THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case no: 562/2015

In the matter between:
MUNICIPAL EMPLOYEES PENSION FUND                         APPELLANT
and

THE NATAL JOINT MUNICIPAL PENSION          FIRST RESPONDENT
FUND (SUPERANNUATION)

THE NATAL JOINT MUNICIPAL FUND            SECOND RESPONDENT
(RETIREMENT)

THE KWAZULU-NATAL JOINT MUNICIPAL     THIRD RESPONDENT
PROVIDENT FUND

Neutral Citation: Municipal Employees Pension Fund v The Natal Joint
Municipal Pension Fund (562/2015) [2016] ZASCA 139 (29 September 2016)

Coram:
Maya DP, Theron, Wallis and Zondi JJA and Schoeman AJA
Heard:
22 August 2016
Delivered:
29 September 2016
Summary:
Pension funds – local authorities in KwaZulu-Natal obliged to
associate as employer with one or more of the respondents – not entitled to associate
with appellant fund to the exclusion of the respondents – local authority employees
obliged to be members of one of the respondents.

____________________________________________________________________
ORDER
____________________________________________________________________
On appeal from: KwaZulu-Natal Division of the High Court, Pietermaritzburg
(Kruger J sitting as court of first instance):
1  Save to the limited extent indicated in paragraph 2 below, the appeal is
dismissed with costs including the costs of two counsel.
2   The order of the court a quo is amended to read:
„1  The Municipal Employees Pension Fund be and is hereby directed to forthwith
make payment to the Imbabazane Municipality of all amounts received by it as
pension contributions in respect of the individuals identified in the list annexed to its
founding affidavit in the application under Case No. 3360/2012 and marked „A3‟.
2(i) Local Authorities located within the province of KwaZulu-Natal are, in
terms of the Local Government Superannuation Ordinance 24 of 1973, the Natal
Joint Municipal Pension Fund (Retirement) Ordinance 27 of 1974, the
KwaZulu-Natal Joint Municipal Provident Fund Act 4 of 1995, and the
regulations promulgated in terms of such legislation, obliged to associate as
employer
with
each
of
the
Natal
Joint
Municipal
Pension
Fund
(Superannuation), the Natal Joint Municipal Pension Fund (Retirement) and the
KwaZulu-Natal Joint Municipal Provident Fund.
(ii)  In terms of the legislation mentioned in para (i) above and the regulations
promulgated thereunder, local authorities located within the province of
KwaZulu-Natal may only associate with any other fund, in addition to their
association with the Natal Joint Municipal Pension Fund (Superannuation), the
Natal Joint Municipal Pension Fund (Retirement), and the KwaZulu-Natal Joint
Municipal Provident Fund or the KwaZulu-Natal Municipal Pension Fund.

(iii)  The Municipal Employees Pension Fund is interdicted and restrained from
representing to any local authority located within the province of KwaZulu-
Natal that it is a pension fund with which such local authority may be associated
in the stead of the Applicants in terms of the legislation mentioned in para (i)
above and the regulations promulgated thereunder.
3 The Municipal Employees Pension Fund is to pay the applicants‟ costs, such
costs are to include:
(i)  All costs reserved at previous hearings and appearances in both the Uniform
rule 30 application and this application, and
(iii) The costs consequent upon the employment of two counsel.‟

_____________________________________________________________________
JUDGMENT
_____________________________________________________________________
Theron JA (Maya DP, Wallis and Zondi JJA and Schoeman AJA concurring):

Introduction
[1] The parties in this matter are three municipal pension funds and a
provident fund established by provincial legislation for the purpose of providing
pension and related benefits to employees (and their dependants) of local
authorities. The rules of these funds enable employees of a local authority to
become members thereof. The provision of benefits is derived from
contributions paid to the funds by participating municipalities (qua employers)
on behalf of their employees and from contributions paid by such employees
themselves. Benefits are paid out to the members who retire, or otherwise
become entitled to a benefit, or their dependants.

