement as sometimes, the
conflict is not clear and may be indirect or present by implication. In Claasen v African
Batignolles Construction (Pty) Ltd , the court pointed out that a contract that seems
‘perfectly valid on the face of it may stipulate for the performance of an act which is illegal,
which would render it void ab initio’.27

[60] I must state from the outset that at first blush, it would seem that the retirement
fund regime propounded by the CA innocuously proposes the amendment of fun d rules
to allow employees the choice to move from one fund to another accredited fund every
five years and merely requires agreed contribution rates and the provision of reports to
the Accreditation Committee of the Council. The succeeding paragraphs show that , in
reality, the CA goes much further than that. Clause 1.1 of the CA expressly states that it
applies to all employees in the sector, with the exception of managerial employees .
Section 32 of the LRA makes it clear that non-parties to a collective agreement concluded
in the bargaining council may be bound by such agreements subject to a bargaining
council requesting the Minister, in writing, to extend the m to any non -parties to the
collective agreement. In terms of the LRA, for the extension to pass muster, t he non-
parties must be within the bargaining council’s registered scope. The Minister will not

parties must be within the bargaining council’s registered scope. The Minister will not
grant this request for an extension to non-parties unless he or she is satisfied that certain
requirements have been met.28 It is common cause that the Council did not request the

26 University of Johannesburg v Auckland Park Theological Seminary and Another [2021] ZACC 13; 2021
(8) BCLR 807 (CC); 2021 (6) SA 1 (CC) para 65.
27 Claasen v African Batignolles Construction (Pty) Ltd 1954 (1) SA 552 (O) at 556H-557A.
28 Section 32(3) provides:
‘(3) A collective agreement may not be extended in terms of subsection (2) unless the Minister is satisfied
that–

31

Minister to exte nd the CA to non -parties. As I see it, this creates a difficulty for the
appellants because the CA is couched in such a manner that its implementation adversely
affects the rights of pensioners, who are non-parties.

[61] Clause 2.1 of Annexure A to the CA stipulates that, in addition to a fund being
entitled to apply for accreditation, SALGA, an employer with employees in the sector, a
trade union with members employed in the sector may also apply for accreditation of a
fund. On this aspect, the responde nts expressed the view that ‘SALGA, IMATU or
SAMWU cannot apply for accreditation of a fund any more than they can apply for the
listing of a random company on the Stock Exchange’. It is incontrovertible that neither
SALGA, trade unions nor municipalities govern the funds in question because funds are
separate from employers and employees.29 That being so, it should never be their call to
request accreditation in respect of or on behalf of any fund. It therefore makes no business
sense for the CA to clothe SALGA, IMATU or SAMWU with the authority to apply for
accreditation of an existing retirement fund. In purporting to arrogate this power to itself,
SALGA clearly acted outside of its mandate, which renders clause 2.1 unenforceable. In
my view, clothing SALGA, IMATU and SAMWU with the authority to apply for funds’

(a) the decision by the bargaining council to request the extension of the collective agreement complies
with the provisions of subsection (1);
(b)(i) the registrar, in terms of section 49(4A) (a), has determined that the majority of all employees who,
upon extension of the collective agreement, will fall within the scope of the agreement, are members of the
trade unions that are parties to the bargaining council; or
(ii) the registrar, in terms of section 49(4A) (a), has determined that the members of the employers ’

organisations that are parties to the bargaining council will, upon the extension of the collective
agreement, be found to employ the majority of all the employees who fall within the scope of the collective
agreement;
(c) . . .
(d) the non-parties specified in the request fall within the bargaining council’s registered scope;
(dA) the bargaining council has in place an effective procedure to deal with applications by non -parties for
exemptions from the provisions of the collective agreement and is able to decide an application for an
exemption within 30 days;
(e) provision is made in the collective agreement for an independent body to hear and decide, as soon as
possible and not later than 30 days after the appeal is lodged, any appeal brought against –
(i) the bargaining council’s refusal of a non-party’s application for exemption from t he provisions of the
collective agreement;
(ii) the withdrawal of such an exemption by the bargaining council;
(f) the collective agreement contains criteria that must be applied by the independent body when it considers
an appeal, and that those criteria are fair and promote the primary objects of this Act; and
(g) the terms of the collective agreement do not discriminate against non-parties.’
29 Section 5(1)(a) and (b) of the PFA; see also Tek Corporation Provident Fund and Others v Lorentz 1999
(4) SA 884 (SCA); [1999] 4 All SA 297 (Tek Corporation) para 15.

32

accreditation despite the fact that they are not empowered to make any decisions on
behalf of the funds is nothing else but an attempt at usurping the powers of the trustees
of a retirement fund. This is one of the examples of how the parties to the CA undermine
the scheme set out in the PFA.

[62] It is worth noting that clause 2.5 stipulates that if an accredited fund does not meet
the requirements for accreditation which ‘may be amended from time to time’, the
Accreditation Committee shall have the right to withdraw its accreditation. Clause 6.3 of
the CA provides that, subject to any criteria that may be established by the C ouncil from
time to time to determine the number and identity of accredited funds in which any
municipality may participate, the municipalities or trade unions may apply to the Council
‘either to increase or decrease the number of accredited funds in which an employer
participates’. The upshot of these two provisions is that the eligibility for accreditation is
something of a moving target because even a retirement fund which amended its rules in
order to be accredited may soon thereafter find itself out in the cold if SALGA or the unions
decide that the number of accredited pension funds ought to be reduced. This means that
even a fully compliant retirement fund can be dislodged at the whims of the Accreditation
Committee of the Council, which is apparently allowed to cull the number of participating
funds if it is of the view that they are too many . This kind of arbitrariness dispels the
appellants’ assertions of a rational connection between the CA and its stated objectives,
thus triggering a legality review.30 Furthermore, there can be little doubt that the ability of
funds to benefit from long-term investments will be eroded by the whimsical migration of
fund membership.

[63] The effect of clauses 5.1.1, 5.1.2 and 8.1 of the CA is that, if the funds refuse to
amend their rules and apply for accreditation (or do so but they are nonetheless denied

amend their rules and apply for accreditation (or do so but they are nonetheless denied
accreditation) the various municipalities, as participating employers represented by

30 Although a review in terms of the principle of legality may involve a lower standard of scrutiny than a
reasonableness review under PAJA, it can still be far-reaching as it includes the requirements of rationality,
legality and a duty not to act arbitrarily, capriciously or with ulterior motive. See Democratic Alliance v
President of the Republic of South Africa and Others [2012] ZACC 24; 2012 (12) BCLR 1297 (CC); 2013
(1) SA 248 (CC) para 91.

33

SALGA, must cease participating in those funds. That the CA envisages the contravention
of s 13A of the PFA is clear. However, the appellants contend that the CA complies with
the PFA because it specifically records that the PFA governs the funds. No regard is paid
to the fact that , in the same breath , the appellants boldly assert that ‘those retirement
funds that do not intend to apply for accreditation (and comply with the terms of the [CA])
do not have the right to continue to receive future contributions from employers in the
sector’.

[64] By the appellants’ own admission, ‘the primary consequence of a fund not being
accredited is that employers will cease to contribute in respect of future service’, and
‘contributions for the ongoing accumulation of retirement benefits for future service will be
made to an accredited fund instead’. The CA’s approval for a disregard of the provisions
of s 13A upon its implementation could not be clearer. Against this revelation of how the
CA would be interpreted, and given the provisions of s 7D(1)(e) of the PFA, which obliges
the funds to ‘take all reasonable steps’ to ensure that contributions are paid timeously to
the funds , the respondents cannot be faulted for bringing this litigation at this stage ,
instead of first waiting to see whether the municipalities would in fact cease to pay the
contributions. The submission that this litigation was brought prematurely therefore has
no merit

[65] It is trite that the appointment of and termination of trustees are aspects that , in
terms of the PFA fall within the domain of fund rules and are under the control of the
trustees. Clause 3.8 of Annexure A to the CA provides that in cases where the employer,
SALGA, or a trade union has the right to nominate or appoint a board member, that party
must also have the right to terminate that appointment at any time. The dangers of the
implementation of a clause of this nature are brought to mind in the observation that was

implementation of a clause of this nature are brought to mind in the observation that was
made in PPWAWU National Provident Fund v Chemical Energy Paper Printing Wood and
Allied Workers Union,31 where the court said:

31 PPWAWU National Provident Fund v Chemical Energy Paper Printing Wood and Allied Workers Union
[2007] ZAGPHC 146; 2008 (2) SA 351 (W) (PPWAWU National Provident Fund) paras 27-28.

34

‘The trustee’s obligation to exercise an independent judgment, regardless of the views of the trade
union (or employer) which appointed him is analogous to the director’s obligation to exercise an
independent judgment, regardless of the views of any party which may have procured his or her
appointment as a director.
I respectfully agree with the following assertion by Nigel Inglis-Jones . . . :
“It cannot be emphasised too strongly that the trustees of a pension scheme must be in a position
to perform their duties wholly free from extraneous pressure, whether such pressure is applied by
the other directors of the employers, or in the case of an employee -trustee by an employer or
other members in the workforce.”
Whilst this assertion is made by the learned author in respect of pensions governed by English
law, I believe it applies with equal force in our law.’
I am in unqualified agreement with this dictum.

[66] What is also discernible from the provisions of the CA is that it creates a committee
known as the Accreditation Committee, which is essentially given powers to oversee the
board of trustees. This is attested to by clauses 3.15 and 5.7 of Annexure A to the CA.
Clause 3.15 provides that the fund must demonstrate its viability to the satisfaction of the
Accreditation Committee , while clause 5.7 stipulates t hat if a fund which had been
accredited fails to meet the accreditation requirements for a year ‘it will cease to be
accredited’. Moreover, clause 5.10 provides for termination of employer participation to
funds that are not accredited, regardless of whether they had requested accreditation or
not, subject only to an appeal that may be lodged with the Accreditation Committee. From
my point of view, it matters not that the CA makes provision for an appeal by an aggrieved
fund which was denied accreditation or given notice of employee termination (clause 6.1)
because the appeal process does not cure the flaws identified above, which amount to

because the appeal process does not cure the flaws identified above, which amount to
usurping of the powers of trustees . In any event, the same bargaining council that has
established the accreditation committee also selects the panel that determines the fate of
the appeal. These aspects persuade me to agree with the respondents’ contention that
the CA impermissibly purports to regulate pension funds and subverts the existing
pension scheme.

35

[67] Furthermore, it is evident from clause 3.3 to 3.12 of Annexure A to the CA, that the
CA adds an additional layer of reporting (to the Accreditation Committee) despite the fact
that the PFA already adequately caters for reporting to the FSCA. The appellants not only
concede that much of the additional reporting required by the CA ‘is identical to what the
funds would have to report to the [Financial Sector Conduct] Authority ’ but they also
acknowledge that such additional reporting would come at a cost, which they consider to
constitute ‘a minimal additional cost’. It is not clear what amount is considered to be
‘minimal costs’. Suffice it to emphasise that it is puzzling why this parallel supervisory
regime, which comes at an additional cost, is considered necessary.

[68] I consider next the issue of the transfer of membership of in-service members. The
CA provides that in order to be eligible for accreditation, ‘the board of the fund must have
adopted a resolution approving amendment to the rules of the fund [so as to permit them
to transfer members to another accredited fund]’ under the terms set out in clause 3.2 to
4.2 of Annexure A to the CA. Clause 3.2.4 provides that in order for a fund to be eligible
for accreditation, it must permit the withdrawal or termination of participation in the fund
by an employer or employers, after giving due notice, in which case the members
employed by that employer may elec t to leave their interest in the fund on a ‘paid up’
basis, or may elect to transfer their members’ interests in the fund to another accredited
fund. The ramifications of this clause manifest clearly when viewed against the backdrop
of various judgments that have, over the years, been handed down in cases in which
employers had, contrary to fund rules, permitted in-service transfer of members from their
current retirement funds to rival funds. Courts were called upon to interpret fund rules

current retirement funds to rival funds. Courts were called upon to interpret fund rules
and, in the process of doing so, pronounced themselves on the rationale for maintaining
the financial viability of retirement funds. It is to this aspect that I now turn.

[69] In Sasol Limited v Chemical Industries National Provident Fund (Sasol),32 this
Court dealt with the transfer of members from one fund to another while they remained in
service. The court had to determine whether members were validly transferred from one
fund to another in terms of the rules of the Chemical Industries Provident Fund. The rules

32 Op cit fn 19.

36

of that fund prohibited in -service termination of membership. Seemingly in response to
pressure from employees to transfer to another fund , the employer decided to offer
employees an opportunity to transfer during a window period. The emplo yer then set 1
January 2013 as the transfer date. The fund objected to this decision, arguing that it was
not compliant with its rules and not in the best interests of its members. The employer
was adamant that after 1 January 2013, about 2 400 employees who had moved to other
funds had validly done so, and that it was entitled to cease paying contributions in respect
of those employees. The fund disagreed and approached the high court over the issue.
The high court granted an order declaring that the employees in question had not validly
transferred from the ‘old’ fund, that they remained members of that fund and that Sasol
remained obliged to pay member contributions to the ‘old’ fund.

[70] On appeal, this Court laid down that the fund rules were paramount and that
trustees were obliged strictly to adhere to and implement the rules in question. It held that
s 14 of the PFA does not regulate the transfer of members but the transfer of assets and
liabilities of members. It observed that members do not, strictly speaking, transfer
between funds. It held that the employer had not complied with the rules of the fund
governing transfer and therefore no transfer had taken place.

[71] In SAMWU National Provident Fund v Ntabankulu Local Municipality and Others
(Ntabankulu),33 the court was required to determine whether rule 3.2 of the SAMWU
National Provident Fund Rules prohibits the transfer of members to a rival fund during the
course of a member’s employment. Rule 3.2.1 of that provident fund stipulated that ‘a
member may n ot withdraw from a fund while he remains in service’. Rule 3.2.2 of the
same provident fund stipulated that ‘a member’s membership of the fund shall terminate

same provident fund stipulated that ‘a member’s membership of the fund shall terminate
on cessation of service’. That court held that ‘. . . any exit or withdrawal from the fund,
save in respect of the defined events, cannot take place unless it equates at the same
time to the termination of service’.34 The court further stated that transfers, if permissible
by the rules, will be effected in accordance with strict provisions of the rules that are

33 SAMWU National Provident Fund v Ntabankulu Local Municipality and Others (457/2015) [2018]
ZAECMHC 43 (14 August 2018) (Ntabankulu Local Municipality) para 63.
34 Ibid para 104.

