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PENSION FUNDS AUSTERITY DRIVEN BUSINESS MODEL IN THE SPOTLIGHT AS LIKHWANE SAGA RAGES ON

Picture sourced from the internet

Written by Fundizwi Sikhondze

The raging saga involving the  beneficiaries of the Eswatini Electricity Company Pensions Fund (EECPF), who have been fighting the EECPF in order to get the payment of benefits due to their dependants resumed, has shone the spotlight on the practices of pension funds in the country. This episode has perhaps revealed legislative weaknesses particularly legislation in relation to the protection of pension funds beneficiaries as well as a poor oversight exercised by the Financial Services Regulatory Authority (FSRA) over what can be described as risky practices of pension funds in the country.

The background of this particular case is that it appears that Likhwane received funds from the different pension and provident funds and proceeded to invest the funds in investment vehicles such as ESW/Escponet Investment and Lingedla PTY LTD. From these funds, in the case of the EECPF, it appears , Likhwane was expected to facilitate the payment to beneficiaries of deceased members of the pension fund.  Likhwane from its own website presents itself to have provided beneficiary funds administration and tracing services and their board chairperson was reported to be respected former Conciliation Mediation and Arbitration Commission (CMAC) former Managing Director Nathi Gumede.  

While the guardians of the EECPF beneficiaries were fighting for the resumption of payments of their dependents' benefits, after they were stopped in June 2023 by Likhwane, there was also a court process   between Likhwane ,the FSRA and the concerned pension and provident funds. From media reports it appears that on 24th August 2023 the FRSA had been granted an ex parte court order to begin the process to liquidate Likhwane. The order is now being challenged by concerned pension/provident fund  including Eswatini Revenue Services Provident Fund, Eswatini Bank Pensions Fund, Umfuso Umbrella Fund, Eswatini National Provident Fund Pension Fund and Eswatini Sugar Association Staff Pension Fund , Civil Aviation Authority Provident Fund according to the daily newspaper the Times of Eswatini (13.10.23).

From the court process these pensions/provident funds are perhaps hoping to salvage some funds for from the operating accounts of Likhwane rather than to wait for the finalisation of the liquidation process.  

Beneficiaries protection 

The case of Likhwane and the EECPF appears to be a serious case of outsourcing of the core operational responsibilities of the pension/provident fund to a third party. The function to pay beneficiaries of a deceased member of a pension/provident fund is one of its core duties and it is baffling to many experts as to why these pension funds such as the EECPF ended up giving away this function to a third party like Likhwane in the first place. 

Experts contacted by this publication but who wanted to remain anonymous pointed out that even amidst these challenges brought by the troubles facing Likhwane, the pension/provident funds concerned ought to still find means to continue to honour their commitments to the beneficiaries of their pension/provident fund.  

It is only a hope for the sake of vulnerable beneficiaries that this serves as a valuable lesson for the industry and that legislation to protect the beneficiaries will be strengthened to prevent any similar episodes in the future.

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