[2] This appeal concerns a „turf war‟ between the funds over the right of the
appellant, the Municipal Employees Pension Fund, to admit, as participating

employers, to the exclusion of the three KwaZulu-Natal based funds, local
authorities within the province of KwaZulu-Natal and to provide retirement
benefits to municipal employees within KwaZulu-Natal. The appellant is a
pension fund established under an ordinance enacted by the legislature of the
former Transvaal Province. The first respondent, the Natal Joint Municipal
Pension Fund (Superannuation), the second respondent, the Natal Joint
Municipal Pension Fund (Retirement) and the third respondent, the KwaZulu-
Natal Joint Municipal Provident Fund, (the respondent funds), were all
established by provincial legislation and operate exclusively within that
province. The court a quo (Kruger J) found that the provincial legislation
relating to the respondent funds, as well as the regulations promulgated
thereunder, oblige local authorities within the province to be associated only
with the respondent funds. It is against this judgment that the appellant appeals,
with the leave of the court a quo.

Background
[3] This application arose from proceedings instituted by the appellant against
the Imbabazane Local Municipality (the Municipality), and 25 of its employees,
in April 2012. The Municipality is located at Estcourt, KwaZulu-Natal, and has
from its inception been a local authority associated with the respondents. In the
early part of 2011 the appellant held a presentation at the Municipality at which
it represented to the latter‟s employees that it was a fund entitled to solicit
members from local authorities within KwaZulu-Natal and a fund with which
the Municipality could be associated. Following on the presentation, 25
employees became members of the appellant.1

1 The affidavits filed in this matter refer to 26 members but this appears to be a typographical error as 25 persons were
joined as respondents by the appellant in the application under Case No. 3360/2012 and the details of these 25
persons are listed in Annexure „A3‟ to its founding affidavit in that application.

[4] During November 2011 the Municipality formed the view that its
employees were not entitled to be associated with the appellant and in writing
advised the appellant that the 25 employees‟ membership was „terminated‟. The
Municipality suspended payment of contributions due to the appellant in respect
of the 25 employees.  The appellant thereafter instituted an application in which
it sought, inter alia, an order compelling the Municipality to make payment to it
of the pension fund contributions of the 25 employees. The Municipality did not
oppose the application and on 4 June 2012, the KwaZulu-Natal Division of the
High Court granted an order in favour of the appellant („the first order‟),
declaring that the suspension of payment by the Municipality of pension fund
contributions was unlawful, and directing the Municipality to reinstate payment.
In August 2012 the respondents launched an application against the appellant in
which they sought to rescind the first order on the basis that it was erroneously
granted and to obtain an interdict restraining the latter from conducting pension
fund business within KwaZulu-Natal. The first order was rescinded by consent
on 19 February 2013. The remaining relief was granted by Kruger J and that
gives rise to this appeal.

Historical background of the respondent funds
[5] It is accepted that the history of legislation may serve as an aid to the
interpretation of a legislative provision and shed „valuable light‟ on its current
meaning.2 Prior to 1939 local authorities in the then province of Natal wishing to
provide pension benefits to employees had to do so by creating superannuation
funds for their own staff. This posed difficulties for smaller municipalities,
because they had few employees and the number of members and the level of
contributions affect the viability of a pension fund. In 1939, by way of the Local
Government Superannuation Ordinance 12 of 1939 (the 1939 Ordinance) the

2 Santam Insurance Ltd v Taylor 1985 (1) SA 514 (A) at 526I - 527C; S v H 1988 (3) SA 545 (A) at 552D-E;  Natal
Joint Municipal Pension Fund v Endumeni Municipality [2012] ZASCA 13; 2012 (4) SA 593 (SCA) at paras 17-24.

Natal Joint Municipal Pension Fund (the NJMPF) was created to address this
problem.  The purpose of the 1939 Ordinance was to „empower local authorities
to make provision as to retiring pensions or other financial benefits payable to
persons employed by local authorities‟. In terms of s 3(1) the NJMPF would
come into existence once two or more local authorities having at least thirty
eligible employees adopted the 1939 Ordinance. The only eligible employees
were persons of „European descent‟.3 All local authorities, irrespective of
whether or not they had existing superannuation funds, could adopt the
ordinance and become associated with the NJMPF.4 If they had an existing fund
then the investments and other moneys of such fund would be transferred to the
NJMPF.5 Larger local authorities, having at least sixty employees and with
existing superannuation funds, could also adopt the 1939 Ordinance without
becoming associated with the NJMPF. In that event the provisions of the 1939
Ordinance would govern the operation of such funds, but the funds would not
form part of the NJMPF. Of particular relevance for present purposes were the
provisions that obliged employees to be members of the fund with which their
local authority employer was associated, that is, either the NJMPF or the local
authority‟s own superannuation fund.6

