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CENTRAL BANK OF ESWATINI (CBE) DEEMS THE ESWATINI PENSIONS INDUSTRY TO BE AT RISK

The CBE logo (Sourced Online)


Written by Fundizwi Sikhondze

The Central Bank of Eswatini (CBE) has voiced out that they deem the pensions funds in the country to be exposed to risk. 

In their 2022/23 annual report of the Eswatini financial sector released in late September 2023 the CBE stated that the pension funds sector was at risk because of three principal factors ,the dominance of two  pensions schemes in the country, the exposure of pension funds to the Johannesburg Stock Exchange (JSE) and the risk associated with "increased exposure to Eswatini government and the continued interconnectedness of the pension sector with financial intermediation of the economy". 

In terms of the dominance of the two pension schemes the report state that the domination of the Public Service Pension Fund (PSPF) which holds around 73% of the pension funds' market share, as well as the Eswatini National Provident Fund (ENPF) which holds 11% of the pensions funds' market value ,poses a risk to the entire pensions industry particularly in the event either or both organisations can collapse.

In terms of the exposure to the JSE the risk according to the CBE may be that a high percentage of local pension funds invested in the international markets are invested in the JSE. According to the Financial Services Regulatory Authority (FRSA) December 2020 annual report about 41% of Eswatini's pension investment assets are invested in the JSE. This possibly implies that any instability that may visit the JSE may cause serious challenges for pensions funds ,particularly in their ability to fulfil their obligations to members.

Lastly, in terms of over reliance on the government in recent years there has been a sharp increase in the purchasing of government bonds by pension funds ,particularly the PSPF, the largest in the country. In their 2022 annual report the PSPF reported  out of the 40% of their investments had been invested locally within Eswatini. Out of the 40% locally invested it was reported that  they had invested the heaviest towards government bonds and promissory notes to the tune of 28%. Their largest investment portfolio locally by a wide stretch. The ENPF o the other hand reported that they had 58% of their investments locally. Their 2022 annual report was not clear in terms of investment in government bonds and other publicly held assets.

It is not clear for now whether the warning by the CBE would inform a trajectory change in the behaviour to the pensions funds sector to avoid a possible instability on the horizon in the sector.

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