37

binding on the fund itself, its board, its members, and any employer who participates in
the fund.35

[72] This Court in Municipal Employees Pension Fund and Another v SAMWU National
Provident Fund and Another (MEPF v SAMWUNPF ), explained the purpose of the
compulsory membership of a particular pension fund as follows:36
‘The number of members which a pension fund has directly affects the viability of the fund and
hence the benefits which the members will receive. It was reiterated by the Co nstitutional Court
in Municipal Employees Pension Fund (CC) para 41, that the obligation to join one of the. . .
Pension Funds and to retain membership until the individual was no longer employed by a local
authority. . . was done to ensure the viability o f these funds, to secure pension benefits for local
authorities’ employees… .’ (Own emphasis.)

[73] The Constitutional Court, in Municipal Employees Pension Fund v Natal Joint
Municipal Pension Fund (Superannuation) and Others ,37 reiterated that the obligation to
join one of the KwaZulu -Natal Pension Funds and to retain membership until the
individual was no longer employed by a local authority in KwaZulu -Natal, was done to
ensure the viability of these funds to secure pension bene fits for local authorities’
employees. In a unanimous judgment, Swain JA, alluding to the judgment of Balton J in
SAMWU National Provident Fund v Umzimkhulu Local Municipality and Others ,38 and
Hartle J in Ntabankulu Local Municipality held as follows:
‘Hartle J therefore correctly concluded that in terms of rule 3.2.1, members may not terminate
their membership of the Fund while in service of the Municipality and that the provisions of s 14
of the PFA were not applicable.’39 (Own emphasis.)


35 Ibid para 54.
36 MEPF v SAMWUPF fn 10 above para 60.
37 Municipal Employees Pension Fund v Natal Joint Municipal Pension Fund (Superannuation) and Others

[2017] ZACC 43; 2018 (2) BCLR 157 (CC); (2018) 39 ILJ 311 (CC) (Natal Joint Municipal Pension ) para
41.
38 South African Municipal Workers' Union (SAMWU) National Provident Fund v Umzimkhulu Local
Municipality and Another [2016] ZAKZPHC 57; (2018) 39 ILJ 121 (KZP).
39 MEPF v SAMWUNPF fn 10 above para 39.

38

[74] In MEPF v SAMWUNPF,40 this Court alluded to the finding made in Sasol and
explained that ss 13A(5) and 14 of the PFA perform separate and distinct functions: the
former deals with termination of membership of the fund in terms of the rules of the fund
and the transfer of individual benefits to another fund, which the individual has joined,
while the latter deals with the transfer of ‘the whole or any part of the business’ of the fund
to another fund. This Court observed that the language used in s 14 does not describe
individual voluntary withdrawals from a retirement fund and the transfer of individual
benefits to another fund. It clarified that the words ‘amalgamation’ and the transfer of ‘any
business’ to any other person ‘are not easily reconciled w ith the concept of individual
voluntary withdrawals and transfers between funds’.41 It also explained that ‘cessation of
the employee’s membership of the Fund in terms of its rules is a necessary condition to
be satisfied in terms of s 13A(5) of the PFA’.42 (Emphasis added.)

[75] Incidentally, the MWRF in the first appeal before us is the successor in title of the
South African Municipal Workers Union Provident Fund which was the respondent in the
MEPF v SAMWUPF matter alluded to above. In that matter, this Court found that the
relevant rule of SAMWUPF: (a) ‘prohibits elective in-service withdrawal of a member from
the Fund while he remains in service’;43 (b) does not infringe employees’ rights to freedom
of association;44 (c) that the purpose of compulsory membership of a particular pension
fund serves to enhance pension benefits and to secure the viability of a pension fund by
ensuring that it has significant numbers of members; 45 (d) that the relevant clause
prohibiting in -service transfer of membership is therefore not unlawful, irrational and
unreasonable;46 and (e) is binding on the members of that specific fund ’.47 Since
participating employers are members of pension funds, it follows that these fund rules are

participating employers are members of pension funds, it follows that these fund rules are
binding on municipalities.

40 Ibid para 28.
41 Ibid para 27.
42 Ibid para 23.
43 Ibid para 16.
44 Ibid para 61.
45 Ibid para 60. This finding reiterated a similar finding made by the Constitutional Court i n Natal Joint
Municipal Pension fn 37 above para 41.
46 MEPF v SAMWUNPF fn 10 above para 65.
47 Ibid para 13.

39

[76] None of the parties in these appeals submitted that any of the findings made by
this Court in MEPF v SAMWUNPF are clearly wrong. It would be a very strange twist of
events if a different panel of the same court, without holding that such findings are clearly
wrong, disavows findings made by a unanimous panel in respect of the same litigant.
Once the findings in MEPF v SAMWUNPF are accepted to be correct by this Court, as
they should on the basis of the doctrine of precedence, then a collective agreement that:
(a) purports to give in-service members of the same fund an election to leave their benefits
as ‘paid up’ and purports to allow them to transfer their membership to an accredited fund;
or (b) stipulates that participating employers (municipalities) will withdraw from that fund;
or (c) that municipalities will be entitled to stop contributing to the former and start
contributing to the new accredited fund is simply misleading on these aspects. It is
misconceptions like these which may encourage fund members to make an election to
transfer to another fund in the false belief that it is permissible.

[77] Given the authorities mentioned above, which underscore the rationale for stability
of pension funds for the greater good, namely financial viability aimed at benefitting fund
members, the fluidity of the accredited fund status as evidenced by clause 6.3 of the CA
is quite telling. The CA’s effect of eroding the economies of scale concept as postulated
by the respondents, which echo the 2015 Facilitator’s report mentioned earlier in the
judgment, and the adverse effect which the frequent migration of membership has on
long-term fund investments , as well as on the management and administration of the
funds are indisputable.

[78] It seems to me that, in respect of in -service members, the appellants’ assertion
that the reference to s 14 of the PFA in various clauses of the CA is a safeguard for its

that the reference to s 14 of the PFA in various clauses of the CA is a safeguard for its
compliance with the PFA is simply an attempt at obfuscation, as that provision is, on th e
strength of MEPF v SAMWUNPF , only applicable if there is a transfer of business and
not when members, in wanton disregard of the binding rules of the fund to which they
belong, nevertheless elect to transfer from one fund to another. The consciousness of the
appellants to the fact that the CA’s accreditation regime sanctions a disregard of binding

40

rules and the thinly veiled coercion of the amendment of fund rules is evident from the
following passage in the answering affidavit:
‘[The unaccredited pension funds] cannot simultaneously receive contributions from employers in
the sector, and have those employers’ employees as their members, without their rules meeting
the agreed standards set by the employers and employees about how deferred compensation is
to be collected, looked after, invested and ultimately disbursed. If the retirement funds fail or
refuse to meet governance standards set by the collective bargaining parties who participate in
the funds, those parties should be entitled to disassociate or to withdraw from those funds, and
should certainly not be compelled to continue contributing to them against their wishes.’

[79] The fact of the matter is that while in-service transfers are not prohibited by the
PFA, fund rules that do not permit such transfers are binding – this is what this Court
confirmed in both Sasol and MEPF v SAMWUNPF . Against the background o f this
judgment, which found that the rules of a retirement fund are binding on its members, it
is simply misleading to assert, in a collective agreement, that an in-service member of an
existing fund, that has not applied for accreditation a nd whose rules do not permit
in-service transfer, may make an election to be assigned the status of a ‘paid up’ member
in that fund and to thereafter transfer to another fund; yet this is what clause 9.3.2 of the
CA sanctions. Because rules of a retirement fund are binding, 48 an in-service transfer of
such a member is impermissible. Of course, the position is different in respect of new
employees who, from the outset, join a fund that permits in-service transfer from one fund
to another, provided that the collective agreement has no other provisions which taints its
lawfulness.

[80] Case law has shown that f und rules that prohibit in -service transfer of individual

[80] Case law has shown that f und rules that prohibit in -service transfer of individual
benefits to another fund are not necessarily crafted with an ulterior purpose, for example
with the aim of preventing competition. In many instances, they are crafted to enable
members to benefit from a generous tax treatment of their contributions and benefits and,
are as such, effective in ensuring that retirement funds do not lose members. 49 This is

48 Ibid para 13.
49 Retirement funds rivalry, voluntary withdrawal of membership, and transfer of assets during the period of
employment.

41

because a substantial loss of members is a risk to the financial viability of a fund. This
Court, in MEPF v SAMWUNPF, acknowledged this rationale as follows:50
‘The right to end an association in the retirement fund context cannot be considered in isolation.
As pointed out by this court in Municipal Employees Pension Fund (SCA) para 30, the purpose of
the compulsory membership of a particular pension fund, serves to enhance pension benefits and
to secure the viability of a pension fund, by ensuring that it has significant numbers of members.
Pension funds must have the necessary critical mass to make them viable. The number of
members which a pension fund has directly affects the viability of the fund and hence the benefits
which the members will receive.’

[81] What is discernible from the above mentioned judgments is that the entire pension
fund scheme set out in the PFA places a high premium on the viability of retirement funds.
Moreover, members may exit a pension fund if this is permissible in terms of the rules of
the pension fund to which they belong, and such rules may be amended, provided that
the board of trustees deem it to be in the best interests of the fund and its members.51 As
stated before, several judgments of this Court have recognised that e ach pension fund
depends, for its stability and continuing liquidity, on maintaining a substantial part of its
membership and constant inflow of funds. If liquidity is lost, then the fund could have to
divest its current investments, often at huge discounts, which could result in investment
losses. It could also affect its ability to make new investments or fulfil its investment policy,
resulting in an inability to generate a reasonable or any return for its members.

[82] The appellants d id not dispute that largescale transfers (ie when a substantial
number of members are transferred out of the fund ) could place a fund’s survival at risk

number of members are transferred out of the fund ) could place a fund’s survival at risk
as it may not be able to sustain its investment portfolio due to loss of members. They
seem to downplay this on the basis that employers (municipalities) would, in terms of
s 30(3) of the PFA, have to carry any shortfa ll that could eventuate as a result of the
winding up or termination of funds.


50 MEPF v SAMWUNPF para 60.
51 In PPWAWU National Provident Fund fn 31 above para 22, the court observed that it is the fund’s board,
and not the union, which is entitled to direct, control and oversee the funds operations.

42

[83] Despite the knowledge of the possible financial instability that could result from
free transfer of members’ interest while in active service, the indifference regarding the
funds’ financial stability being jeopardised to the point of their demise is equally irrational.
This is even more so given the warning sounded in the 2015 Facilitator’s Report which
cautioned that it is not reasonably appropriate to permit transfers o n a regular basis and
that, save in exceptional circumstances, the administrative cost and complexity of this
kind of transfer and potential adverse consequences for accumulated retirement savings
of employees wishing to move and for others left behind, ou tweigh any benefit or
perceived benefit of employees being allowed to move.

[84] Notwithstanding all the aforementioned factors, clause 3.2.1 of Annexure A to the
CA, which was concluded long after the aforementioned judgments were handed down,
specifies as a prerequisite a stipulation that in order for a pension fund to qualify for
accreditation, the rules of that fund must permit the transfer of members to another
accredited fund. Clause 3.2.2 provides that the pension fund rules of a fund seeki ng
accreditation must permit members who have elected or been required to transfer into
the fund, as contemplated in clauses 7 and 9.3 of the CA, to join the fund with effect from
the transfer date. These clauses of the CA apply regardless of whether a fun d’s existing
rules permit transfer of membership.

[85] It bears emphasising that s 5 of the PFA provides that , once registered, a fund
becomes a body corporate that is capable of doing all such things as may be necessary
for or incidental to the exercise of its powers or the performance of its functions in terms
of its rules. Furthermore, s 7C(1) makes it clear th at it is the fund’s board and not the
employers, employees or their representatives which direct, control and oversee the

employers, employees or their representatives which direct, control and oversee the
fund’s operations. In doing so, its decisions must be in the best interests of its members.
While I agree that there is no provision of the CA that expressly forces the funds to amend
their rules against their will, what remains clear is that funds which do not agree to amend
their rules so as to allow in -service transfer of members will not be accredited. Clearly,
the only manner in whi ch an existing fund that does not permit an in -service transfer of
membership is if it agrees to amend its rules to the satisfaction of the Council.

43

[86] All things considered, I find that I have little to add to what was said by the high
court, namely that the very fact that existing funds would, in order to ensure their
continued existence, have to bind themselves to the scheme proposed in the CA is
constative and inimical to the independence of the board and the purpose for which funds
were established, as well as the statutory regime of the PFA. It is plain that the stipulations
of the CA, which purport to permit moving from one fund to another in violation of the fund
rules as a condition for accreditation, are unlawful.

Impact of the CA on pensioners
[87] It was not disputed that some of the fund members are pensioners. Those that
retired before the conclusion of the agreement were obviously not members of any union
that was consulted (IMATU and SAMWU), as they wer e retirees. It follows that these
trade unions cannot purport to have represented pensioners’ interests during the
negotiations which preceded the conclusion of the collective agreement. That being so,
there can be no valid reason why these pensioners’ interests must be decided by trade
unions who negotiated the terms of the CA after these pensioners’ retirement, without as
much as advising them about the proposed terms of the CA and how it could impact their
retirement funds as required by the pension regulatory framework.

[88] Furthermore, the respondents’ assertions of the demise that will befall them if they
are not accredited have not been seriously disputed. The CA states boldly that
contributions to the funds in question (both employer and employee contributions) will
cease and that the members of these funds may leave their accrued fund interests in the
‘unaccredited funds’ as paid-up benefits, while the fund interest would be transferred into
a fund that is ‘ accredited’. The appellants did not dispute that maintaining ‘paid up’
membership in one fund while at the same time actively contributing to another fund

membership in one fund while at the same time actively contributing to another fund
means duplicating the costs of administration. Providing an option to the member to be
treated as ‘paid up’ while having to commence future contributions to another (accredited)
fund is not really a viable option. It makes no economic sense for that member to have to
deal with the administrative burden of participating in more than one fund.

44

[89] As regards the shortfall envisaged in s 30(3) of the PFA, the CA boldly asserts that
the employer will assume responsibility for funding any shortfall applicable52 immediately
prior to the transfer of members to another accredited fund as contemplated in clauses 7
and 9.3 of the CA. While it is indeed so that the retirees take none of the investment risks,
it is cold comfort to suggest that the provisions of s 30(3) of the PFA will protect their
interests because any shortfall will become a debt payable by the employer
(municipalities represented by SALGA). Unquestionably, without sufficient available
funds to cover the shortfall, both the municipalities and the reti rees could be imperilled.
Given the paucity of evidence on this aspect, it is unclear on what basis the appellants
assume that there ‘should’ thereafter be ‘sufficient assets to purchase annuity policies
from an insurer to provide matching benefits’ in the event that active members of the
existing unaccredited fund migrate to an accredited fund.

