Africa-Press – Eswatini. The proposed conversion of Eswatini National Provident Fund (ENPF), valued at over E7 billion, into a national pension fund should be put on hold pending adequate consultation.
A submission by Business Eswatini, which represents nearly 1 000 companies and employs over 80 000 people, has recommended that changes contained in the ENPF Bill no.9 of 2018, should be brought to an immediate halt until such time when the general public and members get the requisite consultation.
It was pointed out that the envisaged consultations should clearly explain motivation for the conversion and the envisaged benefits. BE, whose Chief Executive Officer (CEO) is E.Nathi Dlamini, has called upon government to provide evidence to show if a study has been undertaken to ascertain the affordability of the envisaged contribution rate and must clearly define the proposed membership structure.
The business community, which will mostly be affected by the desired changes, also wants clarity on the collection mechanism and determination of the contribution rate in respect of the self-employed. BE also expects answers as to whether the envisaged benefit structure has been actuarially valued to determine affordability and viability into the future.
To this end, it was suggested that the cost of the envisaged benefits could be done based on the existing data, including a cash-flow projection.
“It would be negligent and unlawful to commit to a national pension scheme without it being granted a certificate of financial soundness by an actuary as required by the Retirement Funds Act,” argued BE in the holistic document, which has been collated with an input by all members of the association. It was also submitted that the contribution rate has been set at 10 per cent split equally between employers and employees.
Therefore, what was viewed to be ironic was that it was not known if that would be sufficient to fund the promised benefits. “It could be 20 per cent or 30 per cent or more? How do we enter into such an arrangement so blindly?” BE rhetorically asked. BE added that at present government was contributing about 4.3 per cent of payroll less than what was required to fund the benefits promised.
When adding the five per cent from the proposed scheme, it could almost be 10 per cent of wage roll, which effectively translates to between five and seven per cent of the national budget. “Can they afford that? Public Service Pension Fund (PSPF) currently has a deficit exceeding E6 billion that government needs to fund!” wondered BE.
It was also brought forth that implementation of the scheme could negatively affect the life insurance sector as many insurers had a significant proportion of their premiums coming from retirement funds. “The compulsory nature of this scheme is going to result in private schemes closing due to the inability to afford both.
This will result in insurance companies having to down size or close their local operations.
The broader impact of this on our economy has not been considered,” BE noted. It was added that the defined benefit structure of the envisaged fund could make it unaffordable in the long run, therefore benefits could not be guaranteed. “Once the contribution rates are set, any requirement to fund a deficit must be for the account of the guarantor.
This has a potential of closing down companies wherein they would not be able to increase contribution the levels required to meet the promised benefits in line with Section 51 in view of the compulsory nature of the envisaged scheme,” added BE.
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