South African labour unions have sounded the alarm over an R8.3bn unpaid pension crisis affecting 590,000 workers.
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Labour unions are sounding the alarm over the growing number of companies that are failing to pay over pension contributions to pension funds, leaving workers destitute at the end of their working lives.
The Public Servants Association (PSA) has revealed that more than R8 billion in pension contributions have not been paid over to pension funds by employers, despite those being deducted from employees.
Labour unions stated that workers have very little recourse when they discover that the company has not been paying over their pension.
Economists say this is a major concern and could be damaging to workers’ lives after retirement, pointing out that many workers cannot retire comfortably as it is, even if they receive their full pension.
In a statement, the PSA said it is shocked and outraged following reports that thousands of employers across South Africa have failed to pay over employees’ pension contributions, with arrear contributions amounting to an alarming R8.3 billion.
“The PSA regards this as a gross betrayal of workers’ trust and a direct attack on the financial security and dignity of employees who work with the legitimate expectation that deductions from their salaries will be paid over to their respective pension funds. Instead, many workers face uncertainty regarding their retirement savings because of the unlawful and unethical conduct of employers.
“This situation is nothing short of a national disgrace. Pension contributions are not optional payments; they are deferred earnings belonging to employees. Any employer who deducts these contributions but fails to pay them over is effectively depriving workers of hard-earned retirement savings.
“The PSA is extremely concerned that many employees only become aware of these outstanding contributions when they resign, retire, or lodge benefit claims, by which time the financial prejudice may already be substantial,” said the union.
The PSA said such conduct undermines confidence in South Africa’s retirement system and places countless families at risk of financial hardship. “The PSA calls on President Cyril Ramaphosa and the government to take decisive and immediate action against employers who fail to comply with their legal obligations.
“The current situation cannot be allowed to continue unchecked. The PSA specifically calls for the imposition of severe financial penalties on employers who fail to pay pension contributions, criminal prosecution of employers who unlawfully withhold or misappropriate employees’ pension contributions, strengthened enforcement and regular compliance inspections by the relevant regulatory authorities, publication of names of defaulting employers to promote transparency and accountability, and urgent measures to ensure that all outstanding pension contributions, together with applicable interest, are recovered and paid into affected employees’ retirement funds without delay,” it stated.
It added that workers should not be forced to pay the price for employers who disregard the law and exploit employees’ trust. “The PSA will continue to advocate for stronger protection of workers’ retirement benefits and will support every effort to ensure that employers who violate their legal obligations are held fully accountable. Retirement savings represent the future security of millions of South Africans and must never be treated as a source of cash flow for irresponsible employers.”
Edwin Mkhize of Cosatu in KwaZulu-Natal said the matter was serious and there are very limited options as recourse for workers.
“Such recourse, which includes opening a criminal case against a particular company, can take a very long time.
“This is a matter of corruption and should be treated as such. We have found many conmen that are doing this; it’s not just small companies; there are big companies doing this and even municipalities,” said Mkhize.
He said part of the solution being explored by Cosatu is to have workers’ interests represented on the board of trustees for these pension funds in order to catch the problem before it snowballs. “We cannot be reactive; we need to be proactive in addressing the issue.”
He added that Cosatu has done a lot of work in addressing the problem, including engaging with the authorities to name and shame the companies that are in breach.
Economist Dawie Roodt described this as a serious problem. “Quite often, people are not really concerned about this (pension contributions) because they trust their employers to do the payment, and people just don’t check them.
“My advice to people is that they make sure that the money is paid over because when it comes to retirement and the money is not there, you have serious issues because the majority of South Africans cannot retire independently as it is, and unfortunately, some of the biggest culprits here are state-owned enterprises and especially the municipalities,” he said.
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