[90] From the discussion in the preceding paragraphs, it is clear that failure to be
granted accreditation status will effectively preclude existing funds from servicing new
employees, thereby creating a risk of them becoming unviable to the detriment of
pensioners, who are entitled to the protections of the PFA. Bearing in mind that the
pensioners were not consulted prior to the conclusion of the CA, potential prejudice of
this nature to this vulnerable category of fund members should not be countenanced.

[91] While it could perhaps be argued that the new members of IMATU and SAMWU
would, for better or for worse, have to stand or fall by the choices made on their behalf by
the trade unions to which they voluntarily belong, in the current economic climate, it would
be unreasonable for anyone, without countervailing evidence, to shrug off potential risks
that are likely to jeopardise the financial stability of some retirement funds to the detriment

of fund members who were not represented by these unions. In this regard, the interests
of all stakeholders in the retirement landscape should have been taken into consideration.
Based on the correspondence exchanged among the parties and the workshop to which
the funds were invited, I am satisfied that the consultative processes in respect of the

52 See para 3.2.1 and 3.2.4 (c) of Annexure A to the CA.

45

funds meet the requirements. This obviously has no bearing on the validity of the CA that
emanated from that consultative process.

[92] Due recognition should be given to the fact that pensioners are the primary
stakeholders of retirement funds as they directly benefit from the fund’s performance and
therefore have a vested interest in th e proper management of the fund . Section 14B(3)
enjoins the board to establish and implement a policy regarding periodic increases to be
granted to pensioners and deferred pensioners, which policy must be communicated to
pensioners and deferred pensioners whenever it is changed. This provision illustrates the
importance of consulting with pensioners as stakeholders of a fund in relation to decisions
which may impact adversely on their monthly pensions. The recognition of pensioners as
stakeholders is evident from the following dictum of this Court in Tek Corporation,53 where
it was stated:
‘The pension fund, the powers and duties of its trustees, and the rights and obligations of its
members and the employer are governed by the Rules of the fund, relevant legislation, and the
common law. The fund is a legal persona and owns its assets in the fullest sense of the word
“owns”. . . . The object of the fund is “to provide retirement and other benefits for employees and
former employees of the employers in the event of their death”. . . . The trustees of the fund owe
a fiduciary duty to the fund and to its members and other beneficiaries. . . .’

[93] In my view, the pensioners, as stakeholders for whose benefit retirement funds are
created, ought to have been consulted as they stand to get affected if largescale transfers
of membership impact on the financial viability . There is no evidence to show that they
were consulted. But more than that, there is no evidence to show that the concerns raised
by the funds i n relation to the pensioners received any serious consideration from the

by the funds i n relation to the pensioners received any serious consideration from the
appellants. The appellants seem not to have paid the requisite attention to the potential
risk of a substantial number of retirement funds being wound up simultaneously or in quick
succession, and the financial burden municipalities would have to bear in terms of s 30(3)
of the PFA, which may in turn impact their ability to meet other financial obligations set

53 Tek Corporation fn 29 above para 15.

46

out in the MSA . This would be a recipe for a disaster for the national fiscus because
municipalities are publicly funded.

[94] As mentioned before, the high court raised a concern about a lack of evidence
showing that the appellants had familiarised themselves with the budget and fiscal
capacity of the municipalities prior to concluding the CA. This evidence would have
sufficed to show that municipalities would be in a financial position to cover any shortfalls
arising from funds wh ich collapse on account of not being accredited . The risk for the
pensioners in the local government sector is that if the municipalities cannot cover the
shortfall, they will be regarded as ‘deferred creditors’, and would therefore not enjoy
priority when the liquidators settle the debts of the funds. The employers’ increased
exposure to the risk of paying higher shortfalls on account of more members having left
a fund to a point o f its non-viability, is a serious risk for pensioners because unviable
funds may not be able to pay pensioners’ monthly pension, or the statutory minimum
increases54 in the future.

[95] Of significance is that the longevity risk that funding shortfalls can cause, impacting
the ability of pension funds to pay out what they are statutorily obliged to pay to its
pensioners, were not disputed. Bearing in mind that the pensioners who were members
of the respondents retired as members of a fund that did not permit transfer of members
from the fund, these pensioners fall into a category of fund members who ought to be
consulted prior to the conclusion of the CA when changes that may have a bearing on
their benefits or are statutory introduced; this did not happen.

[96] It must be borne in mind that in terms of clause 3.1 of Annexure A to the CA, one
of the conditions for a fund being eligible for accreditation is that its board must have
adopted a resolution approving amendment to the rules of the fund, and that the rules of

adopted a resolution approving amendment to the rules of the fund, and that the rules of
those funds must permit the transfer of members to another accredited fund should its
accreditation be withdrawn. Nothing in the PFA pr ohibits retirement funds from allowing

54 The obligation to pay minimum pension increases is stipulated in s 14B(4) of the PFA.

47

in-service transfer of members if such funds are so inclined to allow.55 The appellants’
submission that the Registrar, subsequent to the conclusion of the CA, allowed many
funds that sought accreditation to register is neither here nor there. This is because it is
no answer to the principle laid down in several judgments of this Court: that the rules of
a registered fund are binding not only on the funds and the members and officers thereof,
but also on employers and their employer organisation s. The Registrar would have no
basis to, without more, object to the registration of a retirement fund merely because its
fund rules give its members the choice to join another fund if they are so inclined.

[97] What must be noted for purposes of this jud gment is that s ubsections 71(1) and
(2), which enjoin SALGA to take into account the budgets of municipalities, the fiscal
capacity and efficiency of municipalities and national economic policies in concluding
collective agreements, was introduced by the 2011 Amendment Act. The 2011
Amendment Act was declared unconstitutional by the Constitutional Court on 9 March
2017 on procedural grounds on account of failure to follow proper legislative processes.
That order of constitutional invalidity was suspended until 9 March 2019. After that date,
the original provision as set out in the principal Act was revived. This provision stated as
follows under the heading ‘Bargaining Council Agreements’: ‘Municipalities must comply
with any collective agreements concluded by organised local government within its
mandate on behalf of local government in the bargaining council established for
municipalities’.

[98] In 2022, pursuant to proper procedures being followed, the legislature promulgated
the Amendment Act which introduced the same text that had been introduced by the 2011
Amendment Act. This means that, although the amended provision was applicable at the

Amendment Act. This means that, although the amended provision was applicable at the
time of commencement of negotiations in the Council and at the time of the hearing of the
application at the high court, the amended text was not in force at the time of the
conclusion of the CA; the original text as set out in the principal Act was obviously
applicable. Thus, SALGA was required to conclude agreements ‘within its mandate’.


55 Ntabankulu Local Municipality fn 33 above para 43.

48

[99] Surely, where t he rules of a fund do not permit an in -service transfer of
membership, those rules are equally binding on all the members of the funds, including
the municipalities. The binding nature of such rules on municipalities cannot be
sidestepped or watered down b y SALGA concluding a CA which sets forth the
amendment of the same rules as a prerequisite for eligibility for fund participation in the
local government sector . Despite their awareness about the binding nature of the fund
rules which do not permit in -service transfers, the appellants were adamant that this is
what would happen upon the implementation of the CA:
‘In respect of elective in -service transfers. . . First, the employer can choose which retirement
funds it wishes to participate in. The employees can choose which of those retirement funds they
wish to join. If they find that they are unhappy with their choice (for example because they see
that another fund in which they could participate is offering superior investment returns or cheaper
costs or better governance) they should, periodically, have the right to transfer to that fund.’
Regard being had to this averment, the high court’s conclusion that the powers which the
CA gives to the Accreditation Committee, in essence, coerce the adoption of new rules is
not misplaced.

[100] The pensioners were obviously not members of trade unions who are party to the
CA. Given the protection offered to retirees by the PFA, the question that begs to be
answered is: a t which level of the collective bargaining process were their interests
considered before a decision on the terms of the CA? The appellants’ stance in response
to the concerns raised by the funds prior to the conclusion of the CA was that the
pensioners and deferred members were not affected by the proposal and the CA, save
for the pensioner population of defined benefit funds where the majority of the active

for the pensioner population of defined benefit funds where the majority of the active
members move out of the fund. Despite the risk of the economic impact of reduced fund
viability, the appellants nonchalantly assert that in the event of a fund becoming financially
unviable on account of not being able to manage the accumulated retirement savings of
pensioners and in -service members who choose to leave their accumulated savings in
the old fund, ‘trustees may and probably should decide to wind up the fund, or to merge
with one or more other funds’ . A merger with another fund cannot be imposed on the
existing retirement fund. In any event, little or no consideration is paid to what a resultant
shortfall may cause in the event of a fund being wound up in terms of s 30(3) of the PFA.

49

In my opinion, the State’s exposure to financial risk on the back of the CA is contrary to
public interest and should not be taken lightly.

[101] The appellants contended that the funds are not forced to apply for accreditation
and that they have a ‘choice’ not to apply. When one takes into account that the main
goal of a pension fund is to ensure that there is enough money to pay employees’
pensions after they retire, the respondents’ assertions that their funds will, under those
circumstances, not function optimally and that they would in effect, just be waiting for their
inevitable winding up, cannot be ignored on the basis that there is no obligation to keep
unaccredited pension funds afloat or sustainable.

[102] The appellants’ concession that the pensioner population of defined benefit funds
might be affected by the terms of the CA where the majority of the active members move
out of the fund is significant. In terms of the PFA, retirement benefit funds are required to
increase the monthly pension payments at intervals not exceeding three years. The
minimum amounts by which pension payments must be increased are determined in
terms of a formula that takes into account increases in rates of inflation, returns earne d
on the assets of the funds stretching over periods since the date of retirement of individual
pensioners, and the affordability of such increases. It requires no rocket science to
discern that where active contributions into a fund cease and the fund who se members
have moved to another fund continues to exist only for the benefit of retirees and deferred
members, the fund may not be viable enough to pay statutory minimum increases to
retirees, or even to continue paying the monthly pension until the retirees’ death.

[103] Self-evidently, the organising and financing of income security in retirement relies
on trust in the law and sound financial management. It is incontestable that unionised

on trust in the law and sound financial management. It is incontestable that unionised
employees cannot escape their decision to be members of a union . Thus, by virtue of
their union members hip, they voluntarily assume the risks that ma y result from the
implementation of a collective agreement concluded by their trade union. However, it
would be reckless to allow retirees who were never consulted to be exposed to the risk
of the erosion of their retirement benefits on account of unviable funds, to the point where

50

they could potentially have to be reliant on the government’s social assistance grant
programmes despite ha ving paid employee contributions for the duration of their
employment. The same is applicable in respect of in -service members who are not
unionised and to whom the CA ought to apply only once extended by ministerial
determination in terms of s 32 of the LRA.

[104] In the circumstances of this case, the CA becomes applicable to retirees and non-
unionised employees and affects existing pension funds immediately upon its
implementation, regardless of whether it was extended to non-parties or not. The principle
of majoritarianism cannot, in the context of this case, come to the appellants’ rescue. In
Transport and Allied Workers Union of South Africa v PUTCO Limited,56 the Constitutional
Court rejected the application of this principle under circumstances in which the relevant
collective agreement had not been extended to non -parties by ministerial decree as
envisaged in s 32 of the LRA. That Court said:
‘If it were a foregone conclusion that a collective agreement. . . would be applicable to an entire
sector, then it would defeat the purpose of an extension.’

[105] The following passage in Association of Mine Workers and Construction Union and
Others v Chamber of Mines of South Africa and Others (AMCU) ,57 also shows that the
appellants’ r eliance on the majoritarian principle under the present circumstances is
misplaced:
‘That majoritarianism is functional to enhanced collective bargaining is internationally
recognised. . . . Indeed, seemingly paradoxically, promotion of collective bargaining is so deeply
rooted a principle of internationally recognised labour dispensations that they require merely
adequate or sufficient representivity for enforcement against non -members, and not necessarily
majority representation.

majority representation.

56 Transport and Allied Workers Union of South Africa v PUTCO Limited [2016] ZACC 7; (2016) 37 ILJ 1091
(CC); [2016] 6 BLLR 537 (CC); 2016 (4) SA 39 (CC); 2016 (7) BCLR 858 (CC) para 63.
57 Association of Mine Workers and Construction Union and Others v Chambe r of Mines of South Africa
and Others [2017] ZACC 3; (2017) 38 ILJ 831 (CC); 2017 (3) SA 242; (CC) 2017 (6) BCLR 700 (CC); [2017]
7 BLLR 641 (CC) ( AMCU) paras 56 -58; also see Transport and Allied Workers Union of South Africa v
PUTCO Limited [2016] ZACC 7; [2016] 6 BLLR 537 (CC); 2016 (7) BCLR 858 (CC); 2016 (4) SA 39 (CC).

51

This Court has recognised the constitutional warrant for majoritarianism in the service of collective
bargaining. In TAWUSA, the Court considered the principle in the context of section 32.
Khampepe J emphasised that “the principle finds application after a collective agreement has
been concluded”, namely when the agreement is extended “at the behest of the majority after the
collective agreement process has run its course”. The implication is analogous – that the principle
applies also to section 23 extens ions. . . . Section 23(1) does not countenance indefinite or far -
reaching extension.’ (Emphasis added.)

Review
[106] In its pursuit to have the CA set aside, the respondents relied on PAJA,
alternatively, a legality review, which is anchored on the provisions of s 1 of the
Constitution. Th e respondents argued that this approach was apparently a safety net
designed to insulate the MRO and its co-respondents from any criticism that they avoided
the provisions of PAJA by seeking declaratory relief, 58 or avoiding the legality review
which is, by default, the method of judicial control of all public power.59 Of importance on
this aspect is that, h aving analysed the circumstances of this matter, the high court
concluded that the conclusion of the CA was reviewable under PAJA, but went on to state
that it would similarly be reviewable under the principle of legality.

