I am not against ENPF conversion - Minister Mabulala
MBABANE – Despite fears that the conversion of the ENPF might lead to the collapse of a parastatal under his ministry; Minister of Public Service Mabulala Maseko has set the record straight that he is not against the proposed exercise.
Ever since the proposed conversion made it into the public domain, questions on the future of the Public Service Pension Fund (PSPF), a parastatal under Maseko’s ministry have cropped up now and again.
Also, the continued delay of the proposed conversion has led to many conclusions, one of them being that there were certain individuals, including those at Cabinet level, who were strongly opposed to it.
While no one has come out to openly point fingers at any Cabinet member, certain factions have insinuated that Maseko could be among those opposed to the exercise, by virtue of the fact that he has a duty to protect the interests of PSPF.
Speaking to the Times SUNDAY, Maseko stated that he would never frustrate the proposed conversion, but that he represented the interests of public servants who are the members of the PSPF.
CONVERSION
“I listen to the view of the public servants and cannot be against what they want. The conversion of the ENPF is good especially if it is done in the private sector so that we can see how it performs,” he said.
Asked to clarify, the minister said he believed that there were many emaSwati who stood to benefit in the conversion, including the thousands who are employed in textile firms.
“It is also impossible for me to frustrate the proposed exercise because Cabinet is not about me, I am not alone there. There are many members there and I cannot defeat all of them. The conversion touches on employees of the private sector and this cannot affect us,” he said.
He reiterated that there were thousands of emaSwati who were employed but did not have the pension and retired with nothing.
The minister was asked if it was not the first time hearing that he was being accused of being opposed to the conversion and he responded by saying he had heard about it before but that people had a tendency of making baseless conclusions.
The conversion to a pension fund means that the ENPF will change to a defined benefit scheme.
Under this form of pension scheme, at retirement, a member will receive a monthly payment until they die, as well as a lump sum pay-out, which would be a certain percentage of the entire savings calculated on the years one had been part of the scheme
SUCCESS
Despite that it is now over 10 years since the plan became public and there has been no success, the ENPF management is not giving up the fight.
This publication has gathered that during the recent Cabinet retreat held at the Royal Villas, the management made an attempt to make a presentation, but this ended up not happening due to that there were many other organisations that had come to present.
The management is said to have been advised that they will be called to Cabinet to make the presentation.
It should be noted that the Ministry of Labour and Social Security has now and again shared feedback on progress made regarding the conversion.
In the ministry’s last annual performance report for the 11th Parliament, it was highlighted that the International Labour Organisation (ILO) had conducted a fact finding mission in the country, where they engaged with the different stakeholders including the PSPF to get their position regarding the conversion.
According to the annual performance report, the PSPF highlighted that they wanted to be excluded from the conversion; likewise Business Eswatini also stated their concerns regarding the exercise.
SUFFER
Last year, this publication reported that the PSPF had stated in a report that that it believed that it would suffer a ‘natural death’ as it would quickly run out of funds and eventually face serious financial challenges due to the following: Paying out benefits more than it receives contribution; selling assets (disinvesting) in order to meet the cost of promised benefits and administration of the scheme; and limited investment due to the lack of funds and constrained investment strategy.
The PSPF argued that in the last few years it had been facing liquidity challenges, wherein the current contributions were not sufficient to cover the benefits and expenses on an annual basis.
“A further reduction of the contributions (10 per cent to ENPF) will exacerbate the situation,” the PSPF reportedly said, further arguing that the contribution rate of 10 per cent payable to the new national pension scheme would be taken from the 20 per cent currently paid to the PSPF, that is, total contribution would reduce from 20 per cent to 10 per cent of payable salary.
However, the ENPF came out to allay the fears by stating that there will never be any natural death on the PSPF.
The provident fund said what should be appreciated was that the PSPF is an occupational pension scheme just like the other pension funds in the country.
“The national pension fund will act as a first tier in the social security system in the country, thus complementing the occupational pension schemes, inclusive of PSPF, and will provide an extra savings channel for workers to have more than one source at retirement,” said the ENPF.
On the argument by PSPF that it has been facing liquidity challenges in the last few years, the ENPF said the former is what is actuarially termed a mature fund, therefore it is not surprising that contributions are not sufficient to pay benefits and expenses.
ARGUMENT
It was also the argument of the PSPF that the benefits of the scheme were determined taking into consideration that the employer committed to contributing 20 per cent to the scheme.
“A reduction of the contribution rate would necessitate a reduction in the benefits payable. It has been actuarially determined that the benefits would reduce to 1/3 of the current contributions,” says the PSPF.
There was also another argument by the PSPF that it would have to make forced sales of its assets at inappropriate times in order to honour promised benefits, which may result in long wait for benefits to be paid.
However, the ENPF ruled that out, saying none of its assets will transfer to the PSPF and that the status quo on how the latter manages cash flows will remain.
There was also an argument of constrained investments, where the PSPF argued that reduced contributions would lead to constrained investments strategy, lack of diversification, which would also affect the economy.
In response, the ENPF has stated that an appropriate investment strategy is driven by asset liability modelling, which would, among its output, project cash flow needs.
The PSPF’s proposal is that the new pension scheme should focus on employees who do not have a pension coverage at all, and not seek for duplicate benefits.
Worth noting, is that the delay pained members of the 11th Parliament as they had anticipated to have the conversion completed by the time their term of office came to an end. During their last sitting to debate the budget of the Ministry of Labour and Social Security, the former Members of Parliament (MPs) took turns relaying frustration caused by the delay.
It is worth mentioning that even the previous Parliament eventually left office without having passed the legislation that will ensure the conversion.
Instead, a Bill that they debated and were ready to pass was eventually withdrawn and they left office.
FAILED
Relaying their pain to the Minister of Labour, the MPs made it known that if their term of office came to an end without the Bill having been passed, they would have failed the nation. The MPs requested the minister to come out in the open and tell them who exactly was delaying the process. They mentioned that if it was Cabinet, they were ready to take the matter further. Stakeholders in support of the ENPF have argued that it was key for the Kingdom of Eswatini to have a national pension scheme as was the case in other countries including Singapore. The Singapore pension scheme is one of the oldest and developed national schemes in Asia, according to the Mercer CFA Institute Global Pension Index.
Even though the scheme has received backlash in the past, the Government of Singapore made amends and reviewed some of its metrics.
The Kingdom of Eswatini is said to have modelled the one that exists in Tanzania where the National Social Security Fund (NSSF) covers all other employers in that country and participation for both employers and employees is compulsory.
According to the annual performance report, the PSPF highlighted that they wanted to be excluded from the conversion; likewise Business Eswatini also stated their concerns regarding the exercise.”