[6] The Local Government Superannuation Ordinance 25 of 1966 (the 1966
ordinance) was promulgated to consolidate and amend the law relating to the
NJMPF and to make provision for the pension rights of an employee transferring
from one local authority to another. It made association with the NJMPF
compulsory for all local authorities, save those of Durban and Pietermaritzburg
and, by making membership compulsory for all qualifying employees, ensured
that all local authority employees in the province of Natal, outside Durban and

3 See the definition of „employee‟ in s 6 of the Ordinance.
4 Section 4 dealt with local authorities with no fund and s 5 with local authorities with an existing fund.
5 Section 5(2)(c).
6 Sections 9(3) and 10.

Pietermaritzburg, were obliged to be members of the NJMPF. The relevant
provisions of this ordinance were ss 3 and 4. Section 3 of the 1966 Ordinance
established
„the Natal Joint Municipal Pension Fund with which every existing or future local authority
shall be associated and which shall be deemed to be a continuation of the fund as it existed
under the provisions of the Local Government Superannuation Ordinance 12 of 1939.‟7
(Emphasis added.)
The 1966 Ordinance retained almost exclusive application to white employees
but allowed certain black people to be regarded as employees and become
members of the NJMPF‟.8 The principle of compulsory association, which was
new, and compulsory membership, which was a continuation of the existing
situation, was reinforced by s 4 which provided for „obligatory association with
and membership of the fund‟ and read:
„Every existing local authority not associated with the fund shall become associated with the
fund from the date of promulgation of this Ordinance and every future local authority shall
become associated with the fund on the date upon which it comes into being, and every
employee of such local authority who is eligible to become a member of the fund shall
become a member.‟9 (Emphasis added.)

[7] The Natal Joint Municipal Pension Fund (Non-White) Ordinance 6 of
1967 (the 1967 Ordinance) was enacted to empower local authorities to make
provision for pension and other benefits of black employees.10 In terms of this
ordinance, an employee was defined as any person, other than a white person, in

7 Section 49 of the Ordinance repealed Ordinance 12 of 1939.
8 Section 1(xii)(iv) provided that:
„… a local authority may determine that any person, other than a white person, … in its service in grade or class
specified by it for the purpose shall, subject to the same conditions as for a white person, be an employee‟.
9 In terms of s 2 of Ordinance 25 of 1966, the local authorities of Durban and Pietermaritzburg were excluded
from the application of Chapters II, III and IV of the Ordinance – unless express provision to the contrary was
made.
10 Section 2 provided:
„There is hereby established a pension fund to be known as the Natal Joint Municipal Pension Fund (Non-
White) with which every existing or future local authority shall become associated as hereinafter provided.‟

the service of a local authority.11 The ordinance made association compulsory
because s 3 provided that:
„[e]very existing local authority shall become associated with [the Natal Joint Municipal
Pension Fund (Non-White)] within twelve months of the date of promulgation of this
Ordinance and every future local authority shall become associated with the fund within six
months of the date from which it comes into being‟.

[8] Section 13 of the Ordinance regulated membership of the fund and
provided that: (1) employees who were under the age of 55 years as at the date
of adoption would be obliged to become members of the fund; (2) A person who
became an employee on or after the date of adoption would become a member
of the fund and (3) a member could not withdraw from membership while in the
service of a local authority.

