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JIMMY MOYAHA: The Financial Sector Conduct Authority (FSCA) is currently investigating the employer contributions related to employee pension funds. There has been a concerning rise in instances where employers are neglecting these contributions, leading to more than R5 billion in unpaid amounts.

In light of this, the FSCA is planning to take decisive action and is examining strategies to ensure compliance from those who have failed to meet their obligations.

I’m joined on the line by Zareena Camroodien, the head of Fund Governance and Trustee Conduct at the FSCA, to delve into this issue and the actions planned for the future.

Good evening, Zareena. I appreciate you taking the time to speak with us. Can you shed light on how we have reached a staggering R5 billion in unpaid contributions and how long this situation has been ongoing?

ZAREENA CAMROODIEN: Good evening to you and the audience, and thank you for giving the FSCA this opportunity. The challenge of unpaid contributions has been building over time. As you indicated, surpassing R5 billion in unpaid contributions is a chronic issue.

The launch of the two-pot retirement savings system has heightened focus on this problem.

During the rollout of the two-pot system, members tried to access their savings but were met with either a total lack of funds or insufficient amounts.

This has brought more attention to the issue of delayed contributions. So, while it’s not a new problem, the FSCA, in conjunction with various social partners, is committed to tackling it.

JIMMY MOYAHA: Do we have insights into which particular businesses are not making contributions? We know that sectors like private security have been major offenders, alongside municipalities. Do we have more granular information on which organizations are non-compliant and the specific amounts owed by each?

ZAREENA CAMROODIEN: Yes, we possess a comprehensive breakdown obtained from various funds about employers who are non-compliant. As you’ve mentioned, the private security sector is indeed a primary offender, along with the hairdressing, beauty, and skincare sectors.

Moreover, employers involved in bargaining councils across different sectors such as building, metal, transport, contract cleaning, and furniture are also significant contributors to this issue.

Municipal funds are another area where municipalities have failed to make necessary contributions.

Thus, we have a clear understanding of the main contributors to the non-payment of contributions.

JIMMY MOYAHA: What actions does the FSCA plan to pursue? Some individuals may not be aware that, according to the Pension Funds Act, failing to make these contributions is a criminal offense. This is a serious concern that you and other stakeholders, including the pension funds adjudicator, must be addressing with urgency.

What strategies are you considering to ensure accountability?

ZAREENA CAMROODIEN: That’s a pertinent question. We are currently exploring various options.

To begin with, we are in talks with the National Prosecuting Authority (NPA). Last year, we began engagement with them, and we aim to continue these discussions, as a robust legal response will convey a strong message—though this is not an ideal predicament.

If employers neglect to meet their obligations, as you pointed out, this constitutes a statutory crime and could potentially fall under common law as theft.

When contributions are deducted from employees but not remitted, it is crucial to send a strong message.

We have had some success in previous cases, such as actions taken against the Kai Garib municipality and others in the Northern Cape.

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We are eager to see more employers held accountable for their non-compliance.

Regrettably, we recently received a ruling from the Bloemfontein High Court regarding the Municipal Workers’ Retirement Fund, where municipal managers and executives were deemed personally liable.

The court has referred the case to the NPA for a potential investigation and criminal action as well. We see this as a significant pathway for accountability.

Another strategy involves engaging with boards, suggesting they either bring contributions up-to-date or suspend them—while ensuring the relevant stakeholders are included—until compliance is reached, all while maintaining risk benefits and administrative costs.

We are contemplating enforceable agreements, akin to what we successfully established with the ANC staff’s Provident Fund, where the FSCA and the employer came to an arrangement that has ensured consistent contributions from the ANC.

We are exploring various avenues to effectively tackle the problem of unpaid contributions.

JIMMY MOYAHA: What about the responsibilities of pension fund administrators? We know they fall under FSCA regulation. Is there a chance that some liability rests with them? Can we hold non-compliant administrators accountable if they exist? While it’s clear that some administrators can operate only when contributions are made, is there an opportunity for action here?

ZAREENA CAMROODIEN: Ultimately, the primary and fiduciary responsibility lies with the fund trustees—the board of the fund. Administrators handle administrative functions, but the obligation remains with the board. They may delegate tasks, but cannot strip themselves of their responsibilities.

For example, they could delegate the responsibility to contact non-compliant employers or identify responsible parties within those organizations. However, it is the board’s obligation to guarantee that member contributions are properly remitted.

JIMMY MOYAHA: It’s critical to ensure contributions are made, given that people’s pensions and livelihoods are at stake. The FSCA is dedicated to taking the necessary actions to secure compliance among non-contributing employers.

We’ll wrap up our discussion here, Zareena. Thank you for your insights. That was Zareena Camroodien, head of Fund Governance and Trustee Conduct at the Financial Sector Conduct Authority, addressing the matter of unpaid pension contributions by employers.

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