Illustration: Colin Daniel

A loss of R60 million need not concern members of the Telkom Retirement Fund, because “the investment is very small in relation to total [fund] assets” (0.2 percent of R30 billion).

Shockingly, this is what the Telkom Retirement Fund told its members last week after the Financial Services Board (FSB) had applied successfully for the Western Cape High Court to place under provisional curatorship the Rockland Targeted Development Investment Fund (TDIF); the fund’s manager, Rockland Investment Managers (RIM); and its holding company, the Rockland Group.

The Telkom Retirement Fund is one of six retirement funds that have invested in TDIF.

The main issue in the Rockland saga is TDIF’s largest asset: 480 hectares of undeveloped, windswept sand dunes in Schaapkraal, facing False Bay.

In trying to reassure Telkom Retirement Fund members about the potential loss of their investment in TDIF, the fund’s trustees and/or its advisers seem to:

* Think that R60 million is a little bit of money. I wonder what the average member’s holding is in the retirement fund. It is, after all, the members’ money.

* Quietly forget that the R60 million was invested in TDIF in 2009, and therefore they do not seem to expect any return on the fund’s investment. If the current value is as stated on the fund’s books R72 million, that is the potential maximum loss – not R60 million.

* Think that accuracy is unimportant. The percentage the fund invested in TDIF should be either R60 million of the fund’s total assets in 2009 or R72 million of the fund’s current total assets of R30 billion. It most definitely is not R60 million of R30 billion.

With such a cavalier attitude, one can only wonder what else the Telkom Retirement Fund considers to be small change.

By yesterday, however, the fund had realised that this matter was a little more serious. It said it has appointed an independent investigation into the TDIF curatorship and claimed the board of trustees takes “all its investments seriously, no matter how big or small”.

The Rockland entities are a mass of absolutely unacceptable conflicts of interest (see “Wentzel Oaker at centre of Rockland structure”, below). But conflicts of interest and other problems do not stop at the front door of the Rockland offices in Wolfe Street, Wynberg, Cape Town, or at Schaapkraal.

A Personal Finance investigation has exposed far wider conflicts of interest that are totally unassociated with the Rockland entities.

Sadly, the Rockland provisional curatorship also once again reveals that little reliance can be placed on the opinions and advice provided by professional advisers to retirement funds, as well as on other professionals who provide the supporting evidence that retirement funds use in reaching their decisions. Personal Finance will deal with this important issue in the weeks ahead.

In my view, the Telkom fund and two mining funds have ignored the admonition in FSB circular PF 130 that conflicts of interest must be avoided (see “Circular sets out how trustees should look after your money”, below).

The most unacceptable conflict of interest lies with asset management consultants Riscura and its associated company, Riscura Analytics.

In a nutshell:

* Retirement funds pay Riscura to advise and assist trustees to manage assets (members’ retirement savings) judiciously; and

* Riscura Analytics sells its services to asset managers. These services include indexation, risk and compliance reporting, and investment performance reporting, including performance attribution and technical risk analysis. For these services, Riscura Analytics is paid fees, and some of these fees are based on a percentage of the assets under management and performance. So the greater the value, the more Riscura Analytics is paid.

The clients of Riscura Analytics include: Investec Asset Management; a company called Edge, which focuses on selecting fund managers (mainly of hedge funds) and constructing portfolios; and a diverse and sometimes motley selection of hedge fund managers.

Riscura chief executive Jarred Glansbeek says Riscura Analytics has not provided services to any of the Rockland entities.

Both Edge and Investec are prominent among the asset managers that provide services to the Telkom Retirement Fund and the two mining funds.

The reasons that conflicts of interest are dangerous include:

* If there is a separate cash flow from another associated entity, it enables a retirement fund’s asset management consultants, such as Riscura, to bid for the consultancy at a lower price than its competitors.

* Once ensconced as a consultant, the company can effectively spread its wings, taking over more and more duties, particularly if the board of trustees is weak.

There seems to be an unacceptable trend nowadays for asset management consultants to design investment portfolios and decisively recommend which asset managers a fund should use. This in itself is a conflict of interest, because the primary duty of a consultant is to guard others. Who guards the guard if it is doing asset allocation work?

