Has BP turned its back on SA pensioners? – Ed Herbst

The medical aid contributions of British Petroleum pensioners in South Africa and their spouses are subsidised by the oil giant; it is a commitment the pensioners say the company made when they started to work at BP. But this continued support now appears to be in danger as the BPSA medical scheme (BPMAS) is set to merge with Momentum Health. And the move will lead to a doubling of the medical aid contributions of more than 1,000 pension members of BPMAS. The members are however not taking this lying down; they suspect fraud and that the money held in the scheme will be transferred to BP in the UK once the merger is completed. They are taking their case to the Competition Tribunal and the High Court in South Africa. There is also a call for BP to look at the example of Chevron which were “exemplary” in dealing with the sale of its South African assets. In this article by BP pensioners in Cape Town that includes several ex-employees in high ranking position; they set out their case. They suspect that the move is not only heartless; it could have been hatched in BP London by mid-level executives eager to rake in money for BP UK and bonuses for themselves. – Linda van Tilburg

Comment from BP Southern Africa:

“The amalgamation, as proposed by BP Medical Aid Society (BPMAS), supported by BP Southern Africa (BPSA) and approved by a majority of the members, will provide members with enhanced healthcare and benefits. The Competition Commission has approved the merger and is not investigating BPSA. We make no further comment at this time while we respectfully await the final decision from the Council for Medical Schemes.

BPSA still firmly believes that the merger is in the best interest of all BPMAS members and wish to reiterate our commitment to protect the rights and benefits of all employees, as enshrined in their contracts. BPSA has a strong ethical culture and will continue to work with all parties to achieve a successful amalgamation.”

Has BP betrayed its pensioners to feed its balance sheet?

By Ed Herbst*

The Competition Commission has launched an investigation into the merger between a small medical scheme for employees of oil company BP Southern Africa (BPSA) and SA’s third-biggest scheme Momentum Health, after a complaint from BP pensioners alleging the deal will scale back their benefits. – Tamar Khan Business Day 25/8/2019

The first inkling the South African public had that something might be amiss was a Business Day article by Tamar Khan just over two months ago.

Suffice it to say that BP pensioners and a qualifying group of active employees in South Africa are reeling at what they perceive to be an attempt by BP Southern Africa, (“BPSA”) to evade its long-standing contractual obligation to subsidise their monthly medical aid payments during their lifetimes and those of their surviving spouses. This was a solemn promise made by the company on commencement of employment which, for some, was decades ago and one that was re-affirmed in 2002.

Ed Herbst

This legal obligation is to be unilaterally substituted in terms of a proposed merger with Momentum Health by a new contract that will last only for two years if the merger is approved and not, as was originally promised, for as long as the pensioners and their surviving spouses lived.

Should the merger ultimately go ahead, more than 1070 pensioner members of the BP medical aid society (BPMAS), nearly half of whom are Black South Africans, face the prospect of their monthly medical aid payments more than doubling when the 24 months run out. 

They will then be contractually obligated to a new medical aid society – Momentum Health – which will be rewarded with R83m in cash by BPSA, and entitled to utilise the around R140m cash savings accumulated reserves/cash savings in the BPMAS  accounts for purposes other than the funding of liabilities in respect of current and qualifying BPMAS members.

Duly alarmed, a group of former BPSA senior employees and executives – which  include two retired directors of the company, two former company lawyers and senior former executives who come from every function in the company from sales to distribution, from refining to public affairs and even human resources –  got together to analyse the proposed merger of the BP Medical Aid Society and Momentum Health.

They believe they uncovered what would amount to a prima facie case of fraud should certain representatives of BP and BPMAS not provide rational explanations for what they describe as their ‘evasive, obstructive and secretive actions’ related to the proposed merger. 

They claim to have found that BP Southern Africa has a contingent liability on its books amounting to some R923m and suspect that getting rid of this was the prime reason which motivated the proposed merger.

“When we asked an independent accountant to explain what the consequences would be if our suspicion was correct, his conclusion was that the benefits of a successful merger will accrue primarily to BPSA, “says Carlo Germeshuys one of the two lawyers in the group.

“BPSA will see an immediate reduction of more than R600m to their balance sheet liability, which would extend further to the full amount of the contingent liability when BP is released from the new contract with Momentum Health – a high possibility given the conduct of BP thus far.

“The net effect will be that the current health benefits vested in the BPMAS members will be transferred out the country to BP in the UK should BPSA decide to exit or simply through a financial flow between BPSA and its holding company after completion of the merger,” Germeshuys said.

