FIFI PETERS: Today, August 24, 2021, the Financial Sector Conduct Authority (FSCA), which is the body responsible for market conduct, regulation and supervision, held a webinar to discuss recent developments in the financials industry. retirement funds. We have Olano Makhubela, the FSCA divisional retirement fund oversight executive joining the show. Olano, thank you very much for your time. What exactly happened in today’s webinar, what was discussed, and what was the purpose?
OLANO MAKHUBELA: Good evening, Mrs. Peters, and good evening to your listeners, and thank you for inviting us to your show. The webinar was more than our usual “Hello to the Media”. It is primarily to have an engagement, a discussion, a talk with the media on various topics that affect the retirement industry. Because we hadn’t had one for quite some time, we thought it would be a good time to make one in retirement funds, given the impact of Covid and all the other problems to come. That, in a nutshell, was the purpose of it.
FIFI PETERS: What has the pandemic done to retirement funds so far?
OLANO MAKHUBELA: The pandemic has had a negative impact on literally all levels of our lives. Be it in the economy, be it social, or be it personal, we have all felt its impact. Regarding retirement funds, we actually conducted a survey to assess the specific impact on retirement funds, and the results we received indicated that almost 47% of retirement funds were contacted by an employer and / or employee, requesting to reduce contributions to the fund or temporarily cease contributions. That provides a pretty interesting problem in terms of assessing the impact of Covid.
There is a survey that also indicated that the service and manufacturing industries, which have been the most affected, are in the hospitality sector. When the lockdown began, many businesses were literally shut down entirely, which meant no revenue was received, thus creating challenges in making payments to employees and thus contributions to retirement funds. Therefore, he saw this unfortunate result.
And in certain instances, the entrepreneurs had to literally liquidate, thus affecting the retirement funds, which also ended up going through some liquidations.
So the impact has been quite prominent, but the industry is still strong. That is why we are also thinking about the best way to help restructure the industry as well. Issues related to, for example, automatic enrollment have been considered to allow for better coverage. So that has been the impact of Covid on the industry.
FIFI PETERS: Olano, the last briefing we had with the former finance minister, Minister Tito Mboweni, I think happened last month or so when he described how the latest stimulus or Covid plan announced by the president would be financed, there he said that National El Tesoro I was discussing the possibility of allowing people to access a portion of their retirement funds or retirement annuities because these are difficult times. Where is that process? What does the FSCA think about it?
OLANO MAKHUBELA: Good question and I’ll answer it. I won’t dodge it. I think it is a question of politics. [laughing] because we have also engaged with the Treasury as a regulator. In fact, it is making good progress in that regard. In fact, they were in parliament today discussing the issue. The idea is to create a two-bucket system, which will allow contributions to one conservation container, preserved until retirement, and another container that will allow some form of access.
When this pandemic started, Ms. Peters, most of us thought it would only last a couple of weeks. Unfortunately, we entered a second wave, a third wave, and it became clear that employees are now beginning to really feel the effect of Covid and thus the need to consider whether some kind of early limited access could alleviate some of the the challenges. What we agree with the Treasury on is that if there is indeed going to be any immediate access, then it should be accompanied by preservation, because the biggest challenge in the system is the level of preservation when employees change jobs.
So if the system allows for mandatory preservation, that will really allow for a much more robust system in the future.
FIFI PETERS: Well, we look forward to hearing the results of that debate. In fact, it is echoing something very similar to what Alexander Forbes, who joined us on the show a little earlier, said about a part that is reserved for preservation. We expect a swift policy, sir, on that front, but we’ll leave it there for now.
Thanks to Olano Makhubela, who is a divisional retirement fund oversight executive at the FSCA.