* Once in a position of power, the asset management consultant can insist (with a nudge and a wink) that the asset manager uses the services of a company associated with the asset management consultant, such as Riscura Analytics.

Glansbeek insists that Riscura does not put any pressure on an asset manager to use the services of Riscura Analytics, and it ensures that the conflicts of interest are declared to clients.

But remember there is a nasty history of linked-investment ser-vices providers demanding kickbacks before they would place the funds of unit trust companies on their administration platforms.

* The biggest conflict of interest lies in how a company may collect its fees, which include being paid a percentage of the assets under management. So the greater the value, the more it may be paid. There is little incentive to chop the values of over-valued assets.

I am not at all saying that Riscura Analytics does not do a fair job, but the dangers exist in a wider context.

To understand the dangers, we need to look only at how TDIF increased the value of the Schaapkraal sand dunes by more than 2 000 percent. RIM was receiving a very high annual asset management fee of two percent plus 20 percent of returns above the inflation rate plus five percent on a rolling three-year basis. This is a substantial fee on what may prove to be false current valuation of R847 million, from the original investments totalling R519 million.

* The last conflict of interest is that the asset management consultant is now standing guard over a company associated with it.

Incidentally, any service provider to a retirement fund, including an asset management consultant, has a fiduciary duty to act in the best interests of the fund and its members. This includes avoiding, not managing, conflicts of interest.

Glansbeek says his company has “a clear conflicts of interest management policy, and we disclose all conflicts and potential conflicts of interest with our clients”.

Conflicts of interest must be avoided at all costs because of the potential for something to go wrong. And when things do go wrong, it is always the retirement fund members who seem to suffer; all the rest seem to get off scot-free.

The other problem with conflicts of interest is that the costs, even if there is no skulduggery, will reduce your retirement benefits.


All the conflicts of interest in the Rockland structures and investments swirl about Wentzel Oaker, a Cape Town advocate and businessman who is no stranger to controversy.

Oaker first hit the headlines in 2004, when he rode in as an apparent “white knight” to save the jobs of 600 employees at Tej clothing factory, which was facing closure. But the workers’ jobs were not saved: the factory was, controversially, closed down and most of its equipment was carted off as scrap. Oaker was also involved in a public scrap over control of the Cape Town International Jazz Festival.

Oaker says everything he has done at the Rockland entities is above board and meets accounting standards.

But the Financial Services Board (FSB) and its inspectorate think otherwise. It says “there are no checks and balances in the management of the affairs of the Rockland Targeted Development Investment Fund (TDIF)”. The FSB also says Oaker failed to disclose the profit he made from the sale of the land at Schaapkraal to TDIF.

The FSB says the entire Rockland structure and its underlying investments revolve around Oaker, and this concentration of power in the hands of one person is a cause for concern. The extent of Oaker’s control includes:

* He is the controlling director of the Rockland Group, which owns Rockland Investment Managers (RIM).

* Oaker is the sole director, key individual and compliance officer of RIM, which controls TDIF and manages its assets.

* Oaker is the sole trustee of TDIF, in which he played the conflicting roles of buyer and purchaser of the Schaapkraal land, for which he failed to obtain a second valuation.

* Oaker is one of the directors of Blue Nightingale, a company in which TDIF holds more than 30 percent of the shares. Blue Nightingale has invested in black economic empowerment company Imithi, which was established to purchase shares in pharmaceutical company Aspen.

* TDIF owns 100 percent of Nelco Furniture, of which Oaker’s son and Darren Pillay, chief operating officer of RIM, are the directors.

* Oaker and his son are the directors of C-Max, a company that is 100-percent owned by TDIF. C-Max owns a warehouse in Cape Town that is rented to Shoprite Checkers.

* Oaker is a director of a property company, Allegra, in which TDIF, along with a trade union, holds 50 percent of the shares.

* Oaker is the trustee of the Property Investment Fund (a trust), which is part of the TDIF structure.

* Oaker and his son are the directors of the companies Rapicorp 122 and Rapicorp 123, which were used to purchase the Schaapkraal property. TDIF owns 80 percent of both companies.


Circular PF 130 issued by the Financial Services Board (FSB) lays down how the trustees and principal officers of retirement funds should behave when looking after the savings of fund members.