[9] The Local Government Superannuation Ordinance 24 of 1973 (the 1973
Ordinance), repealed the 1966 Ordinance. The purpose of this ordinance was to
„consolidate and amend the law relating to the Natal Joint Municipal Pension
Fund.  The first respondent was established in term of s 2 of the Ordinance and
s 4(1)(a) empowered the Administrator to make regulations providing that the
fund would be a continuation of an existing fund. Such regulations were made
with the result that the first appellant is a continuation of the NJMPF. In 1978 by
an amendment to the 1973 Ordinance the name of the first appellant was
changed to Natal Joint Municipal Pension Fund (Superannuation). In terms of s
3 of the 1973 Ordinance, it would not apply the local authorities of Durban and

11 Section 1(xi) defined an employee as:
„any person (other than a white person as defined in s 1 of the Population Registration Act 30 of 1950 who, at the
date of  adoption of a scheme by a local authority, is in the service of such local authority or who subsequently
joins the service of a local authority and who –
(a) has attained the age of seventeen years but has not attained the age of fifty-five years;
(b) devotes his whole time to the said service;
(c) has completed twelve months‟ continuous service with a local authority;
(d) is in receipt of a salary or wage of not less than R400 per annum of has been classified as an employee in
terms of section 4(1)(c) of section 5;
provided that any employee who is a member of the Natal Joint Municipal Pension Fund shall be excluded from
the provisions of this Ordinance‟.

Pietermaritzburg, unless they made application in the prescribed manner to
become associated with it. It empowered the Administrator to make regulations
for, inter alia, determining which employees of local authorities should be
eligible to join the fund. The regulations obliged all local authorities, with the
exception of Pietermaritzburg and Durban, to associate with the first appellant
and obliged all eligible employees of associated local authorities to be members
of the first appellant.

[10]  The Local Government Superannuation Ordinance 27 of 1974 (the 1974
Ordinance) repealed the 1967 Ordinance. Its provisions mirrored those of the
1973 Ordinance and in 1978, by way of an amendment to the 1974 Ordinance,
the name of the fund was changed to Natal Joint Municipal Pension Fund
(Retirement), which is the second appellant. As with the first appellant the
regulations obliged all local authorities, with the exception of Pietermaritzburg
and Durban, to associate with the first appellant and obliged all eligible
employees of associated local authorities to be members of the first appellant.

[11] To sum up, the first respondent had existed since 1939 and the second
appellant came into existence in 1967. At all times, either under the applicable
ordinances or the regulations made in terms of those ordinances, it was
obligatory for every local authority in what was then the province of Natal, with
the exception of Durban and Pietermaritzburg, to associate with the two funds. It
was also obligatory for every employee of those local authorities to be members
of one of those funds. The two ordinances remain in force and govern the two
funds, save that references in them to „the Administrator‟ are now to be read as
referring to the Member of the Executive Council (MEC) for Local Government
and Housing.

[12] The KwaZulu-Natal Joint Municipal Provident Fund Act 4 of 1995 (the
Provident Fund Act) established the KwaZulu-Natal Joint Municipal Provident
Fund, the purpose of which was to provide lump sum benefits for the employees,
and their dependants, of a local authority.12  The Provident Fund Act did not contain
a definition of „employee‟ and by this stage the distasteful racial categorisation
applicable to members of the other two funds had been abolished. As a result there
were now three funds available to employees of local authorities in KwaZulu-Natal
and it was necessary to make provision for the manner in which employees of local
authorities would become members of one or other of them.

Basis of the parties’ case
[13] The respondents assert that, apart from Durban and Pietermaritzburg,
local authorities within KwaZulu-Natal are obliged to be associated only with
the respondent funds and that all employees of local authorities within
KwaZulu-Natal are obliged, under the governing enactments establishing these
funds, to become members of one of the respondent funds. They also contend
that the appellant, being a fund established under provincial legislation of the
former Transvaal Province, has no entitlement to solicit membership within
KwaZulu-Natal. This argument found favour in the court a quo and was the
basis upon which the respondents were successful in that court.

[14] The appellant, on the other hand, contends that there is nothing in the
governing enactments to justify a finding that local authorities within KwaZulu-
Natal are bound only to participate in the respondent funds or that prevents the

12  The Provident Fund Act defined a local authority as:
„a city or town council, a town board or a health committee constituted under the provisions of the Local Authorities
Ordinance,1974 (Ordinance No. 25 of 1974), the Development and Services Board in relation to any development or
regulated area within the meaning of the Development and Services Board Ordinance, 1941 Ordinance No. 20 of
1941), any body, council, committee or board contemplated in paragraphs (a), (b), (c), (e) and (i) of the definition of
„local government body‟ in section 1(1) of the Act, any transitional council or transitional metropolitan substructure
established under the Act, and includes any other body or institution deemed to be a local authority by the Minister
for the purposes of this Act, and in relation to an employee or member means a local authority employing such
employee or member.‟

appellant from doing business with local authorities in KwaZulu-Natal. It argued
that the governing enactments do not have the limiting effect contended for by
the respondents and do not empower the Regulator to make regulations
restricting the extent to which a local authority is entitled to participate in a fund
of its choice. To the extent that the Regulator, in exercising this power, created a
restriction on the extent to which local authorities are entitled to participate in
other funds, the Regulator acted ultra vires his powers.