[107] What can be gleaned from more than two decades of our jurisprudence is that,
since the Constitutional Court, in Fedsure Life Insu rance Ltd v Greater Johannesburg
Transitional Metropolitan Council and Others,60 held that the exercise of public power is
only legitimate when it is lawful, the principle of legality has expanded considerably . As
regards a PAJA review, the identification of whether an act constitutes ‘administrative
action’ as contemplated in s 1 of PAJA involves the consideration of facts and the nature

58 To the extent that the conduct of the conclusion of the CA is considered to constitute administrative action,
not relying on PAJA would be fatal to the application, on the strength of Minister of Health and Another v
New Clicks South Africa (Pty) Ltd and Others (Treatment Action Campaign and Another as Amici Curiae)
2006 (2) SA 311 (CC); 2006 (1) BCLR 1 (CC).
59 See Premier, Gauteng and Others v Democratic Alliance and Others ; All Tshwane Councillors who are
Members of the Economic Freedom Fighters and Another v Democratic Alliance and Others; African
National Congress v Democratic Alliance and Others [2021] ZACC 34; 2021 (12) BCLR 1406 (CC); 2022
(1) SA 16 (CC) paras 1 and 66-67.
60 Fedsure Life Insurance Ltd v Greater Johannesburg Transitional Metropolitan Council and Others 1999
(1) SA 374 (CC); 1998 (12) BCLR 1458 para 56.

52

of the function exercised.61 It is trite that the assessment whether a deci sion constitutes
‘administrative action’ is context-specific and, as such, there is no hard-and-fast rule that
can be extrapolated to easily dispense with that assessment. 62 Equally trite is that there
can be no single test of universal application to determine whether a power or function is
of a public nature.

[108] It is well-established that ultra vires acts, lack of rationality or improper motive for
the conclusion of the agreement are proper bases for both a PAJA and legality review.
Notably, in Democratic Alliance v President of the Republic of South Africa and Others
(Democratic Alliance), the Court held that there was no need to believe that the test for
rationality, in terms of the principle of legality and PAJA review, should be any different.63
It remarked that ‘[i]t cannot be suggested that a decision that would be irrational in an
administrative law setting might mutate into a rational decision if the decision being
evaluated was an executive one’. The court also emphasised that rationality is a single,
consistent concept and not a variable one with differing thresholds.64 For reasons that will
later become apparent, this section of the judgment advisedly refrains from canvassing
the evaluation tool of reasonableness.

[109] A plethora of judgments have held that a legality review now includes rationality
and vagueness, aspects previously considered to resort exclusively under the purview of
a review anchored on the provisions of the PAJA review.65 In the ordinary meaning of the
term, a decision is ‘rationally’ connected to the purpose for which it was taken if it is
connected to that purpose by reason, as opposed to being arbitrary or capricious. 66 Of

61 C Hoexter and G Penfold Administrative Law in South Africa 3 ed (2021) at 275 with reference to Chirwa

v Transnet (Pty) Ltd [2007] ZACC 23; 2008 (4) SA 367 (CC); 2008 (3) BCLR 251 (CC); [2008] 2 BLLR 97
(CC); (2008) 29 ILJ 73 (CC).
62 President of the Republic of South Africa and Others v South African Rugby Football Union and Others
2000 (1) SA 1 (CC); 1999 (10) BCLR 1059 (CC) (SARFU) para 143.
63 Democratic Alliance v President of the Republic of South Africa and Others [2012] ZACC 24; 2012 (12)
BCLR 1297 (CC); 2013 (1) SA 248 (CC) (Democratic Alliance) para 44.
64 Ibid para 30.
65 C Hoexter ‘Administrative Justice in Kenya: Learning from South Africa’s Mistakes’ (2018) 62(1) Journal
of African Law 105 at 123.
66 Airports Company South Africa SOC Ltd v Imperial Group Ltd and Others [2020] ZASCA 2; [2020] 2 All
SA 1 (SCA); 2020 (4) SA 17 (SCA) (Airports Company South Africa SOC) para 30.

53

significance is that there must be a rationally objective basis justifying the impugned
conduct.67

[110] In AMCU, the Constitutional Court recognised that a private actor may, depending
on the specific circumstances of a case, exercise public powers. It stated as follows:68
‘. . . [T]he constitutional dispensation recognises that state organs and public authorities may
perform acts that are not public in nature, but conversely, and more pertinently to the present,
that private actors may perform acts that entail the exercise of public power. This is because
“public powers and public functions are wider than governmental powers and governmental
functions”. . . Hence, it is trite that state organs do not alone exercise public power. Non -state
organs may and do exercise public po wer. Beyond the initial question of typology (private vs
public) lies the practically more crucial inquiry as to how the particular exercise of power is
regulated and what safeguards exist for its exercise.’
While the Court stated that the fact that the exercise of public power which entails public
law consequences does not mean that it was ‘administrative action’, it stated that:
‘The conclusion of an agreement under section 23(1) (d) is subject to judicial scrutiny …is
reviewable under the principle of legality.’69

[111] With those principles in mind, I now consider whether the implementation of the
CA brings with it the exercise of public power, or whether the granting of the power to the
Council exclusively to determine whether retirement funds are eligible for accreditation
on the terms set out in the CA has features signifying the exercise of public power, or
whether the arrogation to the Council of the power to extend its application to non-parties
through the mere implementation of t he CA amounts to the exercise of a public power
such as to bring this matter within the realm of a legality review. I also examine whether,

such as to bring this matter within the realm of a legality review. I also examine whether,
in the processes running up to the conclusion of the agreement, the parties to the CA
acted ultra vires as contended for by the respondents.


67 Merafong Demarcation Forum v President of the Republic of South Africa and Others [2008] ZACC
10; 2008 (5) SA 171 (CC) para 63.
68 AMCU fn 57 above paras 69-70.
69 Ibid para 83.

54

[112] First, it is clear from the CA that the Council exclusively determines eligibility of the
retirement funds to provide service s to the employees of participating municipalities.
Second, it is a committee of the Council that makes the initial determination as to whether
a fund that applied for accreditation qualifies for same; in the event of a fund being
aggrieved by its decision, it is a committee/panel appointed by the same C ouncil which
will finally decide the fate of that appeal. Third, even in instances in which the trustees of
the fund opted not to apply for accreditation, a determination can still be made by the
Council if a trade union or SALGA applies for its accreditation. Fourth, it is the C ouncil
that, upon the request of a trade union or SALGA, decides whether the number of
accredited funds should be increased or reduced. Fifth, it can be discerned from the terms
of the CA that, if existing funds whose rules do not allow in-service transfer of membership
do not apply for accreditation, or if they apply but accreditation is not granted, then the
municipalities, as employers, must cease participating in those funds.

[113] Sixth, a further consideration is that employer contributions are withheld from
retirement funds that have not been accredited. Seventh, the CA, interpreted purposively,
reveals that it has direct and immediate consequences for indiv iduals or groups of
individuals. This is because the consequences that in terms of the CA follow once a fund
has not been accredited are extended to funds (for example the MWRF) that do not permit
in-service transfer of membership; this, despite several co urt judgments having found
those fund rules to be justifiable and to be binding on all fund members, which in this
instance would make such rules equally binding on municipalities qua employers.

[114] Eighth, the CA has far-reaching consequences as it expressly states in clause 1.1

[114] Eighth, the CA has far-reaching consequences as it expressly states in clause 1.1
of the CA that it applies to all employees in the sector, save for managerial employees.
This means that it applies to non-unionised employees and retirees despite the extension
envisaged in s 32 of the LRA not having taken place. The fact that clause 4.1 states an
intention to extend the CA to non -parties in the future does not change the fact that its
implementation, even before the envisaged extension, already entails potential prejudice
to this category of employees. Against this background, sight must not be lost of the fact
that unorganised groupings such as retirees and non -unionised in-service employees,

55

too, are interested stakeholders in the pension fund landscape70 and ought to be included
in all consultations in terms of which fund members’ benefits stand to be adversely
affected.

[115] Retirement funds owe it to both current employees and retirees, qua members, to
ensure that these members are not prejudiced. The funds thus have every justification to
be concerned when a collective agreement purports to give SALGA the right to apply to
the Accreditation Committee for the accreditation of retirement funds, and to apply to the
same Accreditation Committee for withdrawal of a fund’s accreditation, in circumstances
where the final say is that of an appeal body whose members are chosen by the Council.71
All of this points to the unlawfulness of the CA.

[116] It is apparent from the seven points canvassed in the preceding paragraphs that
the CA has far-reaching consequences as it grants the Council wide powers that it would
not even have if it was the administrator of the pension funds. It is worth noting that s 28(g)
of the LRA empowers a bargaining council to establish and administer pension, provident,
medical aid, sick pay, holiday, unemployment and training schemes or funds or any
similar schemes or funds for the benefit of one or more of the parties to th e bargaining
council or their members.

[117] Section 13B of the PFA requires that any person who wants to administer the
investments of a pension fund or the disposition of benefits provided for in the fund rules
must be approved by the FSCA and comply with the conditions set from time to time by
that Authority. In terms of s 13B(2) , the FSCA may grant approval only in respect of
specified functions. Since pension funds administered within the contemplation of s 28(g)
require the FSCA’S express approval, the Council cannot, even as a last resort, claim
that the powers it has arrogated to itself in terms of the CA equate to administering

that the powers it has arrogated to itself in terms of the CA equate to administering
pension funds within the contemplation of the LRA. There can be no doubt that the CA
impermissibly arrogates to the C ouncil the power to unilaterally determine which

70 The definition of a stakeholder in s 1 of the PFA includes a current member, a pensioner, a deferred
pensioner, a former member and an employer participating in the fund.
71 Clauses 6.1 and 6.4 of the Annexure to the CA.

56

retirement funds may participate in the local government sector. In doing so, not only does
it impermissibly seek to perform functions beyond the scope of those delineated in the
Main Agreement , but it also seeks to perform functions beyond the scope of its own
constitution as well as those set out in s 28 of the LRA in breach of the requirements of
the PFA. Plainly, the Council acted unlawfully.

[118] Notably, SALGA as a local government representative participated in the
negotiations of and subsequent conclusion of the CA which undermined the scheme of
the PFA in various ways. Against the knowledge that some municipalities were previously
ordered by courts to pay the contributions that they had refused to pay to certain funds
on account of a wrong belief that they were not obliged to do so, and that such orders
may be accompanied by orders for the payment of interest on arrear payments, 72 it is
strange to see municipalities, through SALGA, agreeing that they will cease paying
contributions to unaccredited funds. This arouses curiosity about SALGA’s mandate. In
similar vein, the provisions of the CA purporting to permit an in -service transfer of
membership despite the municipalities’ knowledge about judgments that confirmed the
validity of fund rules that do not permit in-service transfer also pique one’s curiosity about
SALGA’s mandate.

[119] What can be elicited from one of the stated objective s of the CA , namely an
intention to ‘regulate pension funds’ as expressed in the draft collective agreement and
the improvement of the efficiency of the ‘governance of funds’ as set out in clause 2.4 of
the CA, is the true intention of the appellants to regulate the pension fund, which they are
attempting to do without complying with legislative requirements. This explains the
inclusion of various far-reaching provisions that have already been alluded to above. That
being so, I am not persuaded that such unlawful conduct can, by any stretch of the

being so, I am not persuaded that such unlawful conduct can, by any stretch of the
imagination, be perceived as falling within SALGA’s mandate as contemplated in s 71 of
the principal MSA. An irresistible inference is that the conclusion of the CA on its current
far-reaching terms with the potential to harm the financial capabilities of municipalities

72 Compare Municipal Workers' Retirement Fund v Mafube Local Municipality and Others [2025] ZAFSHC
7; [2025] 2 All SA 274.

57

was not within SALGA’s mandate. If it was, then the municipalities’ persistence in conduct
that was censured by the courts in previous judgments is plainly inexplicable.

[120] As regards the issue raised about IMATU’s mandate to conclude the CA, it suffices
to conclude that since it is undisputed that the retirees (who were obviously not members
of any trade union after their retirement) were not consulted about the changes which the
CA intended to introduce to the pension regime . The CA flounders on account of the
failure of the appellants to consult with these important stakeholders . These findings,
coupled with the finding that SALGA had no mandate to be a party to a CA which is clearly
beyond the scope of the Council, means that the CA does not enjoy the protection set out
in s 71 of the MSA, and is on that basis, not binding on the municipalities.

[121] I have demonstrated the extent to which the CA’s conclusion was in contravention
of applicable legislation. I have also demonstrated that the implementation of various
provisions entails a disregard of and ultimately undermines various protections granted
to funds and pensioners by the PFA. Regard being had to all the afore-mentioned far-
reaching consequences of the CA, there can be no doubt that the appellants’ joint
conduct, which finds expression in the CA, warrants judicial scrutiny. The principle of
legality requires that every exercise of public power must be rational. 73 It is a settled
principle of our law that a contract that contains an illegal term is rendered void in its
entirety unless that term is rendered severable from the rest o f the contract. 74 The
appellants argued that even if the impugned clauses of the CA were to be excised from it
on account of unlawfulness, the remainder of the CA would still be enforceable and not
be susceptible to a review. I explored that avenue but found it to be untenable, because
most of the provisions of the CA do not pass muster. The few innocuous provisions are

most of the provisions of the CA do not pass muster. The few innocuous provisions are
interlinked with the impugned provisions and would not make business sense if
interpreted on their own.

73 Democratic Alliance fn 63 above para 27; Minister of Defence and Military Veterans v Motau and Others
[2014] ZACC 18; 2014 (8) BCLR 930 (CC) para 69.
74 See Markowitz & Son Trust v Bassous 1966 (2) PH A65 (C). Also see Sasfin (Pty) Ltd v Beukes [1989] 1
All SA 347; 1989 (1) SA 1 (A) 17D -E; R H Christie and G B Bradfield Christies Law of Contract in South
Africa 8 ed (2022) at 473.

58

[122] There can be no doubt that when a bargaining council arrogates to itself the power
to extend the application of a CA to retirees and non-unionised employees in the manner
in which the CA does, it impermissibly purports to exercise a public power or to perform
a public function which may only be performed by a member of the Executive (ie the
Minister) in terms of legislation (ie s 32 of the LRA), thereby making the CA susceptible
to judicial review. In this regard, the CA is not identical to but largely comparable to the
collective agreement which was the subject of the appeal in AMCU insofar as its impact
on non-parties is concerned. Although the appellants are private bodies, their conduct, in
arrogating to themselves impermissibly wide powers of accreditation which are likely to
adversely affect a wide sphere of public life 75 due to their impact on public funding ,
constitutes a public power which indisputably offends the principle of legality. On the
strength of this finding, and by parity of the reasoning adopted in AMCU (which accepted
that although collective agreements do not constitute administrative action, they may still
be subject to a legality review if they involve the exercise of public power ), I am of the
view that the CA, (i) falls into the category of collective agreements that amount to an
exercise of public power,(ii) has far-reaching external effects that are contrary to public
interest, and (iii) fails the rationality test. These aspects render it reviewable under the
principle of legality. The argument that the review remedy is inapposite has no merit , in
my opinion.

