THE GOVERNMENT has acknowledged that thousands of employers are flouting the Pension Fund Act by failing to make mandatory contributions for their employees' pensions.

Finance Minister Enoch Godongwana and Justice Minister Mmamoloko Kubayi recently responded to parliamentary queries, laying bare the disturbingly low rate of prosecutions against those culpable of this financial misconduct.

As of December 2023, a staggering 12,600 employers were reported to have contravened the Pension Fund Act by neglecting to remit pension contributions, yet only four employers who withheld pension fund contributions were prosecuted since 2019.

This takes place as the Pension Fund Act imposes a statutory obligation on employers to deduct pension fund contributions on a monthly basis from employees and pay the contributions to the relevant Fund.

Those that fail to comply are 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.

Despite these severe penalties, it appears that many employers continue to circumvent their obligations, with only a handful facing the brunt of the law.

Responding to parliamentary questions from MK Party MP Brian Molefe, Godongwana said about 12 600 employers were reported by retirement funds to have contravened the Pension Fund Act due to the non-payment of pension fund contributions as of December 2023.

He said the failure by employers to remit pension contributions has been attributed to various factors.

These included unaffordable contribution rates, termination of contracts, late payment of invoices by service providers and unwillingness by employers to make contributions.

“It should further be noted that, in some cases, funds have failed to allocate payments to employers timeously in their records, creating the erroneous impression of some employers being in arrears,” Godongwana said.

He said the responsibility to report non-compliant employers to the South African Police Service lay with the board of trustees of the respective pension funds.

“The Financial Sector Conduct Authority (FSCA) engages with funds in its supervisory role to review the actions taken in response to non-compliance.”

Godongwana said approximately 113 cases were reported to the SAPS, according to information received from funds as of 31 December 2023.

He also said the FSCA was aware of arrests of officials in the Kamiesberg, Renosterberg and Kai-Garib municipalities in the Northern Cape.

“However, the FSCA does not have details regarding the number of prosecutions and criminal convictions. The National Prosecuting Authority (NPA) would be the appropriate authority to provide these details,” Godongwana added.

Kubayi said the number of criminal cases involving employers who have withheld pension fund contributions in contravention of the Pension Funds Act, which were investigated and handed over to the NPA for prosecution, was not available.

“The NPA does not record the details of offences involved in case dockets submitted for decision. The NPA can, however, confirm that, since 2019, four cases involving employers who have withheld pension fund contributions in contravention of Section 13A of the Act were prosecuted,” she said.

Kubayi also said four cases were prosecuted and proceeded to the trial stage, two of which have been finalised since March 2020.

There were two employers who were criminally convicted in line with the provisions of the Pension Fund Act.

“One of the accused was also charged with fraud in addition to the contravention of Section 13A of the Act,” Kubayi added.

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Pension fund crisis: Thousands of employers dodge payments with impunity