Interpreting the Legislation
[15] The starting point in this appeal is an analysis of the enactments that gave
life to each of the respondents. When interpreting a statute consideration must
be given to the language of the provision itself read in the context in which it
appears and having regard to the purpose of the provision and the background
and circumstances surrounding its enactment.13

[16] The three enactments establishing the respondent funds are for present
purposes sufficiently similar in their terms to be discussed collectively. As
already mentioned, each of the respondents was established for the purpose of
providing pension and related benefits for the employees of local authorities and
their dependants. The rule making power that the MEC enjoys is wide and there
is no attack on the regulations on the footing that they were not within the
powers of the MEC.

[17] The regulations of the respondent funds are substantially identical and
require that those of only one fund, namely the Superannuation Fund, be
considered in detail. An „employee’ is defined as, inter alia, a person who is in
the service of a local authority in a full time capacity and a „municipal council’

13Natal Joint Municipal Pension Fund v Endumeni Municipality, supra,  paras 17-24; City of Tshwane v Marius Blom
& GC Germishuizen Inc & another [2013] ZASCA 88;  2014 (1) SA 341 (SCA) paras 14-15.

includes a municipality or municipal entity.14 A ‘member’ is defined as a person
not being a local authority who is a contributor to the fund.

[18] The regulations relevant to this matter are set out hereinafter. Clause 4 is
headed „Obligatory association with the fund‟ and provides that every municipal
council,
„shall be associated with the fund from the date of establishment and every future municipal
council shall be associated with the fund within six months from the date of becoming a
municipal council‟.

[19] Clause 5(1) deals with the preparation, adoption and approval of a scheme
and reads, in relevant part:
„Each local authority not associated with the Fund at the date of commencement shall prepare
a scheme which shall provide –
(a)
the date from which its association with the Fund is to commence: Provided that such
date shall not be later than the dates contemplated in regulation 4.
(b)
that subject to the provisions of Regulation 16 (3) all employees shall become
members of the Fund as from the date of association‟.

[20] Clause 16, in relevant part, reads:
„(1) . . . a member of the Fund immediately prior to the date of commencement shall continue
to be a member.
…

14 Clause 1 (xviiAA) of the regulations states that:
„“municipal council” means where appropriate according to the context in which the expression occurs -
(a) a municipal council as defined in section 1 of the Municipal Structures Act;
(b) a municipality;
(c) the management body of uMsekeli appointed in terms of section 2(2) of the uMsekeli Municipal Support Services
Ordinance, 1941 (Ordinance No. 20 of 1941), as amended;
(d) uMsekeli; or
(e) a municipal entity as defined in section 1 of the Local Government : Municipal Systems Act, 2000 (Act No. 32 of
2000)
and any reference in the Regulations to a local authority shall be deemed to be a reference to the appropriate meaning
of “municipal council”‟.

(3)  An employee of a local authority which becomes associated with the Fund on or after the
date of commencement shall elect, in writing, to become a member with effect from the date
of association of either –
(a) the Fund;
(b) the Retirement Fund;
(c) the Provident Fund; or
(d) the KZN Municipal Pension Fund:
Provided that he may elect, in writing, within a period of six months of the date of becoming
an employee, to amend such original election retrospectively to the date of becoming an
employee, but provided, further, that such right of election shall not apply to an employee
electing to become a member of the KZN Municipal Pension Fund;

(4)  A person who becomes an employee on or after the date of commencement shall, subject
to his conditions of service, elect, in writing, to become a member of either –
(a) the Fund;
(b) the Retirement Fund;
(c) the Provident Fund; or
(d) the KZN Municipal Pension Fund if the employee is employed by a local authority
associated with such Fund in terms of its regulations:
…
(8) Subject to the provisions of Regulation 16A(1), a member may not withdraw from
membership while he remains in the service of a local authority which is associated with the
Fund.
(9) When a member ceases to be in the employ of a local authority which is associated with
the Fund he shall, subject to the provisions of these Regulations, forthwith cease to be a
member‟.