“It is as yet unclear to us what the true motive for the merger and the unethical manner in which it was pursued were. We do however believe that the undue pressure placed by BP on the Competition Commission and the Council for Medical Schemes to approve the merger well before 1 July 2019. Pressure was also placed on the administrators of the two funds to have everything in place well ahead of 1 July 2019 for instantaneous completion of the implementation of the merger on the same day. This suggests that BP was pursuing the merger for its own commercial benefit and not the best interests of the members of BPMAS”, he said.

The pensioner group also claim that the negotiation process between BPMAS, BP and with Momentum Health had been stealthy, even underhand, and that the members of BPMAS had  certainly not been fully briefed in good faith about the loss of benefits, nor further consequences and financial liabilities they would incur as a result two years after an approved merger.

The first step in this process, the pensioner groups says, was a survey of existing staff and pensioner members of BPMAS asking them if they were satisfied with their company medical aid society.

The second sign was a message from BPMAS suggesting that it was under financial stress and would therefore have to amalgamate with a larger private sector medical aid company.

That set alarm bells ringing. When they examined the BPMAS financials it did not appear to be a medical aid scheme in trouble. On the contrary they felt it was in far better shape than Momentum Health and would remain so for as long as the promised BP subsidies continued.

What was to happen, they asked of the BPMAS trustees, to the solemn lifetime medical aid subsidy arrangements which had been agreed with  the around 1,070 pensioner members – in some cases 30 years ago – and qualifying active employee members, in terms of their employment and severance contracts, as had been  re-affirmed by BPSA in 2002? The answers received were vague and evasive.

When that penny dropped, they formed an investigatory group. As one of the members said at the inaugural meeting of the concerned members support group, “I smell a rat. A very large rat”.

This group now contend that their fears have been justified and that former employees who had given their working lives to BP in South Africa, are indeed being sold out. Its perception is that BP, the company that pensioners and current qualifying employees had trusted and had been proud to serve, was not going to honour its contractual commitments to them.

The realisation came as a shock. But the more the group dug, the more its members uncovered. But they were playing catch-up. The BP plan was well laid and the vote for all BPMAS members that was called to approve the BP plan went ahead. 

The group claims that the Council for Medical Schemes, who had to approve the merger and the resultant termination of the BPMAS, had not been told about BPSA’s contractual perpetual subsidy obligation to the pensioners and the affected group of qualifying current employees.

When all members of the BP medical aid society were asked to vote on its proposed dissolution and merger, there was no BP company guarantee of the continuation of the subsidy arrangements which such persons, as former and current employees and members of BPMAS had expected. 

Finally, the group of concerned pensioners found that the Competition Commission – which also had to approve the proposed merger – was also ignorant of their rights.

 In response to representations made by the group to the Commission, the latter is now investigating the possibility that the concealment by BPMAS and BPSA of materially relevant information, which should have been placed before the commission, warrants a reversal of its earlier approval of the merger.

A dossier of the whole sorry saga was arranged to be delivered to BP head office in London to its Chief Ethics Officer who promptly sent it for review by an “internal team “.  The group believe this team included the person who appears to be the motivator behind what they perceive to be an unethical plan to benefit BP to the detriment of the interests of all BPMAS members.

The concerned pensioner group alleges that he and whoever else was involved in the review, refused to recognise, or even reply to their requests for an assurance of the continued status of the subsidy arrangements provided for under the original contracts of employment, which the 1,070 pensioners and qualifying current employees had always accepted were a condition of their employment when they were hired by BPSA.

In the opinion of the group what has been uncovered is collusion between the trustees of the BP Medical Aid Society, and BP in South Africa up to and including the BP Group head office in London itself.

Whether this occurred with the knowledge of BP Group senior executives or not has yet to be determined. Lawyers advising BP in South Africa and BPMAS on the amalgamation of BPMAS and Momentum Health  and the filing of merger notifications with the Competition Commission, are all potentially involved, wittingly or unwittingly, in what the pensioners believe to be a betrayal – on so many levels – of BP’ s previously-justified ethical heritage.

“What I find astounding” says John Bush, the other lawyer in the group, “is that Momentum Life’s principal officer, Toni van den Bergh, could make the statements attributed to her in the Business Day interview with Tamar Khan on 25 August. 

