Importance of the Pension system to provide social protection for workers

Comrade Gcaleka-Mazibuko ANC (MP)

15 November 2024

HONOURABLE SPEAKER,

I stand here as a former shop steward and a former local government practitioner who understands the struggles of workers. It is an honour for me to remind honourable members of the importance of celebrating one of the greatest achievements of the democratic dispensation on behalf of the workers of South Africa: the addition of Section 13A to the Pension Funds Act in 1996.

Workers have waged struggles for equal access to social protection through access to pension funds and old age grant access.

Access to pension funds is a critical gain we should protect as part of protecting the well-being of all South Africans particularly workers and the retired.

In introducing specific requirements and timelines for employers!” contributions into their employees!”pensions and for allowing for penalties to be levied on employers in cases of late payments, Section 13A represents one of the strongest shows of force of our human-rights-centered constitutional democracy; a testament to the tireless work of the labour movement; a fitting reminder of the good that comes when the alliance that birthed our democracy works in harmony.

The Pension Fund Adjudicator is an institutions which exist to primarily address issues that the Motion seeks to achieve through the establishment of an ad-hoc committee to investigate some local government municipalities and private companies found in violation of Section 13A of the Pension Fund Act.

Scholars have highlighted that the “legislative history of the Pension Fund Act demonstrates that the legislature considered and understood that the effect of creating an Adjudicator with the power to issue binding decisions would create legal precedent, which would apply not only to the individual case before the Adjudicator but future cases as well.”

Section 13A specifies the following key obligations and provisions:

• Timely Payment of Contributions: Employers must pay both employee and employer contributions into the pension fund by the specified due date, typically within 7 days after the end of the month in which the contributions were deducted.
• Deductions from Employees!” Salary: Employers are required to deduct the agreed-upon employee contributions from their salaries and submit them to the pension fund within the same timeframe. Regulatory oversight by the Ombud Council also played a pivotal role in maintaining the effectiveness of the ombud system.

In the 2023/24 financial year, the Pension adjudicator received and registered 9 177. The Pension adjudicator archived 8 399 complaints closed of which 77% were within six months.

This demonstrates the extent to which matters that relate to the pension fund get addressed.

However, we are concerned that a number of private-sector organisations and public institutions do dishonour their commitment, by deducting pension fund contributions and not paying to the pension fund and in other circumstances, the employer does not make their contributions. This results in a risk of employees losing their benefits, this also poses a risk for other financial services such as funeral cover which pension fund members can lose.

We empathise with families who have been impacted by situations of nonpayment of pension funds and also for families impacted by non-payment of salaries, which disrupts livelihoods and the financial obligations of workers.

Non-payment of salaries from the public sector and in the private sector has severe consequences, and we call on all employers to always develop financial buffers to prioritise the compensation of workers.

It goes without saying that workers and employers operate in a symbiotic relationship. When employers default on their contributions, the financial health of these employers and the relationships between the employers and their stakeholders deteriorate and put the livelihoods of employees at risk

We have observed challenges of non-payment of pension contributions in the period of the two-pot system when workers could not direct a withdrawal because their employer had been defaulting on contribution payments. This has resulted in many household not receiving relief which they thought they would receive as part of their employment. We call on all workers who have been unjustly impacted by the non-compliance of employees to report matters to the pension fund adjudicator.

In the public service, this problem largely impacts local municipalities, which are in financial distress and unable to pay salaries. This is a result of financial sustainability challenges which impact the cash flow of municipalities. To resolve this challenge. The funding model of local government should be reviewed.

This problem is also largely in the private sector, where workers are not effectively organised. The existence of a union in a workplace is a critical factor in ensuring that employers comply with required legislation. The lack of organising weakens the ability of workers to challenge unjust labour practices.

HONOURABLE SPEAKER,

The democratic dispensation also created institutional mechanisms such as the Financial Services Conduct Authority (the FSCA) to enforce the employers!” obligations in terms of the law. In addition, the FSCA is empowered and required by law to assist employees to ensure that they can monitor their pension fund statements and report any discrepancies to their fund administrators or directly to the FSCA to address issues promptly.

Are all these mechanisms, Honourable Speaker, sufficient to protect workers, their families and their communities? Are penalties, including interest, on late or missed contributions strong enough to ensure that employers fulfil their duties to their employees at all times? Is it enough that even individuals, including directors and financial officers, who are responsible for the management of these contributions can be held personally liable for noncompliance?

Are pension funds or trustees themselves strong enough to take legal action against non-compliant employers when it is necessary?

Sadly, there are still many employers who, for whatever reason, do not fulfil their obligations for timely pension contributions. Some of the reasons for non-compliance include:

• General Financial Distress due to normal business cycles.
• Poor Trading Conditions due to exposure to the global political and economic climate.
• Poor Financial Status due to poor financial management systems and controls.

IN CONCLUSION

Given all of the above, given the importance of the Pension System for the Social Protection of Workers in South Africa, and given the strong institutions that are in place to tackle the problem, the African National Congress does not support the motion to establish an ad-hoc committee to investigate violations of Section 13A of the Pension Fund Act. Instead, the African National Congress calls upon the House to focus on existing structures and institutions, enforcing accountability where necessary and providing support where needed.

The Finance Standing Committee has sufficient scope to ensure institutions that have to investigate non-compliance with Section 13A of the Pension Fund by local government municipalities and private companies to effectively address challenges in the interest of the workers.