ENPF members paid E313m, savings could be depleted
MBABANE – The effects of the delay in the conversion of the Eswatini National Provident Fund (ENPF) into a pension fund may be too costly. This is due to the fact most members are potentially in danger of depleting their savings before reaching the standard retirement age, thus posing a threat to the stability of the fund, if it were to be converted into a fully-fledged pension scheme. It is currently being administered as a provident fund.
The ENPF Annual Report for the financial year 2023 reflects that from about E313.4 million paid out as benefits to members, a bigger chunk of it accommodated those who fell under the age benefit category.
The report reflects that a high percentage, 60 per cent to be precise, of the money paid out was for the age benefit, while only 18 per cent related to early retirement.
It is stated that the age benefit is paid out when the member has reached 50 years of age, whereas the early retirement one is for members who are aged between 45 and 49 years and have retired from regular employment.
This disparity, the ENPF, said, in the report, suggests a concerning pattern where many members may deplete their savings before reaching the standard retirement age.
“We are optimistic that the proposed legislative transformation of the fund into a pension scheme will address this issue, offering a more sustainable financial future for our members and the nation as a whole. It remains our deepest aspiration that we work towards the conversion as it will bring numerous benefits for members and be all-inclusive of economically active workers, while playing an impactful role in the national developments,” the ENPF said.
It mentioned that the workers’ inclusivity will encompass those in informal and domestic work sectors. Also mentioned was that the delay in concluding the important national project was not doing the members of the fund any good.
“Members who would have qualified for membership of the pension fund in terms of the minimum number of contribution years have fallen out of the qualifying bracket. These members invariably become candidates for poverty in old age. The only time that this situation will be arrested is the day the conversion will receive the long-awaited approval,” it was highlighted.
The management of the fund said they were hopeful that the due processes that have begun would eventually see the vision of the conversion become a reality for the benefit of thousands of emaSwati. It has been over 10 years since the plan to convert the fund into a pension scheme became public.
Specifically, the process began in the early 2000s, whereby stakeholders including employers, workers and government engaged and there was a consensus on the conversion from a provident fund to a pension fund.
Experts from countries including Zambia and Singapore were invited to discuss and share their experiences on the conversion process.
‘‘ Members who would have qualified for membership of the pension fund in terms of the minimum number of contribution years have fallen out of the qualifying bracket. These members invariably become candidates for poverty in old age. The only time that this situation will be arrested is the day the conversion is finally approved.”
ILO BACKS INITIATIVE
The International Labour Organisation (ILO) has also been supporting the initiative, sending its own experts to engage with the local stakeholders.
However, despite all these efforts, legislation that will allow for the conversion is yet to see the light of day. 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 MPs took turns relaying the frustration caused by the delay.
It is worth mentioning that even the 10th Parliament eventually left office without having passed the legislation that would ensure the conversion. Instead, a Bill that they debated and were ready to pass was eventually withdrawn and they left office.
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.
Once the legislation has been enacted, members of the fund who are 45 years and below, will
transfer to the national pension fund.
Members who would qualify to receive pension are those who will have contributed at least 15 years of service before retirement at the time of conversion. 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, government 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.
Meanwhile, there are many positives reflected in the annual report regarding membership.
Among them is the fact that as of June 30, 2023, the total members’ funds stood at E4.81 billion, reflecting an increase from the previous year’s E4.46 billion.
Contributions received in the year under review totalled E452.9 million, a 7.3 per cent increase from the previous year’s E419.4 million, attributed to both the annual rise in contributions and the positive economic rebound post-COVID-19 lockdowns.
GROWTH IN MEMBERSHIP
In her statement, which forms part of the report, Acting Chief Executive Officer Futhi Tembe highlighted that the fund’s activities in the year under review had been intricately aligned with its 2020-2025 Strategic Plan, focusing on four critical areas being; finance and investments, human capital, systems and business processes and member focus.
“The tactical execution of this plan has yielded substantial improvements in our financial and operational performance, a testament to our strategic direction, as detailed in this report,” Tembe said.
She mentioned that the fund was beyond the midpoint of its existing strategic plan and that in anticipation of the one that will run from 2026 to 2030, they will evaluate progress and accomplishments in the new financial year.
“This appraisal will provide critical insights into our successes and areas of enhancement, equipping us with the knowledge necessary to forge ahead with a precise and robust strategy,” she said.
Meanwhile, the membership of the ENPF grew to 156 732 as of June 30, 2023.
This reflects a significant rise from 142 023 registered in 2022. The fund’s annual report reflects that the number of active registered employers also saw growth, with 6 659 on record compared to 6 077 in the preceding year.
It was highlighted in the report that with the introduction of the online claiming app, the fund continued to exceed processing efficiency benchmarks with the average claim processing and payout duration sitting at an impressive 1.14 days, an improvement to last year’s 1.8 days and well below the established three-day benchmark.
Another positive cited in the report is that the fund witnessed an uptick in compliance rates, achieving an average of 87.98 per cent, which edged closer to a target of 92 per cent.
“Financially, the ENPF remains robust, with contributions consistently exceeding benefits payouts, a testament to the fund’s health and its ability to expand investment opportunities and grow members’ funds,” reads part of the report.