[123] Furthermore, the discussion in the preceding paragraphs demonstrates the extent
to which the CA unfairly jeopardises the position of non-unionised members and retirees.
As stated before, the retirees and non -unionised employees fall within the definition o f
‘member’ in the PFA. That being the case, the self-evident prejudice to fund members

‘member’ in the PFA. That being the case, the self-evident prejudice to fund members
who were not represented by the trade unions during the negotiations that preceded the
conclusion of the CA clearly goes against the grain of the legislative scheme of the PFA.
The CA cannot take away the protections granted by the PFA. This is another reason why
the CA is unlawful.


75 Recognised ‘public interest ’ includes that, as far as possible, parties to a contract should have equal
bargaining power, and that the full exercise by persons of their legal rights should not be interfered with.
See Hutchison et al The Law of Contract in South Africa 3 ed (2017) at 182-183.

59

[124] In summing up, I reiterate this court’s finding in Minister of Home Affairs and Others
v Scalabrini Centre, Cape Town and Others,76 that a determination of whether a decision
is rationally connected to its purpose calls for a factual enquiry blended with a measure
of judgment.77 I have, in the foregoing paragraphs, demonstrated that (i) given the wide
powers accorded by the CA to the accreditation committee in relation to granting and
terminating accreditation, which is an accreditation mechanism that allows arbitrariness;
(ii) the absence of sufficient safeguards to prevent an irrational exercise of such wide
powers;78 (iii) the CA’ usurpation of the powers granted to the trustees by the PFA , (iv)
the CA’s imposition of an obligation on municipalities to participate only in accredited
funds, which could trigger a reduction in fund viability, and (v) the obligation of employer
municipalities to cover shortfalls as contemplated in s 30 (3) of the PFA, there is a
plausible risk that the implementation of the CA could result in increased financial liability
for municipalities and, by extension, the national fiscus as a result of largescale winding
up of retirement funds that are unable to meet their obligations.

[125] Moreover, the CA is also fatally flawed by its far-reaching consequences that are
plainly inconsistent with its stated objectives of providing equitable access to retirement
fund benefits and the quest for overall improved efficiency.79 Given the trite principle that
the question whether a decision is rationally related to the purpose for which the power
was given calls for an objective enquiry.80 The fact that the flawed CA was concluded by
the respondents with good objectives in mind does not render it objectively rational, as to
do so would amount to placing form above substance.81

[126] All things considered, the CA, bears all the hallmarks of the exercise of a public

[126] All things considered, the CA, bears all the hallmarks of the exercise of a public
power that is not rationally related to the purpose for which such power was given . It

76 Minister of Home Affairs and Others v Scalabrini Centre, Cape Town and Others [2013] ZASCA 134;
2013 (6) SA 421 (SCA); [2013] 4 All SA 571 (SCA) (Scalabrini Centre).
77 Ibid para 66; Airports Company South Africa SOC fn 66 above para 30.
78 Compare AMCU fn 57 above paras 69-70 and 86.
79 See clauses 2.2 and 2.4 of the CA.
80 Airports Company South Africa SOC fn 66 above para 30.
81 Pharmaceutical Manufacturers Association of South Africa and Another: In re Ex Parte President of the
Republic of South Africa and Others 2000 (2) SA 674; 2000 (3) BCLR 241 (CC); 2000 (2) SA 674 (CC) para
86.

60

therefore triggers a review predicated on the principle of legality. To deny the existing
funds legal recourse in the form of a judicial review under glaring circumstances as the
ones explained above would not serve the interests of justice . Instead, it would give an
imprimatur to the flagrant violation of governmental principles and lead to non-fulfilment
of local government’s constitutional mandate.82

[127] Furthermore, the pension fund legislative scheme grants the board of the fund the
prerogative to exercise an independent discretion in deciding how the fund is to be
governed, arranged and operated, and these boards are well within their rights to cover
these aspects in their fund rules. Given the binding nature of fund rules, I am of the view
that any attempt at manipulating the independence of the trustees to the point of intruding
on the workings of a retirement fund, in breach of the protections entrenched by the PFA
and fund rules is irrational. Equally irrational is the parties’ apparent participation in
negotiations without complying with legislative provisions designed to ensure that
organised local government does not conclude collective agreements that stray beyond
the scope of substantive matters that may be covered in a collective agreement .
Measures which have not been thought t hrough and which may create an unforeseen
burden on the fiscus do not constitute a legitimate purpose for the conclusion of the CA.

[128] For all the reasons mentioned in the foregoing paragraphs , I am persuaded that
the CA is invalid and un enforceable. Because ultra vires acts and a lack of rationality or
improper motive for the conclusion of the agreement are proper bases for both a PAJA
and legality review, having concluded that the CA is susceptible to a legality review, it is
unnecessary for me to delve into a discussion on whether there are bases upon which a
PAJA review would succeed. That, in my view, would be tantamount to surplusage, as

PAJA review would succeed. That, in my view, would be tantamount to surplusage, as
both pathways lead to the same outcome: the CA is reviewable.

[129] The high court held that since the declaratory order was sought as alternative
relief, it does not arise for consideration, given its finding that the CA is reviewable. I do,
for the sake of completeness, express the view based on the reasoning I have adopted

82 See ss 152 and 195 of the Constitution.

61

in this judgment, that the MRO’s case for an order declaring the CA to be unenforceable
in respect of non -unionised employees and pensioners was properly made; the CA is
irrational, invalid and unlawful.83

Just and equitable remedy
[130] It is trite that the determination of a just and equitable remedy as envisaged in
s 172(1)(b) of the Constitution requires an examination of the circumstances of the case
to establish whether there are factors that require the amelioration of legality. 84 I am of
the view that the findings of invalidity of the CA on account of SALGA’s lack of mandate,
the C ouncil exceeding its powers and the far -reaching consequences of the
implementation of an overbroad CA on the fiscus, exacerbated by its lack of consultation
with pensioners as key stakeholders in the retirement fund landscape , considered
together with the flaws alluded to in paragraphs 123-124 above, all constitute a litany of
errors which, on the facts of this case, rule out consideration of any other order under the
rubric of just and equitable orders that may salvage the CA. The only appropriate order
is to set the CA aside in its entirety. Based on this reasoning, it follows that the appeal
must be dismissed.

[131] In considering the cross-appeal, it warrants reiterating that the criticism that the
accreditation regime propounded in the CA fetters the decision -making powers of the
trustees insofar as it allows SALGA, IMATU and SAMWU to apply for accreditation on
behalf of funds, is justifiable. Equally justifiable is the criticism that the CA impermissibly
gives the Council the exclusive power to arbitrarily decide which funds remain accredited
to participate in the local government sector in the future . In my view, these criticisms

83 In Pharmaceutical Manufacturers Association of South Africa and Another: In re Ex Parte President of

the Republic of South Africa and Others see fn 81 above para 90, the Constitutional Court held that
‘[R]ationality in this sense is a minimum threshold requirement applicable to the exercise of all public power
by members of the executive and other functionaries. Action that fails to pass this threshold is inconsistent
with the requirements of our Constitution, and therefore unlawful.’
84 Compare National Education Health and Allied Workers Union v Minister of Public Service and
Administration and Others; South African Democratic Teachers Union v Department of Public Service and
Administration and Others ; Public Servan ts Association and Others v Minister of Public Service and
Administration and Others; National Union of Public Service and Allied Workers Union v Minister of Public
Service and Administration and Others [2022] ZACC 6; [2022] 5 BLLR 407 (CC); (2022) 43 ILJ 1032 (CC);
2022 (6) BCLR 673 (CC).

62

apply with equal force in respect of the accreditation envisaged for new employees in
terms of clause 8(1) of the CA. MEPF’s argument that clause 8 is inextricably dependent
on the accreditation regime is theref ore correct . Th at being the case, clause 8 is not
severable from the rest of the agreement . The upshot is that the entire CA is invalid on
the grounds of illegality and falls to be set aside. It follows that t he cross-appeal must
therefore be upheld with costs.

[132] For all the reasons mentioned above, the following order is granted:
1. The appeals are dismissed with costs, including the costs occasioned by the
employment of two counsel.
2. The cross-appeal is upheld with costs.
3. The order of the high court is set aside and replaced with the following:
‘3.1 The Retirement Fund Collective Agreement signed on 15 September 2021 is
reviewed and set aside on account of illegality.
3.2 The first to fourth respondents are ordered to pay the applicants’ costs on the
scale as between party and party, which costs are to include the costs
occasioned by the employment of more than one counsel, where so employed.’


___________________________
M B MOLEMELA
PRESIDENT
SUPREME COURT OF APPEAL


Keightley JA and Coppin AJA (dissenting):

Introduction
[133] We have read the judgment of Molemela P (the main judgment), with which,
respectfully, we disagree. For the reasons detailed in this judgment, we would have
upheld the appeal.

63


[134] The appeal concerns a consolidated hearing of three matters from the high court.
It raises important questions regarding the legality and competency of employees, and
their representatives, on the one hand, and employers, and their representatives, on the
other, to conclude a collective agreement in terms of s 31 of the LRA. Also at issue is the
underlying question of whether a collective bargaining agreement is reviewable by third
parties under either PAJA or the Constitution.

[135] The collective agreement in question, the Retirement Fund Collective Agreement
(the CA), was concluded in the South African Local Government Bargaining Council (the
Council) between the South African Local Government Association (SALGA),
representing local authority empl oyers, and two trade union s representing employees,
being the Independent Municipal and Allied Trade Union (IMATU) and the South African
Municipal Workers’ Union (SAMWU). In essence, in the CA the parties agreed that,
moving forward, employers would be bound to make payment of retirement contributions
to accredited pension or provident funds (retirement funds) only. Significantly for this
appeal, the accreditation criteria lay down certain requirements that must be included in
the rules of any retirement fund seeking accreditation. These include, among others,
permitting transfers by members from one accredited fund to another accredited fund,
reporting obligations, and governance requirements, such as a limitation on the number
of board members.

[136] The CA was concluded on 15 September 2021 after a long period of collective
bargaining in the Council. According to the appellants, retirement funds whose members
constitute more than half of the total number of employees operating in the local
government sector have applied for accreditation under the CA. However, the respondent
funds, (the respondents) have not done so. Instead, they brought separate applications,

funds, (the respondents) have not done so. Instead, they brought separate applications,
which were consolidated for hearing, in the high court, to review and set aside the CA.
The r espondents relied on the PAJA, alternatively, on the principle of legality in the
Constitution, as the basis of the reviews. They also alleged that the CA breached certain
constitutional rights.

64


[137] The respondents succeeded in their review applications. The high court found that
the ‘conclusion [of the CA] is manifestly “administrative action” within PAJA’. It stated that
even if PAJA was not applicable, the CA ‘would not withstand a legality review’.
Consequently, the high court set aside all but clause 8 of the CA. It found it unnecessary,
in those circumstances, to make any determination on the respondents’ constitutional
attacks on the CA.

Parties
[138] The appellants, who are bargaining parties to the CA, are the following: the South
African Local Government Association (SALGA), which is cited as the second appellant
in this appeal, and which represents the interests of municipalities in South Africa, as
employers; IMATU, which is cited as the third appellant in this appeal; and SAMWU, which
is cited as the fourth appellant in this appeal. IMATU and SAMWU are trade unions and
together they represent approximately 96 percent of the employees in the local
government sphere. It is not in issue that at the time of the applications br ought by the
respondents South Africa had 257 municipalities, w hich, together, employed
approximately 271,308 persons. All the appellants participated in the appeal.

[139] The retirement funds and individuals that challenged the CA and participated in
the appeal are the following. The fund that brought an application under case number
2905/2022 in the high court is the Municipal Workers Retirement Fund. The retirement
funds that brought an application under case number 30396/2022 in the high court, are
the Municipal Employees Pension Fund (MEPF), and the Akani Retirement Fund
Administrators (Pty) Ltd (ARFA). They were joined by an individual, Kenyatta Chomane.
Those that brought a challenge under case number 4580/2022 in the high court are the
Municipal Retirement Organisation, the Germiston Municipal Retirement Fund (GMRF),
and the Municipality Gratuity Fund (MGF). The y were joined by an individual, Pieter
Johannes Venter.

65

[140] The Minister of Employment and Labour and the Financial Sector Conduct
Authority (FSCA) were cited as parties to the review applications. However, they did not
actively participate in the proceedings.

History
[141] The history of employment relationships, including retirement fund arrangements,
and collective bargaining in the local government sector gives critical context to the issues
in dispute in this appeal. It is dealt with in detail in the affidavits filed on behalf of the
appellants in the review proceedings, and is largely uncontroversial. The Council is an
established and registered bargaining council in terms of the LRA. SALGA is the o nly
employer-representative party and IMATU and SAMWU are the trade union parties
representing employees in the Council.

[142] Before the enactment of the Local Government Transition Act 209 of 1993 funds
were segregated. In some instances, the y were established for employees of a specific
race, or for employees of a specific region. Numbers of lower paid employees in the sector
historically did not belong to a retirement fund. But shortly before the new constitutional
dispensation the membership of funds changed, though their rules largely remained the
same. When new municipalities were established and others were dis established
following the commencement of the Local Government: Municipal Structures Act 117 of
1998, existing municipal employees usually transferred from municipalities that were de-
established to the newly established ones . However, in general, their conditions of
employment, including the retirement fund arrangements that applied to them, remained
the same. Some funds that continue to operate in the local government sphere were
established pre-constitutionally, while others were established thereafter.

[143] Given these realities, the parties to the council began to negotiate to bring about
uniformity and an end to the disparity that existed in employment arrangements, including

uniformity and an end to the disparity that existed in employment arrangements, including
retirement fund arrangements. These negotiations , over time , resulted in several
collective agreements establishing uniform c onditions of service nationally covering a
range of aspects of the employment relationship, such as annual leave, maternity leave,

66

sick leave, housing subsidies, working hours and common grievance and disciplinary
procedures.

[144] The negotiations around retirement fund arrangements took much longer.
According to the appellants, the need for uniformity arose from the fact that in the local
government sphere there were, and are, about forty to fifty different retirement funds
operating. These retirement funds have different benefits, contribution rates, and financial
and governance arrangements . Consequently, employees and employers in the
government sector still had to contend with several retirement funds which had no uniform
rules or standards, and where there were historical inequalities. The appellants aver that
union and employer representatives in the sector jointly and collectively identified a strong
need for change in that regard. In addition, the appellants aver that the large number of
legacy retirement funds operating resulted in inefficiencies of various kinds. According to
them, the conclusion of the collective agreement was a necessary step to ensure equality
of access to benefits among employees in the local government sec tor, and to put paid
to undesirable legacy patterns of retirement fund arrangements.