“I say that because she was the person who suggested to BP that the subsidy payments should be limited to a two-year period. What I find even more astounding is the statement attributed to the Principal Officer of the BP Medical Aid Society that ‘… employment contracts… firmly protect their rights before and after the amalgamation’.  She made this statement when she was well aware of the compounding detrimental effects of the 4 July 2019 agreement between BPSA and Momentum Health, and the termination of the BP Medical Aid Society, upon implementation of the amalgamation, on the rights of the members of the group”.

“The disingenuous response of BPSA to the enquiries by the Competition Commission that ‘its view is that that your complaint has no merits as BPSA has a legal obligation to continue to provide subsidies …. notwithstanding the merger’, shortly after it signed the 4 July 2019 agreement is odiously cynical when the background, described above, against which it was made, is considered” Bush said. 

This, they find to be ironic given that BP’s history in Africa has so far been above reproach. It has never bribed anyone. It has prided itself on never doing so. It withdrew from Nigeria, for example when bribery in that country became pervasive. And, in South Africa, BP was at the forefront of private-sector pressure on the former government to abolish apartheid laws and release Nelson Mandela and other ANC leaders from prison.

This good repute, they believe, is now being put at risk by the proposed merger of the local BP Medical Aid Society with Momentum Life.

This information could well emerge in the near future in both the High Court in South Africa and the Competition Tribunal, should the present request of BP to the Council for Medical Schemes to overturn the decision of the Registrar not to approve the merger, and to the Competition Commission not to revoke its earlier approval of the merger, succeed.

“The group has started preparations for an application to the Competition Tribunal to reconsider and overturn the earlier approval of the merger by the Commission, and is ready to bring an urgent application to interdict implementation of the merger should this become necessary” Germeshuys said.   

It is a curious fact that the sale by Chevron of its South African assets was exemplary in all respects and should have been an example to BPSA on how such negotiations should be conducted.

The group discovered that when Chevron assets in South Africa were sold, resulting in a similar withdrawal by Chevron from funding of the liabilities of the Chevron medical aid society in respect of the employee and pensioner members of the society, it agreed that its own solemn contract towards them was binding. Furthermore, Chevron secured continued payment of the subsidies in a manner agreed with and acceptable to its transferring employees and pensioners. 

“People are our most valuable asset,” used to be a part of the BP mantra, repeated again and again over decades in chairperson statements to the staff of BP in South Africa.

BP pensioners, now in their 70s and 80s, used to believe them. Will BP Group head office staff in London – and all BP associate companies around the world – ever again believe this now-empty promise?

BP pensioners in South Africa including former directors and legal officers are appalled by what they alleged is unethical and possibly fraudulent behavior by BP head office in London, its subsidiary (BPSA) and the BP Southern Africa Medical Aid Society (BPMAS) which they claim have used unethical methods to facilitate a breach of contract to deprive them of their rights. 

Sources say the probability of court submissions alleging unethical behaviour and asking for damages is high. Substantial legal costs have been incurred by the pensioners. 

They cite both company’s actions to deceive BP medical aid society members to vote for the dissolution of their society and the amalgamation with Momentum Life without knowing all the facts and allege that a financial windfall will accrue to BP in London as a result. This, they feel was probably the main motivator. 

Germeshuys concluded: “The group are convinced that the ongoing efforts by BP to force the merger through are doomed to fail. We are not against a change in the status quo, but will resist all efforts by BP to prematurely terminate their subsidy obligations. BP should put an immediate stop to the present process and in a transparent manner – led by a suitable independent expert – join us in finding a mutually beneficial basis for giving effect to those obligations.” 


  1. Chevron SA pensioners had a similar fight on their hands when Caltex SA was sold. They appealed to the Competition Commission and won. BP carefully avoided telling the Commission or the Council for Medical Aid Societies of its similar obligations. For that reason the Council and the Commission withdrew their permission for the proposed merger of the BP medical aid society with Momentum Health pending an investigation when the fraud was revealed to them by the BP pensioners.
  2. The public is unaware of the contingent liability that BPSA holds regarding the pensioners employed prior to 2002
  3. Momentum health says they were unaware of the liability but according to its agreement with BP this lifetime guarantee of a subsidy has been reduced to two years after which it falls away.

The pensioners have been advised that a simple annuity bought by BPSA/BP plc would solve the problem which raises the suspicion that the conversion of the liability to a tax free profit was the goal.

  • Ed Herbst is a veteran journalist who these days writes in his own capacity.

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