(Bloomberg) -- The failure by South African employers to pay 5.2 billion rand ($287 million) in pension contributions may leave retirees facing poverty, and the retirement system may be destabilized if the problem continues to worsen, the head of the financial regulator said.
Currently 7,770 employers have failed to make pension contributions deducted from workers’ salaries, including almost 150 local-government authorities, whose arrears are estimated at about 1.4 billion rand, Financial Sector Conduct Authority Commissioner Unathi Kamlana said in a speech Tuesday.
“As pension funds rely on steady contributions to maintain liquidity and fulfill their obligations, they may become strained when contributions are inconsistent or delayed,” he said. “This in turn could limit their ability to invest in long-term projects, diminishing their role as major institutional investors in the economy,” making the entire retirement system more vulnerable, he said.
Failing to make the contributions also has implications for workers’ retirement savings in a nation where less than 10% of the population is able to retire comfortably, said Kamlana
The regulator expects the enactment of the Conduct of Financial Institutions Bill to remedy the situation. The law will bring employers who pay retirement contributions under its supervision, allowing it to boost compliance and accountability, Kamlana said.
The regulator is also considering greater penalties on fund managers and administrators who don’t take action against employers that have pension-contribution arrears, he said.
(Updates with more enforcement actions by the FSCA in final paragraph)
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