By Miccah Nkabinde

ENPF Conversion Specialist

 

The recent heavy rains have touched many lives with loss and uncertainty, reminding us of our shared fragility and responsibility as a nation. Our thoughts and prayers are with the families who are mourning loved ones and rebuilding after damage to homes and livelihoods, and we urge all readers of Likhweti to take care of themselves and their communities, and remain safe. We thank God for first responders, volunteers, and neighbours whose compassion reflects the spirit of buntfu.

It is against this backdrop of shared responsibility, resilience, and the need for institutional trust that the strategic transition of the Eswatini National Provident Fund into a defined-benefit National Pension Fund (NPF) must be understood.

This strategic transition is predicated upon a multi-dimensional framework: the integration of a resilient governance architecture, stringent prudential supervision by the Financial Services Regulatory Authority (FSRA), and the institutionalisation of periodic actuarial valuations to ensure long-term solvency and fiscal sustainability.

The Governance Structure of the NPF

The NPF will be administered by an independent Board, which acts as the supreme governing body of the Fund. Effective governance is paramount for a national pension scheme to safeguard assets and ensure benefits are paid efficiently and fairly.

The Board

The Board’s mandate is to control the overall business, administration, and assets of the Fund. Key features and composition are designed to comply with international standards where institutions that have employers, workers and Government as key stakeholders are involved to ensure balance and expertise:

Independent Appointment

The Board members are appointed by the Minister for Labour and Social Security.

Tripartite Representation

     The structure ensures all key stakeholders have a voice, typically including:

• • Representatives of the Government (as employer and regulator).
  • Representatives of Employers (nominated by employer federations/business community).
  • Representatives of Employees/Workers (nominated by trade union federations).
  • Representative of retirees
  • Representative of informal sector/self employed
  • Representative of traditional structures
  • The Chief Executive Officer (CEO) of the Fund, who serves as the Secretary to the Board.

Tripartite Representative Board Structure

In the context of social security and pension fund management, a tripartite representative Board structure refers to a governing body composed of three distinct stakeholder groups: Government, Employers, and Employees (Labour). This model, championed by the International Labour Organisation (ILO), is considered the gold standard for institutional legitimacy and fiscal accountability. Its significance lies in several critical areas:

Enhanced Legitimacy and Buy-in

Since pension funds are primarily financed through the contributions of workers and employers, a tripartite structure ensures that those who “own” the capital have a direct seat at the table. This inclusivity reduces resistance to policy changes (such as increasing contribution rates or adjusting the retirement age) because the representatives of those affected have been part of the decision-making process.

Conflict Mitigation and Social Dialogue

By bringing together potentially opposing interests—such as employers seeking to minimize costs and employees seeking to maximize benefits—the Board serves as a platform for social dialogue. Decisions reached through this consensus-based model are generally more sustainable and less likely to lead to industrial action or legal disputes.

Protection against Political Interference

Public pension funds are often vulnerable to being used as “cheap credit” by governments for non-pension related projects. A tripartite structure acts as a check and balance:

1. Employer and Employee representatives act as watchdogs to ensure that investments are made in the best interest of the beneficiaries (fiduciary duty) rather than for political expediency.
2. Government representatives ensure that the fund’s strategy remains aligned with national social protection goals and macro-economic stability.

Fiduciary Duty

The Board members have a legal and ethical obligation (fiduciary duty) to act in   the best interest of the members and beneficiaries above all else.

Specialised Committees

To handle complex tasks, the Board is typically assisted by specialized sub-committees, such as the:

• • Remuneration Committee: Responsible for ensuring that the Fund’s “people spend” is an investment rather than just an expense
  • Investment Committee: Responsible for defining investment strategies and monitoring the performance of fund managers.
  • Audit/Finance Committee: Responsible for financial reporting, risk management, and internal controls.
  • Benefits Committee: Responsible for advising on benefit products and administration.                             

Management and Operations

The day-to-day operations are handled by the executive management team led by the Chief Executive Officer (CEO). The CEO reports directly to the Board of Trustees and is responsible for:

1. Implementing the policies and strategies approved by the Board.
2. Ensuring compliance with the new NPF Act and all regulations.
3. Managing the collection of contributions and the timely disbursement of benefits.

The Critical Role of the FSRA

In Eswatini’s financial ecosystem, the FSRA is the independent body mandated to supervise and regulate all non-bank financial institutions, including retirement funds. For the new NPF, the FSRA’s role is crucial for ensuring prudential management and protecting members.

Key Regulatory Functions of the FSRA:

Function
Description
Impact on the NPF

Registration & Licensing
The FSRA registers the NPF (and other retirement funds) under the Retirement Funds Act, 2005, ensuring it meets all legal and statutory requirements to operate.
Provides legal authorization and legitimacy to the Fund.

Prudential Supervision
The FSRA monitors the financial health of the NPF, including its capital adequacy, funding levels, and adherence to actuarial standards.
Prevents the Fund from becoming insolvent and ensures long-term fiscal sustainability, especially for a Defined Benefit scheme.

Investment Regulation
The FSRA prescribes prudential investment guidelines, including asset allocation limits (e.g., limits on foreign investment) and the crucial local asset requirement.
Safeguards members’ funds by ensuring investments are diversified and not overly exposed to high risk. Enforces rules on investing a portion of assets locally.

Governance Oversight
The FSRA ensures that the Board adheres to fit and proper standards, follows good corporate governance practices, and manages conflicts of interest.
Ensures that the Board acts responsibly and in the best interest of the members.

Consumer Protection
The Authority acts as a point of appeal or inquiry for members who feel they have been unfairly treated by the Fund.
Provides an independent mechanism for redress and promotes transparency and fairness.

Strengthening Accountability

The co-existence of a strong Board with a rigorous independent regulator like the FSRA is the foundation of a sound national pension system.

Crucial Requirement: The new NPF, under the regulatory guidance of the FSRA, will be required to conduct regular actuarial valuations (usually every three years) to assess its financial health and long-term ability to meet its defined benefit obligations. Any potential shortfall must be immediately addressed by the Board in consultation with the regulator.

This dual oversight model, where the Board governs internally and the FSRA supervises externally, is the public’s assurance that the nation’s collective retirement savings are managed professionally, ethically, and in a fiscally responsible manner.

Conclusion: The Cornerstone of Institutional Integrity

The transformation of the ENPF into a NPF represents a fundamental shift toward sustainable social protection. However, the success of this transition is not merely a matter of financial engineering; it is an outcome of rigorous governance.

A tripartite Board, comprising Government, employers, and employees, serves as the primary guardian of the Fund’s assets, ensuring that every decision is filtered through the lens of fiduciary duty and stakeholder consensus. By balancing diverse interests and insulating the Fund from political volatility, the Board provides the strategic leadership necessary for institutional stability.

When coupled with the stringent prudential oversight of the FSRA and the scientific rigor of actuarial valuations, this governance framework creates a “dual lock” system of accountability. Ultimately, a robust governing body is the public’s greatest assurance that the NPF will not only be solvent today but will remain a reliable and equitable anchor for the retirement security of all emaSwati for generations to come.

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