[21] Clause 16A(1) governs transfer of membership and provides:
„A member may elect to terminate his membership of the Fund [ie the Superannuation Fund]
and to become a member of either the Retirement Fund or the Provident Fund, or the KZN
Municipal Pension Fund if the local authority employing such member is associated with that
Fund.‟

[22] Clause 76 deals with special conditions applicable to contract employees:
„In an event that, a contract employee who was compelled to become a member of the Fund in
accordance with Regulation 16(4) elects, after the commencement of this Chapter, not to
remain a member of the Fund, the benefits payable to such members shall be in accordance
with Regulation 71.‟15

[23] Certain additional provisions in the regulations of the third respondent are
particularly material to this matter. Clause 12(5) prohibits a member from
withdrawing from membership whilst the member remains in the service of a
local authority that is associated with the Provident Fund. The exception is
where members terminate their membership to become a member of one of the
other respondent funds. The only cessation of membership permitted under these
regulations is a transfer between funds.

[24] The Ordinances and the Provident Fund Act expressly provide that the
Legislature‟s objective in establishing the respondents was to provide benefits
for the employees of local authorities and their dependants. These could only be
local authorities located within the Province of KwaZulu-Natal. It was to give
effect to this objective that the regulations promulgated under these enactments
obliged all local authorities within KwaZulu-Natal to be associated with the
respondent funds. It must follow (save for the exceptions in the regulations,
which do not apply to the present matter) that local authorities must be
associated with the respondent funds for the purpose of providing pension
benefits to their employees. Were local authorities entitled to be associated with
a fund other than the respondents, in order to provide pension benefits to their
employees, the purpose of the Ordinances and the Provident Fund Act would be
subverted. The effect of the regulations is that local authorities are legally
obliged to ensure that their employees join one of the respondent funds.

15 The corresponding Provident Fund regulations in relation to those quoted in the text are regulations 2, 3, 12 and 40.

Individual employees may not continue their employment without holding
membership with one of the respondent funds. The employees obviously have
the right to hold membership in any other fund as well, but that is an entirely
different matter of the individual making additional provision for their own
retirement.

[25] Clause 3 of the Provident Fund regulations relates to local authorities that
are not associated with the third respondent at the date of commencement of the
regulations. It obliges each such local authority to prepare a scheme that makes
provision for two matters. The first is „the date from which the association with
the fund is to commence.‟ The scheme must accordingly provide for the local
authority concerned to become associated with the Provident Fund from a
particular date provided for in the scheme.

[26] The second aspect that the scheme must provide for (pursuant to Clause
3(1)(b)) is that all employees of local authorities, who do not elect in terms of
regulation 12 to become members of the first respondent, the second respondent
or the KZN Municipal Pension Fund, shall become members of the Provident
Fund as from the date on which the local authority becomes associated with the
Provident Fund. The scheme must accordingly provide for compulsory
membership of the Provident Fund as the default position, if the employee
concerned elects not to become a member of the first or second respondents.

[27] Clause 16(4) of the Superannuation Fund‟s regulations provides that
every person who becomes an employee of a KwaZulu-Natal municipality on or
after the date of commencement of the regulations, shall, subject to his
conditions of service, elect, in writing, to become a member of one of the
respondent funds or the KZN Municipal Pension Fund. The meaning of this,
according to the appellant, is that persons who become employees of KwaZulu-

Natal municipalities on or after 1 February 1996, may have conditions of service
which require or permit them to become members of other pension funds. The
appellant interprets „subject to his conditions of service‟ in the Regulations to
introduce a potential choice between the respondent funds or any other pension
fund, including the appellant. This phrase is the appellant‟s escape hatch from
the general import of the Regulations. The proposition is that a local authority‟s
conditions of service for its employees may include a condition that they elect to
become a member of one of the respondents or some other fund.16

[28]  The obligation to „elect‟ relates to the employee electing to become a
member of one of the respondent funds and not an entitlement to elect to
become a member of some other fund. The word „subject to his conditions of
service‟ which govern and relate to that election cannot logically convey that the
employee‟s contract of employment can provide for the employee not to become
a member of one of the respondent funds. The election is made subject to the
employee‟s conditions of service in order to cater for a situation where the local
authority is not associated with all of the four funds referred to in the regulation
or wishes to restrict incoming employees‟ choice to only one or two of the
respondent funds.