[145] The appellants contend that the continuation of the large number of legacy
retirement funds was problematic , giving rise, not only to inequalities but also
inefficiencies and a lack of transparency . Of particular concern to both employers and
employees were widely varying contribution rates, costs and risks; weak governance of
retirement funds caused by scarce management resources available to municipalities to
provide effective employer representation on the governance structures of so many
retirement funds; funding deficits in many funds in an already financially constrained local
government environment; high contribution rates and additional contributions being
required by some funds to provide for excessive benefits , placing a further strain on the

required by some funds to provide for excessive benefits , placing a further strain on the
finances of municipalities; in many cases, unreasonably high costs of the administration
of funds; and problems with transferability of members between funds.

[146] Having identified those problems and needs , the appellants set about attempting
to agree on the solution through collective bargaining, their joint objective being to achieve

67

equality, affordability and sustainability for retirement fund arrangements in the local
government sector. According to the appellants the bargaining process was challenging,
involving the complex task of conceiving, negotiating and reaching agreement on an
appropriate future framework for retirement fund arrangements. Oppositio n from some
existing funds added to the challenges.

[147] Early attempts at collective bargaining took place either within the structures
established for a single municipality, or on a provincial basis. The Council was established
in March 2001, which allowed for collective bargaining to be conducted in one forum for
all employees and employers in the local government sector . This improved the viability
of their attempts at bargaining . The process gathered im petus after the parties to the
collective agreement formed a task team consisting of representatives from each of them.
They agreed on enlisting outside persons with the necessary expertise in labour relations,
pensions law and the restructuring of retirement fund arrangements to assist them. One
of those persons, an attorney, Mr Chris Todd, was appointed as facilitator, and an actuary,
Mr Jeremy Andrew, was to assist in the facilitation. They were also to advise the parties
on setting governance standards for future retirement funds.

[148] Draft proposals issued by the facilitator were circulated to the parties after they
were considered by the task team. During October 2015 the facilitator produced the first
draft report and proposal on the terms of a collective agreement in respect of reti rement
funds. During November 2015 these documents were sent to the various retirement funds
in the local government sector, and they were invited to make written representations
concerning the proposals. The appellants’ stance was that although retirement funds
were not parties to the collective bargaining process, and thus had no inherent right to be

were not parties to the collective bargaining process, and thus had no inherent right to be
consulted, it was important for the parties to receive a broad range of input and views
from funds. Various retirement funds participated in the process, inc luding the Municipal
Retirement Organisation (MRO) and the Germiston Municipal Retirement Fund (GMRF).
The views expressed by them at that time largely foreshadowed the stance that they still
maintain in respect of the CA.

68

[149] On 13 June 2016 the appellant convened a workshop to which all retirement funds
in the local government sphere had also been invited. Representatives of sixteen of those
funds attended. Following the workshop the representatives of the funds were invited to
make further representations. According to the appellants, the representations that were
made were carefully studied and analysed by the task team in conjunction with the
facilitator and the actuary. Consequently, changes were made to the draft, and it was
recirculated, including to the respondent retirement funds. The MRO, the GMRF and the
MGF submitted their comments during the period May to June 2017. Their comments,
according to the appellants, were considered and the draft proposals were further
amended in light thereof.

[150] On 1 June 2018 the Council issued a draft retirement fund collective agreement to
the bargaining parties and on 28 August the draft was circulated to the various retirement
funds. Further revision of the draft and input from the facilitator and actuar y followed. In
September 2019 the actuary and facilitator prepared a consolidated summary of issues
for consideration by the bargaining parties in light of what the retirement funds and
technical advisors of the bargaining parties had raised. A consolidated summary of further
representations received from the retirement funds was prepared in June 2020 , and the
CA was ultimately concluded in the Council on 15 September 2021.

Overview of the collective agreement
[151] The CA applies to all employees and employers falling within the scope of the
council (clause 1.1). Clause 2 outlines the main objectives , as being to: (a) establish a
uniform approach to the provision of retirement fund benefits to employees in the sector
(clause 2.1); (b) provide equitable access to retirement fund benefits for employees in the
sector (clause 2.2); (c) provide uniform rates of contribution to retirement funding for

sector (clause 2.2); (c) provide uniform rates of contribution to retirement funding for
employees in the sector, subject to preserving the accrued rights of employees in existing
defined benefit arrangements; (d) improve the overall efficiency and governance of funds
(clause 2.4); and (e) give employees an opportunity to exercise an election to move from
one local, regional or national fund in which their employer participates, to another, within
parameters established by the CA (clause 2.5).

69

[152] The main thrust of the CA records the parties’ agreement that as from the
implementation date, they will enter into, or retain, retirement fund arrangements only with
accredited retirement funds. This is captured in clause 5, which provides that: (a) new
employees will be required or permitted to join only an accredited defined contribution
retirement fund in which their employer participates (clause 5.1.1), and (b) employers will
pay over contributions on behalf of existing employees only to a retirement fund that is
accredited (clause 5.1.2). Clause 6.2 records that employers will contribute as
participating employers only in accredited funds, while clause 6.5 obliges employees to
elect to join an accredited fund in which their employer participates.

[153] The effects of non -accreditation are dealt with in clause 9. An employer will be
obliged to give notice of termination of participation to an existing retirement fund that is
not accredited, or which has its accreditation withdrawn (clause 9.1). In -service
employees will cease contributions to that fund with effect from the date of termination
and will commence contributi ons to an accredited fund in which their employer
participates (clause 9.3.1). In that case, a member may elect to leave his or her
contribution in the terminated fund as ‘paid up’. Alternatively, but subject to the rules of
the terminated fund, and of s 24 of the PFA, he or she may elect to transfer their member’s
interest to the new fund.

[154] Clause 7 addresses the movement of existing members between retirement funds.
It gives in -service members of an existing retirement fund an initial election, to b e
exercised within six months of the implementation date, to transfer to any accredited fund
in which their employer participates (clause 7.1 read with 7.3). Clause 7.4 gives
employees a similar election three years after the implementation date and therea fter at

employees a similar election three years after the implementation date and therea fter at
intervals of five years. This is subject to any applicable law and subsequent collective
agreement.

[155] Clause 8 deals with new employees and contribution rates, providing that
employers must pay a minimum contribution of 1 8 percent of the pensionable salary to
the accredited fund concerned, unless the employer is already paying a higher

70

contribution. The CA binds the parties, although it makes provision for it to come into
operation in respect of non -parties who fall within the scope of the Council on a date to
be determined by the Minister of Employment and Labour. It is agreed that no such
determination has yet been made. Clause 12 permits any employer, SALGA or a trade
union bound by the CA to apply for exemption from any of the pr ovisions (clause 12.1).
The Council is bound to consider a list of criteria in determining an exemption application,
including comparable benefits, any competitive advantage that may be created by an
exemption, whether budgetary provisions have been made for the implementation of the
obligations arising from the CA, and the infringement of basic conditions of employment
rights.

[156] The accreditation procedure is detailed in Annexure A to the CA. It permits a
request for accreditation to be made by SALGA, an employer with employees in the local
government sector, a trade union with members employed in the sector, or a by retirement
fund with members so employed (clause 2.1). The request is to be considered by the
accreditation committee of the Council, established by the Council’s executive committee
(clause 5). A retirement fund will not be accredited unless it meets the required criteria to
a ‘material degree’, materiality being determined by the accreditation committee. It will be
given an opportunity to make representations as to why the failure to meet the criteria is
not material (clause 5.6). Clause 6 of Annexure A provides a right of appeal against an
accreditation decision.

[157] The accreditation criteria are listed in clause 3 of Annexure A. Clause 3.1 provides
that in addition to a retirement fund being registered in terms of the PFA, ‘[t]he criteria for
accreditation must be satisfied, where applicable, by the terms of the registered rules of
the fund or the board of the fund must have adopted a resolution approving amendment

the fund or the board of the fund must have adopted a resolution approving amendment
to the rules of the fund to bring these rules into compliance with the provisions below’ .
The ‘provisions below’ detail the criteria that the rules of a fund must comply with for
accreditation purposes.

71

[158] These include that the rules must permit the transfer of members, as contemplated
in clauses 7 and 9.3 of the CA (clause 3.2.1), and the withdrawal or termination by
employers of their participation after giving due notice (clause 3.2.4). The rules must also
provide that no amount will be paid to an investment or other professional adviser except
for services rendered to it in the ordinary course of the governance, management,
investment or administration of the fund (clause 3.2.6). Clause 3.3 details reporting
obligations that an accredited fund must comply with vis -à-vis the council on a range of
matters, including costs, the proportion of contributions saved, and a fund’s investment
performance over each financial year.

[159] As far as governance of funds is concerned , an accredited fund, among others,
must have a board, the number of members of which does not exceed 10; it must in
certain circumstances permit employees to appoint a management committee, permit
SALGA, an employer, or a trade union to terminate the appo intment of a board member
whom they have appointed; and the board must have the right to take certain steps as
regards members who are not ‘fit and proper’. Further reporting requirements are placed
on the boards of accredited funds, for example, in respect of an accredited defined benefit
fund, it must demonstrate that it has a viable funding plan which makes the provision of
benefits sustainable for the fund’s existence.

[160] Clause 3.5 records that ‘[i]t is envisaged that in the future the parties may introduce
further accreditation criteria, which will be introduced on not less than 12 months’ notice
to accredited funds’. The examples listed include a reasonable cap on the amounts spent
on governance, management and administration of the fund and relat ed costs, and a
reasonable cap on asset management fees.

The nature of the review challenge
[161] For purposes of this judgment it is important to understand the nature of the review

[161] For purposes of this judgment it is important to understand the nature of the review
challenge. Common to all the respondents’ complaints is that the CA is not a legitimate
collective bargaining agreement. The thrust of the complaint is directed at the system of
accreditation. It is alleged that through this, the CA impermissibly seeks to regulate the

72

entire local government retirement fund industry. In so do ing, it strays into, and seeks to
override, the remit of pensions regulatory bodies established and governed by the PFA.
It is billed as an unlawful parallel to the statutory regulatory regime. Moreover, it is
contended that it is in effect a mechanism to eradicate various funds in the sector because
it will lead to the demise of retirement funds who ‘refuse to submit to the will’ of the
appellants. It is also averred that the CA directs retirement funds to act in a certain way
and to disregard their fiduci ary duties, and to forgo the independence that they are
statutorily obliged to maintain, by amending those rules of their retirement funds that do
not comply with the accreditation criteria.

[162] As indicated, the respondents aver, primarily, that the CA is subject to review under
PAJA, in that its conclusion constitutes ‘administrative action’. Alternatively, it’s
conclusion was an exercise of public power that is constitutionally reviewable in terms of
legality (it is not a legitimate collective bargain ing agreement and is thus ultra vires), or
rationality.

[163] Two related features of the respondents’ review challenge are notable. The first is
that the review application was launched as a pre-emptive strike. None of the respondents
have sought accred itation, even with the proviso of a reservation of rights. They have
taken a principled decision not to do so. Consequently, they have not demonstrated the
actual effect that the accreditation process and criteria have had on their operations, or
on the de cision-making powers of their boards of trustees in real terms. The second
feature is that the challenge is directed against the CA as a whole. Although they refer to
several of the accreditation criteria to support their case, they do not challenge and seek
to set aside specific clauses of the CA or Annexure A.

[164] The central premise of the challenge is not only that the appellants have, but that

[164] The central premise of the challenge is not only that the appellants have, but that
they can have, no authority to agree on criteria that retirement funds must adhere to if
they wish to do retirement fund business with employers and employees in the local
government sector. The interlinked question is whether the conclusion of a collective

73

bargaining agreement adopting an accreditation mechanism for retirement funds is
reviewable at all.

The legitimacy of the collective agreement
[165] The first question raised by the respondents’ challenge is whether the CA is a
legitimate ‘collective agreement’ as envisaged in s 213 of the LRA. The section defines
several concepts and words as used in the LRA, including the term ‘collective agreement’.
The section defines it as meaning:
‘A written agreement concerning terms and conditions of employment or any other matter of
mutual interest concluded by one or more registered trade unions, on the one hand, and on the
other hand – (a) one, or more employers; (b) one or more registered employers’ organisations; or
(c) one or more employers and one or more registered employers’ organisations.’

[166] If the CA satisfies all the definitional elements it is a ‘collective agreement’ in terms
of the LRA. The CA is in writing, and it is concluded between two registered trade unions,
IMATU and SAMWU, on the one hand, and the only registered employers’ organi sation
in the local government sector, SALGA, on the other hand. The remaining question is
whether the CA concerns ‘terms and conditions of employment’ and/or ‘any other matter
of mutual interest’. If so, then the CA would be a competent collective agreement in terms
of the LRA. If not, it would not be enforceable be tween the parties for this reason alone.
The appellants accept this to be so.

[167] The Labour Appeal Court has accepted that there is an integral link between
pension benefits and employment, and that pension benefits fall within the scope of
conventional terms and conditions of employment. 85 It has also been accepted that
pension benefits constitute a form of deferred compensation. 86 The respondents do not
dispute these propositions. Their compl aint is that the CA is neither an agreement that
concerns terms or conditions of employment or another matter of mutual interest. This is

concerns terms or conditions of employment or another matter of mutual interest. This is

85 SA Society of Bank Officials v Bank of Lisbon International Ltd (1994) 15 ILJ 555 (LAC) (Bank of Lisbon)
at 559A-G.
86 Resa Pension Fund v Pension Funds Adjudicator and Others 2000 (3) SA 313 (C); (2000) 21 ILJ 1947
(C) (Resa) at 322.

74

because, they aver, the underlying rationale and objective of the CA is in fact to regulate
the retirement fund industry, which is not something that falls within the scope of s 23 of
the LRA.

[168] The difficulty with the respondents’ approach is that it is based on circular logic: it
asserts a rationale for the CA and then concludes that because of that rationale the C A
cannot be a legitimate collective agreement. It also excises the CA from its historic and
labour relations context. The correct starting point is the fact that employers and
employees in the local government sector have a necessary interest in retirement
contributions as part and parcel of the employment relationship. Retirement benefits are
benefits relating to the remuneration of employees, and it is a legitimate subject of
collective bargaining in terms of the LRA. 87 If, under the terms and conditions of
employment, an employer provides a pension plan for its employees it will either do so
through an in-house retirement fund or, as here, through intermediary private institutions
such as the respondents. The business o f operating such a fund is lucrative, especially
since it involves the management of stock or investment portfolios potentially worth
substantial sums.

