Rise in employers defaulting on pension fund contributions to employees is alarming - Cosatu

The Financial Sector Conduct Authority (FSCA) released its latest report on employers defaulting on pension fund contributions to their employees. It raises deeply alarming matters that cannot be left as yet another burden of life for workers to suffer through.

Pension funds are workers’ hard earned deferred wages. When employers, public or private, claim to be making them fail to do so, that is fraud and must be treated as the criminal offence it is. Worse is when employers deduct the employees’ contribution and then pocket the money. It is extremely worrying that the number of delinquent employers has seemingly doubled from just under 8 000 in the last FSCA report to over 15 500 in its most recent. This may be due partly to improved reporting since the advent of the Two Pot Pension Reforms initiated by the Congress of South African Trade Unions (Cosatu) came into effect in 2024.

Key findings of the FSCA include almost 600 000 employees are said to be owed R7.29 billion by employers with the largest number of culprits to be found in municipalities, auto industry and ironically the private security sector. In many instances, these arrears are not a matter of months but years.This theft of workers’ pension contributions is not merely a violation of the law but condemns these workers and their families to a life of absolute poverty and misery when they should be enjoying their retirement in comfort and security after decades of hard work.

It is a moral crisis as it is these workers whose blood and sweat has generated billions of Rands profits for those companies and helped keep the economy afloat. 600 000 workers being robbed of their pension fund contributions further adds to an existing crisis where less than 10% of South Africans can afford to retire. Most pensioners play a key financial role in supporting their families even when they are retired.

Workers’ pension funds are the backbone of the economy and the largest source of stimulus and investments, in particular public servants’ pension invested by the Public Investment Corporation valued at R3 trillion. When employers pocket these funds for their own self-enrichment or to bail out their failures, that denies badly needed stimulus to an economy struggling at 1% annual growth since 2008.This is a ticking time bomb. It will take an extraordinary amount of self-control for an employee who’s worked for decades at meagre wages, has looked forward toretirement only to find out that their employer has been pilfering through their pension funds, not to snap. This is literally a recipe for violence.

Some municipal employers seek to settle outstanding balances, and this must be done. However, this needs to include outstanding interest that would have been accumulated by those funds if they had been invested timeously as legally required. Otherwise, workers remain the victim as the very essence of pension funds is the interest they accumulate. Cosatu, working with the FSCA, Treasury, pension funds and other stakeholders at Nedlac are putting in place various interventions to put an end to this crisis.

Some are more complicated and caused by external challenges, e.g. the massive deterioration of good governance in many municipalities. This requires the continued and ramped up interventions by Treasury and the Department of Cooperative Governance to deal with such instances, including withholding grants owed until salaries, pension and related funds are paid. It demands deeper interventions including the deployment of competent municipal leadership, removing corrupt elements and a new local government funding model. Otherwise, this crisis in municipalities will spread.

A firm hand is needed with private security companies, including the deregistration of employers who refuse to comply with the law and pay monies owing. If no action is taken, then we cannot be surprised when things do not change. Workers in the security industry are paid a pittance and should not be expected to tolerate such theft by their employers. One has to question whether such employers should be entrusted to provide security when they have no qualms about robbing their employees.

Positive engagements at Nedlac have secured a progressive agreement with the Department of Employment and Labour to issue a Ministerial Directive to all labour inspectors to include pension contributions compliance when doing workplace inspections. The increase of the existing 2 000 labour inspectors this year by 10 000 and a further 10 000 in 2026 will provide an invaluable boost in this battle.

In the labour law reform negotiations at Nedlac, Cosatu was able to secure agreement with the Department to strengthen the provisions of the Basic Conditions of Employment Act compelling employers to comply with their pension obligations to workers. Whilst the above interventions are critical to overcoming this challenge, boards and more specifically worker representatives on them where they have seats, must do much more. It is not acceptable that board members are silent or even complicit in many instances when employers default, worse when these take places for months and even years.

It is not sufficient to simply send an email to the offending employer. Boards must actively report them to the FSCA and also the unions and employees of those workplaces. Boards must do more to ensure that fund members are actively aware of their balances, rights and how funds work.

Cosatu is working closely with our affiliates, especially in the affected sectors, to make sure that they and workers are aware of who these offending employers are, that action is taken to stop the non-payments and that plans are put in place to settle the arrears in full. With employers who refuse to obey the law, it is time that charges are laid with the South African Police Service and that those who steal from workers be charged, prosecuted and sent to prison. R7.9 billion for 600 000 workers is a lot of money. This is not something that can be allowed to continue. It requires decisive and collective action and consequences.

Cosatu President Zingiswa Losi

*** The views expressed here do not necessarily represent those of Independent Media or IOL.

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