[29] In this context, „subject to‟ clearly means save as otherwise qualified.
This is the obvious and sensible construction of clause 16(4) and the appellant‟s
suggestion that the regulation must be interpreted to afford a municipal
employee the entitlement to choose to become a member of any fund without
holding membership in one of the respondent funds, is contrary to the wording
of the regulations and the objective of the Natal Ordinances and the Provident
Fund Act. Clause 16(9), for example, expressly provides that when an

16 It was not suggested that Imbabazane‟s conditions of service, or those of any other local authority, contained such a
provision.

employee‟s employment with a local authority ceases, the employee‟s
membership of the fund ceases.

[30] The purpose of the compulsory membership provisions of the KwaZulu-
Natal legislation serves to enhance pension benefits and secure the viability of
the respondent by ensuring that they have significant numbers of members.
There is nothing to indicate that the legislation does not serve its purpose. The
evidence of the respondents supports the view that funds must have the
necessary critical mass to make them viable. The Principal Officer of the
respondent funds has said:
„It is also extremely expensive to administer and manage a fund. As explained above the
[respondent funds] are collectively self-administered on a costs-recovery basis and matters
such as administration are not outsourced to third parties. On account of the costs of
administering a fund the number of members which a fund has directly affects the viability of
the fund and hence the benefits which members will receive. A large pool of members result
in economies of scale and this reduces the overall costs. In the case of local authorities they
have perpetual existence and the consequence is that they will continue to employ people. In
this context economies of scale and the number of members are crucial considerations.
Related to this fact is the fact that permitting employees to join multiple funds generates
additional administrative obligations since the employer is required to produce and maintain
records of the rules and requirements of several funds and deal with each administratively.
This would result in additional costs having to be incurred and additional functions being
performed by municipal staff, which reduces productivity.‟

[31] In its affidavits, the appellant raised constitutional points premised on the
rights to freedom of association, freedom of trade, occupation and profession
and fair labour practices. On appeal, it invoked only the right to freedom of
association. It in fact advanced no constitutional challenge. The issue on appeal
was the proper interpretation to be placed on the legislation establishing the
respondent funds and the regulations promulgated thereunder. The appellant‟s

reliance on the Constitution was restricted to interpreting the legislation and
regulations consistently therewith.

[32] The contention that the constitutional issues raised favour the MEPF‟s
interpretation, is based on the assumption that such interpretation better accords
with a local authority‟s freedom of association. It would appear from the papers
that the decision to impose a restricted choice of pension funds on municipal
employees in KwaZulu-Natal, enhances the pension benefits of such employees
and is to the advantage of municipalities in respect of cost effectiveness. When
interpreting a statute and more than one meaning is possible, a sensible meaning
is to be preferred to one that leads to insensible or unbusinesslike results or
undermines the apparent purpose of the legislation.17 On the established
principles of interpretation, the Ordinances, the Provident Fund Act and the
regulations of each of the respondents oblige all local authorities within
KwaZulu-Natal to be associated with the respondents and also oblige the
employees of such local authorities to elect to become a member of one of the
respondents. In my view, the court a quo correctly interpreted these instruments.