[169] For both employees and employers, their legitimate interests extend beyond the
right to belong to a retirement fund and the concomitant obligation on the employer to
make contributions. The phrase ‘matters of mutual interest’ is not limitless, but it has been
accepted by the Labour Appeal Court as including ‘any matters which affects employees
in the workplace, however indirectly’. The manner in which pension or retirement funds
are administered and regulated under their rules is also a matter of mutual interest. 88

87 Bank of Lisbon Op cit fn 88; Lorentz v Tek Corp Provident Fund 1998 (1) SA 192 (W); (1997) 18 ILJ 1253

(W); Resa fn 8 8 above para 15; and Protekon (Pty) Ltd v Commission for Conciliation, Mediation and
Arbitration and Others (2005) 26 ILJ 1105 (LC); [2005] 7 BLLR 703 (LC) para 20.
88 Pikitup (Soc) Ltd v SA Municipal Workers Union on behalf of members and Others [2013] ZALAC 33;
[2014] 3 BLLR 217 (LAC ); (2014) 35 ILJ 983 (LAC) paras 54 -57; Confederation of Associations in the
Private Employment Sector and Others v Motor Industry Bargaining Council and Others (2015) 36 ILJ 137
(GP) para 22; National Union of Metalworkers of SA on behalf of members v SA Airways (Soc) Ltd and
Another (2017) 38 ILJ 1994 (LAC) para 33; De Beers Consolidated Mines Limited v CCMA [2000] 5 BLLR
578 (LC) paras 16 -17; Vanachem Vanadium Products (Pty) Ltd v Numsa [2014] ZALCJHB 159; [2014] 9
BLLR 923 (LC); (2014) 35 ILJ 3241 (LC) paras 10-19; Itumele Buslines (Pty) Ltd t/a Interstate Buslines v
Transport and Allied Workers’ Union of SA and Others (2009) 30 ILJ 1099 (LC) para 44; C Thompson and
P S Benjamin South African Labour Law (1965) vol 1 at 135.

75

Employers and employees both contribute to retirement funds: it is their money, and
hence, their risk that is of prime importance to them. They have a legitimate mutual
interest, born out of the employment relationship, to decide with whom, and on what
conditions they will engage with, and place, their pension and retirement contributions.

[170] The appellants explain in detail why it was necessary, and of mutual interest, for
municipalities and trade unions to transform the retirement fund landscape that had been
historically inherited within the local government sector. It cannot be gainsaid that the
reasons provided were legitimate and that there was a pressing need to move towards a
system of uniformity in the interests of both employers and employees. The CA expressly
recorded these objectives in clause 2. They formed the rationale for the accreditation
process. Against this background and context, it is difficult to conceive of how it can
convincingly be asserted that the subject matter of the CA was not one concerned with
terms and conditions of employment, or of mutual interest to the parties to it. Still less,
can it be convincingly asserted that the real purpose was impermissibly to regulate the
retirement fund industry.

[171] For these reasons, the argument on behalf of the respondents that the agreement
in this matter is not a collective agreement as contemplated in s 213 of the LRA is not
sound.

Reviewability of the collective agreement
[172] This leads to the question of reviewability: is the CA reviewable, either as
‘administrative action’ as defined in s 1 of PAJA; or in the alternative, on the principle of
legality in the Constitution. The appellants, in turn, argue that the CA is lawful an d that it
is not reviewable under either PAJA or the principle of legality. They say so for the
following reasons: (a) It does not bind anyone who is not a party to it, let alone bind them

following reasons: (a) It does not bind anyone who is not a party to it, let alone bind them
adversely; (b) it does not constitute ‘administrative action’ as de fined in PAJA, or
constitute the exercise of a public power or the performance of a public function; (c) even
if it may involve the exercise of public power, which is denied, it is still not reviewable
under PAJA, and at worst would only be reviewable in t erms of the principle of legality,

76

and more particularly be reviewable for rationality only; and (d) in any event, that none of
the grounds relied upon by the respondents support a case for the judicial review of the
collective agreement.

[173] The premise of the review, as indicated earlier, is that the CA is not what it appears
to be: although it purports to be a contract between bargaining council parties, it is, in fact
an impermissible attempt, through a ‘legislative and regulatory instrument’ to cont rol
retirement funds, and to mould them in the image the appellants prefer. It is thus, the
respondents contend, in reality, a form of ‘administrative action’ within the meaning of
PAJA which has direct, external effect because the CA’s ‘effects extend beyond the direct
employment sphere and seek to bind already existent third -party retirement funds who
are not members of the bargaining council’. The high court upheld that argument and
agreed with the respondents that ‘not only the contents of the CA but th e effects of
acquiescence by existing retirement funds and implementation cast it squarely as
administrative action and within the remit of PAJA’ . In this Court, the respondents also
argued to the effect that the CA adversely affects former employees, who are pensioners,
but who remain members of retirement funds and who are not members of the bargaining
council.

[174] As we have found, the CA is a collective agreement in terms of s 31 of the LRA,
and not one concluded in terms of s 23 of the LRA, as the r espondents seem to imply.
The question then becomes whether, as a collective agreement, its conclusion by the
parties, constitutes administrative action.

[175] Section 31 of the LRA deals with the binding nature of a collective agreement
concluded in a bargaining council. The section provides:
‘Binding nature of collective agreement concluded in bargaining council
Subject to the provisions of section 32 and the constitution of the bargaining council, a collective

agreement concluded in a bargaining council binds –
(a) the parties to the bargaining council who are also parties to the collective agreement;

77

(b) each party to the collective agreement and the members of every other party to the collective
agreement in so far as the provisions thereof apply to the relationship between such a party and
the members of such other party; and
(c) the members of a registered trade union that is a party to the collective agreement and the
employers who are members of a registered employers ’ organisation that is such a party, if the
collective agreement regulates –
(i) terms and conditions of employment; or
(ii) the conduct of the employers in relation to their employees or the conduct of the employees in
relation to their employers.’

[176] The respondents, as retirement funds, are not bound by the CA in terms of s 31 of
the LRA. It is so that a collective agreement concluded within a bargaining council may
be extended, on certain conditions, by the responsible Minister at the request of the
bargaining council, to any non -parties to the collective agreement that are within its
registered scope and who are identified in the request. The Minister is not obliged to do
so, and before doing so the Minister must be satisfied that certain conditions are met, as
contemplated in s 32(3). However, in this instance the respondent retirement funds (or
the pensioners who remain their members and are not affiliated to any of the parties to
the CA) are not parties to the CA and there has been no request that it be extended to
them. Whether such request can ever be extended to them is improbable, because they
are neither an employee nor an employer type of party and do not fall within the Council’s
scope.

[177] It is important to appreciate that the collective agreement that the Constitutional
Court considered in Association of Mineworkers and Construction Union and Others v
Chamber of Mines in South Africa and Others (AMCU)89 was not one concluded within a
bargaining council. Accordingly, it fell within the scope of s 23 of the LRA, rather than

bargaining council. Accordingly, it fell within the scope of s 23 of the LRA, rather than
s 31. In particular, the focal point of the dispute there was s 23(1)(d), which permits parties
to a collective agreement to extend its binding effect to identified employees who are not

89 Association of Mineworkers and Construction Union and Others v Chamber of Mines in South Africa and
Others [2017] ZACC 3; (2017) 38 ILJ 831 (CC); 2017 (3) SA 242 (CC); 2017 (6) BCLR 700 (CC); [2017] 7
BLLR 641 (CC).

78

members of the trade union that is a party to the agreement. The parties may do so if the
trade union party to the agreement is the majority trade union in the workplace. 90 In
AMCU, the collective bargaining parties used s 23(1) (d) to extend the collective
agreement, which curtailed the right to strike, to members of the Association of
Mineworkers and Construction Union (AMCU) and other unions, which were not a
signatories because they were not majority unions. AMCU and the other uni ons
contended that s 23(1) (d) was unconstitutional as it infringed the constitutional rights of
freedom of association, collective bargaining, and the right to strike. It was specifically in
this context that the issue of majoritarianism arose, and was dis cussed by the
Constitutional Court. The present case does not give rise to the same considerations of
majoritarianism as in AMCU.

[178] However, of critical relevance to this appeal is that the Constitutional Court found
that the invocation of s 23(1) (d) by the parties to a collective agreement under s 23 was
not administrative action. It found:
‘That the exercise of power entailed public law consequences does not mean that it was
“administrative action” as defined in PAJA. This is because the decision to conclude an agreement
that the statute, upon fulfilment of the conditions it specified, extends to non -parties, was not “of
an administrative nature.” The parties were not administering policy or statutory powers; they
were agreeing amongst themselves. Th eir agreement had wide -ranging public consequences.
But in concluding it, they did not act administratively. Their conduct was public, but not
administrative in nature.’91

[179] This Court in Grey’s Marine Hout Bay (Pty) Ltd and Others v Minister of Public
Works and Others (Grey’s Marine), similarly, has found that:

90 In terms of Section 23(1)(d) of the LRA - Legal effect of collective agreement:
A collective agreement binds-
…

A collective agreement binds-
…
(d) employees who are not members of the registered trade union or trade unions party to the agreement
if-
(i) the employees are identified in the agreement;
(ii) the agreement expressly binds the employees; and
(iii) that trade union or those trade unions have as their members the majority of employees employed by
the employer in the workplace.
91 Op cit fn 92 para 83.

79

‘Administrative action is rather, in general terms, the conduct of the bureaucracy (whoever the
bureaucratic functionary might be) in carrying out the daily functions of the State, which
necessarily involves the application of policy, usually after its translation into law, with direct and
immediate consequences for individuals and groups.’92

[180] Furthermore, in Calibre Clinical Consultants (Pty) Ltd and Another v National
Bargaining Council for the Road Freight Industry and Another (Calibre)93 this Court held
that when a bargaining council was managing its wellness fund and procuring services
for that purpose, it was performing ‘a domestic function in the exercise of its domestic
powers’, and its decisions are not subject to review in terms of PAJA.

[181] In that matter the national council for the road freight industry (the national council),
a bargaining council, out of concern for the impact of HIV/AIDS on the employees in that
industry, established a wellness programme. The parties to the national council agreed
to extend the programme by the establishment of a wellness fund that would, inter alia,
introduce and maintain a programme that would provide antiretroviral treatment to
employees in the industry. The agreement was contained in a clause in a collective
agreement which had been extended by the minister in terms of s 32 of the LRA to the
entire industry. The fund was to be financed from compulsory contributions levied on al l
employers and employees in the industry, and it was to be administered or controlled by
a committee that was given the power in the agreement to contract with service providers
for the provision of all services and other matters that were necessary for t he
implementation and sustenance of the programme. The national council was to appoint
such a service provider.

[182] The national council invited selected providers to submit proposals in that regard.
It subsequently extended the invitation more generally. A partnership, consisting, among

It subsequently extended the invitation more generally. A partnership, consisting, among
others, of Calibre, made proposals, but the national council did not appoint any of them.

92 Grey’s Marine Hout Bay (Pty) Ltd and Others v Minister of Public Works and Others [2005] 3 All SA 33
(SCA); 2005 (6) SA 313 (SCA); 2005 (10) BCLR 931 (SCA) (Grey’s Marine) para 24.
93 Calibre Clinical Consultants (Pty) Ltd and Another v National Bargaining Council for the Road Freight
Industry and Another [2010] ZASCA 94; 2010 (5) SA 457 (SCA); [2010] 4 All SA 561 (SCA) (Calibre) para
46.

80

Instead, it engaged an auditing firm to identify suitable candidates, and it appointed two
service providers from those so identified. The partnership sought to review and set aside
the national council’s decision, relying on the provisions of PAJA. The high court
dismissed the review. The partnership’s appeal to this Court was also unsuccessful.
Nugent JA, writing for the Court, stated:
‘A bargaining council, like a trade union and an employers’ association, is a voluntary association
that is created by agreement to perform functions in the interest and for the benefit of its members.
I have considerable difficulty seeing how a barg aining council can be said to be publicly
accountable for the procurement of services for the project that is implemented for the benefit of
its members – whether it be a medical-aid scheme, or a training scheme, or a pension fund, or,
in this case, its wellness programme.’ 94

[183] In Calibre the fact that the bargaining Council could cho ose or select the service
providers it was prepared to contract with, and the fact that it could reject others that did
not meet its criteria, did not make its collective agreement ‘administrative action’
reviewable in terms of PAJA, or for that matter, an exercise in public power and
susceptible to legality review. In this matter the high court distinguished Calibre from the
facts of this case on the purported basis that the CA’s ‘effects extend beyond the direct
employment sphere and seek to bind already existent third-party pension funds who are
not members of the bargaining council’ . But that distinction was not valid. The effects of
the agreement in Calibre extended beyond the direct employment sphere. The service
providers that the national council in t hat matter could appoint, were not parties to the
collective agreement and were not within the employment sphere. They were outsiders
and were not members of the council. But those facts did not make the agreement in that

and were not members of the council. But those facts did not make the agreement in that
matter administrative action reviewable in terms of either PAJA, or the principle of legality.

[184] In this appeal, there was no exercise of the s 23(1) (d) power by the parties as in
AMCU. Consequently, there is even less scope for the argument that the conclusion of
the CA was ‘administrative action’ and thus subject to review under PAJA. The Council
and the parties concluding the CA did not seek to perform a governmental function, or to

94 Ibid para 41.

81

take the place of government, and the money involved in the implementation of the
arrangement costs related to in the CA is the money of its members, in particular that of
its employee members. Further, it does not seek to operate outside the scope of the
PFA,95 or to usurp the authority of the Financial Sector Conduct Authority (FSCA), or the
authority of the registrar of retirement funds, or of the Minister.96 Following AMCU, Grey’s
Marine and Calibre, that proposition that it constituted ‘administrative action ’, simply
cannot be countenanced. The high court was plainly wrong in accepting it.

[185] The question then arises whether the conclusion of the CA is reviewable under the
principle of legality. In AMCU,97 the Constitutional Court dismissed the constitutional
challenge to s 23(1)(d) of the LRA on the basis that the exercise of that statutory power
by parties to a collective bargaining agreement could be subject to judicial scrutiny. This
was because it amounted to an exercise of public power. As already explained, there was
no invocation of s 23(1) (d) in this case. AMCU is distinguishable and is not binding
authority for this Court to find that the conclusion of the CA amounted to an exercise of
public power. While it may be arguable that the exercise of the Minister’s power to extend
the CA to non -parties under s 32 may be an exercise of public power, that has not
occurred in this instance and is unlikely to occur.

