The Public Service Pensions Fund (PSPF) has warned that the proposed conversion of the Eswatini National Provident Fund (ENPF) into a National Pension Fund will force it to liquidate investments, retrench staff and abandon job-creation projects, effectively crippling its role in the domestic economy.
PSPF Chief Executive Officer (CEO) Masotja Vilakati sounded the alarm during an engagement with the Editors Forum in Mbabane on Thursday, cautioning that the Fund’s financial stability would be “completely shattered if contributions by civil servants were diverted to the new scheme.”
Vilakati explained that the PSPF was already under significant financial strain, carrying liabilities of E42.7 billion against assets of E37.5 billion, leaving it with a deficit of E10.2 billion. He said reducing contribution flows at this stage, therefore, would leave the Fund unable to meet its obligations, forcing it to sell off investments and cut jobs.
“The moment money stops coming into the Fund the way it is supposed to, our ability to create jobs and invest in the domestic economy is impacted. At that point, we would be waiting to pay benefits and literally die,” Vilakati stated.
Vilakati said the Fund’s actuary had already confirmed that any diversion of contributions to another scheme would accelerate the widening of the deficit.
“Our actuary made it clear to us that the deficit would continuously increase. It is not even hard mathematics to see that. We cannot fight the Maths,” he said, adding that the PSPF depends entirely on contributions from civil servants and government as employer to sustain itself.
According to Vilakati, the law governing the PSPF also prohibits unilateral changes to benefits, meaning the Fund would be compelled to continue paying full pension entitlements even if its revenue shrinks.
“PSPF cannot reduce benefits because the law compels us to pay the formula that is in place. A single civil servant can take us to court and say, in terms of the Constitution, you cannot reduce what I am entitled to. We would be forced to pay,” he said.
The CEO explained that the Fund’s 41 000 members would continue to retire gradually and would expect their full pension entitlements, regardless of what happens with contributions.
“These are obligations we cannot escape. People are entitled to the correct amount, and we would have to start by selling assets, such as the Hilton Hotel, to be able to pay off,” he said.
Vilakati warned that once assets are liquidated to cover payouts, the Fund’s investments in domestic projects, which currently provide jobs and contribute to economic growth, would collapse.
“That means our ability to invest in the economy and create jobs will be destroyed,” he stated.
Vilakati also questioned the legal framework of the proposed Bill, saying it creates confusion by attempting to cover civil servants who are already provided for under the statutory PSPF.
“The Bill itself is written in a way that says the national pension scheme will co-exist with other occupational schemes. That is fine for private companies, but for us it is problematic because currently, there is no contribution to anything other than the pension scheme. If that changes, it weakens PSPF immediately,” he said.
He emphasised that the PSPF was not against the establishment of a national pension scheme, but was firmly opposed to the inclusion of civil servants.
“Again, I want to accentuate the fact that we support the national fund. But not with civil servants included. Otherwise, it will be the unintended downfall and demise of PSPF,” he added.
Vilakati further cautioned that the collapse of the PSPF would inevitably draw in government, which might be forced to provide direct bailouts to cover pension obligations.
“If contributions are reduced, the Fund will shut down or government will have to support it with money. That is the reality. How can you expect this to work otherwise?” he asked.
He said any government bailout would in turn burden taxpayers, creating a vicious cycle of unsustainable costs.
The PSPF’s warnings stand in stark contrast to assurances given recently by ENPF Chief Executive Officer Futhi Tembe, who told editors that the conversion of ENPF into a National Pension Fund would not undermine or kill PSPF.
Tembe argued that the two schemes would operate independently and complement each other, saying the aim of the Bill was to broaden social security to cover all workers, not to reduce civil servants’ benefits.
“The PSPF will remain intact. The proposed conversion does not interfere with its operations or the security of its members’ funds,” Tembe said during her engagement with the Editors Forum two weeks ago.
However, Vilakati dismissed this view, insisting that the mathematics of pensions cannot be ignored.
“Any effect on our contributions will systematically collapse PSPF. It is not an exaggeration; it is mathematics,” he said.
The CEO underlined that the Fund’s deficit is already on a worrying trajectory.
This year it stands at E10.2 billion, but because pension obligations grow annually, the shortfall will continue to widen.
“The gap is perpetually moving. Liabilities could climb to E44 billion next year, and unless contribution flows remain steady, they will outpace the growth of assets,” Vilakati said, reiterating that even small reductions in contributions could destabilise the Fund.
“Some people say E400 is insignificant to PSPF, but that is not true. Even one lilangeni matters. The 20 per cent contribution rate is what sustains us. If we drop it, it worsens our position immediately,” he stated.