[33] In support of its argument that the area of jurisdiction of the appellant is
not restricted to the area of the former Transvaal, the appellant relied on the
repeal of s 79quat of Local Government Ordinance 17 of 1939 (for the province
of Transvaal). This provision was repealed with effect from 19 March 1999 by s
58 of the Rationalisation of Local Government Affairs Act 10 of 1998, Gauteng.
Section 79 of the Ordinance regulated the general powers of the council.18 In

17 Natal Joint Municipal Pension Fund v Endumeni Municipality, supra, paras 17-24.
18 Section 79quat came into operation on 1 July 1970 and was inserted by s 4(1) of Local Government Ordinance
16 of 1972 which read as follows:
„(1) The Administrator may establish a joint municipal pension fund (hereinafter in this section referred to as a
joint fund), for the benefit of Non-White employees and retired Non-White employees of local authorities, of the
joint fund, of the joint medical aid fund established in terms of s 79bis and of any other body established in the
interest of local government and approved by the Administrator and for the dependants of such employees and
retired employees.

view of my conclusion on the main argument it is unnecessary to express a
definite view on this point. The notion that the repeal of the original
empowering provision, which is still referred to in the appellant‟s rules, had the
effect of enabling it to operate on a broader scale than previously is certainly
unusual. But the point requires a more careful consideration of the statutory
provisions governing pension funds and we have not had the detailed argument
on the point that would permit us to reach a firm conclusion one way or the
other.

[34] It must be reiterated that there is nothing in the legislation and the
regulations enacted thereunder that prevents a local authority located within
KwaZulu-Natal from being associated with a pension fund other than the
respondent funds, provided that such association is in addition to its association
with the respondent funds. In the premises, and to the extent that the order of the
court a quo provides that local authorities located in KwaZulu-Natal may only
associate with the respondent funds, such order needs to be amended.

[35] For these reasons, the following order is granted:
1  Save to the limited extent indicated in paragraph 2 below, the appeal is
dismissed with costs including the costs of two counsel.
2   The order of the court a quo is amended to read:
„1  The Municipal Employees Pension Fund be and is hereby directed to forthwith
make payment to the Imbabazane Municipality of all amounts received by it as

(2) The Administrator may, if he deems it expedient, approve of the dissolution of the joint fund and may give
instructions regarding the disposal of the assets of such fund.
(3) Subject to the provisions of subsection (4), every local authority shall be associated with the joint fund.
(4) The Administrator may, subject to such conditions as he may determine, exempt any local authority from the
provisions of subsection (3).
(5) The provisions of subsection (4) and of subsection (5) of section 79ter of the principal Ordinance shall apply
mutatis mutandis to the joint fund.‟

pension contributions in respect of the individuals identified in the list annexed to its
founding affidavit in the application under Case No. 3360/2012 and marked „A3‟.
2(i) Local Authorities located within the province of KwaZulu-Natal are, in
terms of the Local Government Superannuation Ordinance 24 of 1973, the Natal
Joint Municipal Pension Fund (Retirement) Ordinance 27 of 1974, the
KwaZulu-Natal Joint Municipal Provident Fund Act 4 of 1995, and the
regulations promulgated in terms of such legislation, obliged to associate as
employer
with
each
of
the
Natal
Joint
Municipal
Pension
Fund
(Superannuation), the Natal Joint Municipal Pension Fund (Retirement) and the
KwaZulu-Natal Joint Municipal Provident Fund.
(ii)  In terms of the legislation mentioned in para (i) above and the regulations
promulgated thereunder, local authorities located within the province of
KwaZulu-Natal may only associate with any other fund, in addition to their
association with the Natal Joint Municipal Pension Fund (Superannuation), the
Natal Joint Municipal Pension Fund (Retirement), and the KwaZulu-Natal Joint
Municipal Provident Fund or the KwaZulu-Natal Municipal Pension Fund.
(iii)  The Municipal Employees Pension Fund is interdicted and restrained from
representing to any local authority located within the province of KwaZulu-
Natal that it is a pension fund with which such local authority may be associated
in the stead of the Applicants in terms of the legislation mentioned in para (i)
above and the regulations promulgated thereunder.
3 The Municipal Employees Pension Fund is to pay the applicants‟ costs, such
costs are to include:
(i)  All costs reserved at previous hearings and appearances in both the Uniform
rule 30 application and this application, and
(iii) The costs consequent upon the employment of two counsel.‟

____________________
L V Theron
Judge of Appeal

APPEARANCES
For Appellant:
AM Breitenbach SC
Instructed by:
Dockrat Inc, Johannesburg
Honey Attorneys, Bloemfontein

For Respondents:
KJ Kemp SC with HS Gani

Instructed by:

J
Leslie
Smith
&
Company
Inc,
Pietermaritzburg

McIntyre & Van Der Post, Bloemfontein