[186] In Chirwa v Transnet Ltd98 the Constitutional Court accepted that it was difficult to
determine if a power or function was public. Each case has to be determined on its own
facts. The relevant facts include: (a) the relationship of coercion or power that the actor
has in its capacity as a public institution; (b) the impact of the decision on the public; (c)
the source of the power; and (d) whether there is a need for the decision to be exercise
in the public interest. None of those factors on their own are determinative of the question,

in the public interest. None of those factors on their own are determinative of the question,

95 Pension Funds Act 24 of 1956. In terms of s 2(1) of that Act ‘subject to section 4A and any other law in
terms of which a fund is established, the provisions of this Act apply to any pension fund, including a pension
fund established or continued in terms of a collective agreement concluded in a council in terms of the
[LRA], and registered in terms of section 4’.
96 Op cit fn 96 para 42.
97 Op cit fn 92 paras 74-88.
98 Chirwa v Transnet Ltd [2007] ZACC 23; 2008 (4) SA 367 (CC); 2008 (3) BCLR 251 (CC) ; [2008] 2 BLLR
97 (CC) ; (2008) 29 ILJ 73 (CC) para 186.

82

but a court must weigh all of them in coming to a conclusion whether the function or power
is public or not.99

[187] In this instance the Council is a voluntary association of trade unions and employer
parties. They acted in their private capacities to enter into the CA, and the only parties
upon which the agreement is binding are the parties to the CA. This is made clear in s 31
and expressly in the CA itself. Even though the binding power of the CA is recognised in
s 31 of the LRA, it cannot be said that the parties to it have the power to extend the CA
to non-parties, in the sense of binding them as if they were parties to it. In this respect,
and unlike in the case of an agreement conclu ded in terms of s 23(1)(d) of the LRA, the
mere conclusion of the CA, does not have a public character and does not have sufficient
public consequences ‘to make what they did the exercise of public power’.100

[188] Nonetheless, the respondents contend that although they are not formal parties to
the CA, its effect is to coerce them to bend to the will of the parties, and in this sense it
constitutes an exercise of public power. This contention is misdirected. That the CA may
put the respondents in a position to have to make important decisions does not mean that
it is coercive. Retirement funds with members in the local government sector will have to
consider their rules to determine whether they currently meet the accreditation criteria or
not; if not, they will be duty bound by their fiduciary duties to consider what is best for the
members and the fund. For example, they will have to consider whether an amendment
would be in the funds’ overall interests, or whether a request for a non-material deviation
of their rules is advisable. The same consideration would apply to rules that currently do
not permit in -service transfers between funds. While this Court found, in Municipal
Employees Pension Fund and Another v SAMWU National Provident Fund and Another

Employees Pension Fund and Another v SAMWU National Provident Fund and Another
(MEPF v SAMWUNPF ), that such rules are enforceable by retirement funds, 101 that
decision is not precedent for the rules’ immutability, and we are not called upon to find
that decision clearly wrong. Retirement fund rules may be amended under s 12 of the

99 Op cit fn 92 para 75.
100 Compare AMCU fn 57 above paras 82-83.
101 Municipal Employees Pension Fund and Another v SAMWU National Provident Fund and Another [2019]
ZASCA 42 (MEPF v SAMWUNPF).

83

PFA, subject to approval by the registrar. If a proposed amendment is found not to be
financially sound, the registrar may refuse it under s 12(4). In that event, either the fund
in question, or an employer or employee party to the CA could apply, respectively, for a
non- material deviation or exemption from the relevant provisions of the CA. However,
because of the principled stance adopted by the respondents to not apply for
accreditation, they have not yet undertaken this necessary exercise.

[189] The point is t hat these are all decisions that will fall to each fund, individually, to
make within their independent powers of determination. Ultimately they will be overseen
by the registrar of the FSCA, who must approve all rule changes .102 In short, the
respondents are not obliged to collaborate, or to become accredited retirement funds, nor
are their powers fettered. That it may be in their best interests to request accreditation,
does not mean that they are legally obliged to do so. The e ffect of the CA on the
respondents is not ‘coercive’ in the sense required for the exercise of a public power.

[190] As already noted, the rationale for the conclusion of the CA, as set out in detail by
the appellants, is to address the parties’ concerns regarding retirement funding
arrangements, and particularly to bring about certainty and equality, and to ensure
transparency, affordability, sustainability, effectiveness and fairness. It is clearly aimed at
addressing the interests of the parties to the collective bargaining process, rather than
the public interest collectively. While collective bargaining agreements may be of interest
to the general public, it does not mean that collective bargaining agreements are matters
of public interest in the revi ew sense. Were the latter so, it would mean that every
collective bargaining agreement would be subject to legality review. This is not our law.

collective bargaining agreement would be subject to legality review. This is not our law.

[191] It follows that the CA is not subject to legality review either. However, even if it
were so subject, the review would be doomed to fail. Having rejected the contention that
the CA was not a collective agreement as defined in s 213 of the LRA, for purposes of

102 The undisputed evidence of the appellants was that the FSCA had approved rule amendments in respect
of retirement funds that had requested accreditation.

84

this judgment, the vires avenue of review is closed. The remaining ground, were the CA
to be reviewable, would be that of rationality.

[192] The test for this type of review is stringent. It is not about reasonableness, but
about rationality.103 There must be a rational relationship between the provisions of the
CA and the achievement by the council and the bargaining parties of a legitimate
purpose.104 The means selected, as embodied in the CA, must be examined to determine
whether they are ration ally connected to the objectives sought to be achieved. 105 It has
been held that a decision is rationally linked to its purpose if it is linked to that purpose by
reason, as opposed to arbitrariness or caprice.106 That there may have been, in the court’s
opinion, other or better means to achieve those purposes or objectives, is irrelevant. The
test is an objective one.107

[193] It is important to bear in mind what the Constitutional Court stated in Scalabrini
Centre:
‘But an enquiry into rationality can be a slippery path that might easily take one inadvertently into
assessing whether the decision was one the court considers to be reasonable. …[R]ationality
entails that the decision is founded upon reason – in contra-distinction to one that is arbitrary –
which is different to whether it was reasonably made. All that is required is a rational connection
between the power being exercised and the decision, and a finding of objective irrationality will
be rare.’108

[194] The question is thus not whether the CA is reasonable or whether the parties acted
reasonably in concluding it. This Court is required to consider whether there is a rational
relationship between the purpose of the collective bargaining power, together wit h the

103 Scalabrini Centre fn 76 above para 65.
104 See inter alia AMCU fn 57 above para 65; Scalabrini Centre paras 64-65.

104 See inter alia AMCU fn 57 above para 65; Scalabrini Centre paras 64-65.
105 Law Society of south Africa and Others v Minister of Transport and Another [2010] ZACC 25; 2011 (1)
SA 400 (CC) ; 2011 (2) BCLR 150 (CC) paras 34-35; Democratic Alliance v President of South Africa and
Others [2012] ZACC 24; 2012 (12) BCLR 1297 (CC); 2013 (1) SA 248 (CC) para 29.
106 Airports Company South Africa SOC Ltd v Imperial Group Ltd and Others [2020] ZASCA 2; [2020] 2 All
SA 1 (SCA); 2020 (4) SA 17 (SCA) para 30.
107 Pharmaceutical Manufacturers Association of South Africa and Another: In re Ex Parte President of the
Republic of South Africa and Others [2000] ZACC 1; 2000 (2) SA 674; 2000 (3) BCLR 241 para 86.
108 Op cit fn 104 paras 65.

85

objective sought to be achieved by the CA, and the CA’s incorporation of an accreditation
mechanism. If there is, objectively, that rational connection, the rationality review would
fail.

[195] The purpose of collective bargaining is to further the mutual interests of the
bargaining parties in matters connected with the employment relationship. As we
recorded earlier, the main objectives of the CA are expressed in clause 2. They are plainly
directed at serving the mutual interests of the appellants in their engagement with
retirements funds, which form an integral part of the employment relationship. The
appellants explain the history and context that led to the negotiations, over a period of
some 20 years, with the input of experts in the field, and ultimately to the conclusion of
the CA. This is not objectively irrational conduct: it demonstrates that the accreditation
mechanism agreed upon was subject to serious deliberation as to how best to achieve
the objectives of uniformity, equality of access to retirement benefits, efficiency, greater
transparency in retirement fund -employer/employee relationships, and flexibility for
employees to move between retirement funds at stated intervals.

[196] The criteria relating to maximum board size, greater reporting requirements (above
the minimum requirements established in the PFA) and transfer of members are all
rationally related to these objectives. That the respondents subjectively consider that
some of these criteria may go too far and are not reasonabl e is not the test: the test is
whether there is a rational, and not arbitrary, connection between the objectives sought
to be achieved and the accreditation mechanism and criteria. In any event, as noted
earlier, the respondents seek to set aside the entir e CA, and not selected, identified
provisions. Consequently, the rationality link must be examined on the basis of the CA as
a whole, and its overall objectives. The requisite rational relationship is amply

a whole, and its overall objectives. The requisite rational relationship is amply
demonstrated. We conclude that even if, contrary to our finding that the conclusion of the
CA is not an exercise of public power and hence not reviewable, the review would fail.

86

Pensioners
[197] The plight of pensioners was something relied upon by the respondents in their
address to this Court at the hearing of the appeal. It is an issue that the main judgment
appears to have found persuasive. We disagree. In the first instance, the first question to
consider is whether the CA is reviewable under PAJA or legality. If it is not, as we have
found, then the position of pensioners becomes irrelevant.

[198] However, it goes further than this. Even if the position of pensioners was,
somehow, a relevant factor in the appeal, there is no proof that the interests of the
pensioners were not taken into account when the CA was negotiated and concluded. Nor
that they are adversely affected by the provisions of the CA. These pensioners are former
employees of the municipalities who have retired, and because the rules of the retirement
fund have allowed it, they have chosen to stay on as members, even though they no
longer contribute to the retirement fund and the employer no longer contributes on their
behalf to the retirement fund. They are the ones to whom the retirement fund, as insurer,
has issued an annuity. Their pensions are preserved in these annuities that provide them
with pensions. They have several options upon retiring. The annuities are freely
transferable to another insurer. Their pension provisions are fully protected in terms of
the insurance and pens ion laws. Certain of the respondents have opportunistically tried
to make a case for review on the basis of this group, the dimensions of which the
respondents did not disclose. And it was clearly for them to spell out exactly how the
rights of this group were adversely affected by the CA. They failed in that regard.

Rights challenges
[199] The MEPF and ARFA launch generalised constitutional challenges to the CA
based on the right to freedom of trade, which is protected under s 22 of the Constitution,
and the right to freedom of association, under s 18. The s 22 challenge is based on the

and the right to freedom of association, under s 18. The s 22 challenge is based on the
averment that ‘[i]f t he Collective Agreement is implemented, this will have a direct and
conclusive effect on the funds’ ability to trade’. Assuming 109 (without deciding) that the

109 There are conflicting decisions on the question of whether juristic entities can claim protection under s
22 of the Constitution. In City of Cape Town v Ad Outpost (Pty) Ltd and Others 2000 (2) SA 733 (C), the
High Court found that the right did not extend to juristic entities. The judgment was not followed by the

87

right is available to juristic persons, the s 22 challenge lacks proper foundation and
substantiation. As we noted earlier, one of the features of the review application is that it
was launched as a pre-emptive strike, following a principled decision by the respondents
not to seek accreditation. Should they continue to hold this stance, it will be their election
that may adversely affect their trade, not the CA. Given that they have, to date, not sought,
nor been refused accreditation, they have failed to provide any evidence that the CA will
cause their demise, as they assert. There is thus no merit in the challenge.

[200] As to the freedom of association challenge, Akani and the MEPF fail to advance
any grounds upon which they have locus standi to institute the challenge on behalf of
their individual members. Mr Chomane, an individual, is cited as a co -applicant in their
application, and he is described as being a member of the MEPF. Assuming he has locus
standi, the question is whether there is any merit in the challenge.

[201] As with the s 22 challenge, the freedom of association challenge is asserted in the
most general of terms: essentially, it is that the effect of the CA is that ‘employers and
employees in the Sector are forced to join accredited funds and to terminate their
membership of existing non -accredited funds, even if they would otherwis e elect to
remain with the non -accredited fund and regardless of the fund’s performance and
benefits’. The challenge suffers from the same problems as those that afflict the s 22
challenge. In addition, it is incorrect that anyone is ‘forced’ to join a par ticular fund:
employees will have a choice between accredited funds. They have the election to leave
their members’ interest in a non-accredited fund as ‘paid up’, and so to continue to remain
invested in their first choice retirement fund. In any event, t he restrictions imposed only
has financial implications for the member. This Court held in Municipal Employees

has financial implications for the member. This Court held in Municipal Employees
Pension Fund v South African National Provident Fund 110 that restrictions of this nature
do not infringe the right to freedom of association. There is thus no merit in the s 18
constitutional challenge.

Labour Court in Contract Employment Contractors (Pty) Ltd v Motor Industry Bargaining Council (MIBCO)
and Others [2012] ZALCJHB 22; [2012] 7 BLLR 726 (LC); 2013 (3) SA 308 (LC).
110 MEPF v SAMWUNPF paras 57 and 61.

88

Conclusion
[202] For all of these reasons, we would have upheld the appeal and dismissed the
cross-appeal and made an order directing the respondents to pay the costs, including
those of two counsel where so employed, and we would have substituted the high court’s
order in each of the matters with the following order: ‘The application is dismissed with
costs, including the costs of two counsel where so employed.’


___________________________
R M KEIGHTLEY
JUDGE OF APPEAL


___________________________
P COPPIN
ACTING JUDGE OF APPEAL

89

Appearances
Case number: 2905/2022
For the appellants: A Franklin SC with L Hollander
Instructed by: Bowman Gilfillan Inc, Johannesburg
Honey Attorneys, Bloemfontein

For the respondent: C Watt-Pringle SC with S Khumalo SC and H Drake
Instructed by: Shepstone & Wylie Attorneys, Johannesburg
McIntyre van der Post Inc, Bloemfontein

Case number: 30396/2022
For the appellants: N Maenetjie SC with R Tshetlo
Instructed by: Bowman Gilfillan Inc, Johannesburg
Honey Attorneys, Bloemfontein

For the respondents: V Movshovich
Instructed by: Webber Wentzel, Johannesburg
Lovius Block Inc, Bloemfontein

Case number: 4580/2022
For the appellants: N Maenetjie SC with R Tshetlo
Instructed by: Bowman Gilfillan Inc, Johannesburg
Honey Attorneys, Bloemfontein

For the respondents: C Loxton SC with A Milovanovic-Bitter
Instructed by: JJ Jacobs Attorneys Inc, Pretoria
Pieter Skein Attorneys, Bloemfontein.