FSCA names and shames employers owing pension contributions

The Financial Sector Conduct Authority has imposed heavy fines on the directors of Smart Billions Investments. Picture: Supplied

The Financial Sector Conduct Authority has imposed heavy fines on the directors of Smart Billions Investments. Picture: Supplied

Published Sep 10, 2023


The Financial Sector Conduct Authority (FSCA) has had its fill of employers that fail to pay over their employees’ contributions to their pension and provident funds and has taken to naming and shaming them publicly.

On August 31, the authority published a list of employers that were four or more months in arrears at the end of April. The document, which is available on the FSCA’s website, contains the names of 3 262 companies and municipalities, which are up to 252 months, or 21 years, in arrears with pension fund payments.

Note that this is money that is deducted from employees’ payslips for their retirement savings. It belongs to the employees, not the employers, and by withholding it, the companies are, in effect, committing theft.

The names of the employers on the list were provided by the retirement funds concerned. The funds are mostly trade union, bargaining council and umbrella funds (commercial funds that house multiple employers). The trade union and bargaining council fund members are among the lowest-paid workers in South Africa.

Of the 3 262 employers on the list, 2 663 are in arrears by a year or more. Of these:

  • An astonishing 2 224 (83%) are security companies in arrears to the Private Security Sector Provident Fund.
  • 158 (6%) are Western Cape furniture manufacturers in arrears to the Bargaining Council for the Furniture Manufacturing Industry of the Western Cape Provident Fund.
  • 73 (3%) are various companies with employees belonging to the Saccawu National Provident Fund.
  • 47 (2%) are clothing manufacturers owing payments to the National Bargain Council for the Clothing Manufacturing Industry Northern Region Chamber Provident Fund.
  • 113 (4%) are municipalities owing payments to various local-government funds.

The FSCA’s statistics show that private-sector companies owe about R6 billion and municipalities a further R1bn in contributions.

In an accompanying statement, Olano Makhubela, the divisional executive in charge of retirement fund supervision at the FSCA, said the issue of arrear contributions had a long history in the retirement industry and “leads to prejudice and unfair outcomes for retirement fund members”.

The statement referred to a communication in June last year, whereby the FSCA informed the industry of its intention to publish the names of retirement funds and employers with arrear contributions and invited funds to submit the names of non-compliant employers.

Makhubela outlined the legal obligations of funds and employers in ensuring that employees’ retirement fund contributions were up to date.

He quoted Section 13A of the Pension Funds Act, which states that employers must pay an employee’s contributions to their fund “not later than seven days after the end of the month for which such a contribution is payable”.

The act further states that “any person who contravenes or fails to comply with section 13A is guilty of an offence and liable on conviction to a fine not exceeding R10 million or to imprisonment for a period not exceeding 10 years or to both such fine and imprisonment”.

But the funds themselves have a responsibility to ensure participating employers fulfil their obligations. The FSCA’s Conduct Standard 1 of 2022, which became effective on February 19 this year, places notification and reporting obligations on the board of a fund, principal officer or other authorised officers when an employer fails to comply with the act.

The retirement fund with the worst record regarding non-compliant employers, as is clear from the list, is the Private Security Sector Provident Fund, which has had various run-ins over the years with the FSCA and the Pension Funds Adjudicator, Muvhango Lukhaimane.

In August last year, the FSCA imposed administrative penalties on several of its trustees for various irregular actions including improper procurement practices. Sanctioned trustees had to vacate their positions on the board, while those who had left were fined up to R230 000. Several of the sanctioned individuals appealed to the Financial Services Tribunal, but in May this year, the decision was upheld.

“This ruling has far-reaching implications for trustees and principal officers, as it confirms the powers of the FSCA to remove such officers from the boards of funds, as well as the feasibility of imposing penalties in the personal capacity of such representatives,” the FSCA said in a subsequent statement.