Unfortunately, PF 130 is currently only a guidance note. However, National Treasury, which is concerned about the ongoing problems in retirement funds, has announced that it intends to make PF 130 legally enforceable.

The most important part of PF 130 is its admonition that both trustees and principal officers have a fiduciary duty to act with the utmost good faith, due care and diligence when carrying out their duties. This has been accepted to mean that trustees and principal officers are in a position of trust and must act with greater care than they would when dealing with their own affairs.

In terms of PF 130, trustees and principal officers cannot abdicate their responsibilities when they use advisers and service providers, and trustees can be held personally liable if things go wrong.

The FSB considers conflicts of interest to be so important that it devotes a special section of PF 130 to the issue.

Section 19 states that the fiduciary duty owed by the board of trustees and the principal officer “requires that they avoid conflicts of interest”. It also states that trustees “should distinguish between conflicts of interest which may be structural, and therefore unavoidable, and those conflicts which can be avoided or, if this does not compromise the credibility of the governance arrangements, managed appropriately”.

Trustees must ensure “in relation to any service provider to the fund, that a conflict of interest is removed or, if this is not possible, resolved transparently and defensibly”.


In 2007, 480 hectares of windswept sand dunes known as Schaapkraal were bought for about R36 million and then sold on, resulting in a tidy profit of about R224 million. About one-third of this profit effectively went to Cape Town businessman Wentzel Oaker, who remained in control of the investment until it was placed under provisional curatorship last month.

The Financial Services Board (FSB) wants to use the curatorship to recover the R224-million profit, which was made at the expense of members of six retirement funds, which invested R519 million in the Rockland Targeted Development Investment Fund.

Today, it is claimed the land is worth R890 million, and it has a fancy new name, Oakland City Development.

According to Oaker, who spotted this wonderful investment opportunity from which he has already profited so well, the increase of more than 2 000 percent in the value of the land can be ascribed to two factors: there are huge profits to be made from exploiting deposits of building sand (claimed to be worth R450 million) and the construction of a mini-city.

The only problem is that neither Wentzel, who, through his companies and the companies Rapicorp 122 and Rapicorp 123, owns 20 percent of the land, nor TDIF, which owns 80 percent of the land, have mining rights.

One of the Rapicorp companies is applying to exploit the sand on only three of the 21 erven that make up the Schaapkraal property.

Furthermore, Rapicorp 122 and Rapicorp 123 do not have approval to develop a multi-billion-rand mini-city.

So the land is what it was, apart from visions of the future.

According to Deeds Office records unearthed by the FSB’s inspectors, the land was bought by Rapicorp 122 and Rapicorp 123 for R36 million in 2007. According to Oaker, at the time the two Rapicorp companies were owned by the Rockland Group and two faceless trusts, the Shuster River Trust and the Merlow Trust, which sold their shares to the Rapicorp companies.

The Rapicorp companies then sold 80 percent of their shares at a “discounted” R260 million, netting a profit of about R224 million for the Rockland Group, the Shuster River Trust and the Merlow Trust. Oaker says the land was valued at R300 million at the time of the sale.

In papers in support of the Rockland provisional curatorship, the FSB and its inspectorate say that “in light of Oaker’s conflicted role and position, the amount for which the land was valued in December 2007 has a ring of suspicion” given:

* Oaker’s failure to explain the sudden rise in valuations;

* Oaker’s failure to follow standard business practice in transactions of this magnitude by obtaining a second, independent valuation of the land; and

* The increase of 2 125 percent in the value of the land, from R36 million in April/May 2007 to R890 million in December 2010.


The Mine Employees Pension Fund and the Sentinel Mining Industry Retirement Fund say they are comfortable with the conflicts of interest presented by Riscura.

In reply to questions from Personal Finance, Andre la Grange, chairman of the funds, and Eric Visser, their chief executive and principal officer, say they “are aware of the conflict, and any recommendations made by Riscura are assessed on this basis. We are comfortable with the level and quality of disclosures that Riscura provides to the funds about its business, and these disclosures are in line with the funds’ codes.

“The funds require very high standards of integrity and transparency from all [their] service providers. These principles are embodied in the funds’ code of ethics for service providers. We receive full disclosure from Riscura in terms of risk management services being provided to asset managers and the fees that it receives from the managers,” La Grange and Visser say.