The private security sector in South Africa leaves guards …


Members of TSU’s protection services who were called in to keep order at Shoprite supermarket in Nyanga Ruction after some shoppers became angry for waiting a long time for the fifth day of the national lockdown on March 31, 2020 in Cape Town, South Africa. (Photo: Gallo Images / Roger Sédres)

The people South Africans rely on to protect them and their property, in turn, need protection. Employers fail to honor pension fund commitments and a mandatory fund is accused of bad governance.

First published in the Daily Maverick 168 weekly newspaper.

South African security guards, who are already making a pittance, are getting ripped off by their employers – and possibly their pension funds when it comes to their retirement savings.

The office of the pension fund arbitrator revealed last week that it had reported the Private Security Sector Provident Fund (PSSPF) to the Financial Sector Conduct Authority (FSCA) over what appear to be systemic issues governance and administration of funds. The fund has been the largest contributor to complaints over the past year, with employers accused of failing to pay premiums by making deductions from employees’ wages.

The arbitrator of the pension fund, Muvhango Lukhaimane, expressed concern about the quality of the responses which required follow-up and that the fund did not take advantage of his office’s revised complaints handling process.

“There has been no attempt to [the PSSPF’s] party to resolve complaints directly with members, ”she said.

In a statement last month, the FSCA confirmed that it had previously conducted an on-site surveillance inspection of the PSSPF in November 2017. It has since filed an application to put the fund under trusteeship. But in September 2018, with the agreement of the trustees, it appointed statutory managers to the fund’s board of directors.

The statutory managers then ordered an independent forensic investigation of the fund. Following these inquiries, the FSCA “initiated regulatory action against various parties”. He would not disclose anything further because this action is an ongoing and confidential process, he said.

Olano Makhubela, the divisional director of the FSCA for pension funds, explains that a trusteeship, which can be done by consent between the regulator and the trustees of the fund or by court decision, withdraws the management of the fund and entrusts it to the conservative.

“Given the history of some trusteeship functions in terms of cost and duration, the unions feared losing their participation in the management of the fund over an extended period, which would also have significant financial implications for the fund.”

A statutory manager is appointed by agreement between the fund trustees and the regulator. Makhubela says that in this case the management is still vested in the trustees, but they are overseen by the statutory manager and work jointly with him.

“It is important to note that one of the conditions stipulated by the FSCA before accepting a statutory manager was that some trustees could not continue on the fund, given the various allegations,” he says.

Lukhaimane says his office has referred matters relating to the management of the fund to FSCA for at least seven years.

“There is also a huge problem with the administration of the fund. In some cases, employers pay contributions, but they are not allocated in a timely manner to members’ files. This has resulted in cases where some employees have asked their employers to stop contributing to the fund. [which is against the law] because they have seen their colleagues leave without receiving their benefits or die and have dependents who do not receive the death grant.

She notes that the private security sector is “very special” in several respects. Employers do not need to have a background to participate in the sector. The Private Security Industry Regulatory Authority (PSiRA) authorizes security companies and regulates their operation.

“Even though participation in the fund is compulsory as prescribed by the Ministry of Labor, compliance is very low and none of the actors, except the fund itself, takes care of the payment of contributions to the fund. You have small employers, large employers, and employers who include safety as a side business to their larger businesses.

“Added to this is the proliferation of smaller players in the industry who are affected by cash flow. When you have clients who do not pay on time, it has a ripple effect on all of the employer’s other obligations. The law on pension funds has gone so far as to criminalize non-payment of contributions; however, the fund must act and get the ball rolling, ”says Lukhaimane.

“So far, some employers who have tried to sue have yet to see a single case taken up by the NPA. [National Prosecuting Authority]. At the political level, however, there is enough information for industry and the Ministry of Labor to make a decision on the adequacy of this fund. In other words, given all the peculiarities of the sector, is there no better way to provide for security guards than through a compulsory fund? she asks.

The most recent financial statements published on the PSSPF website are for fiscal year 2019, although FSCA has verified that it has received the financial statements for the fiscal year up to February 2021.

The 2019 financial statements reflect that members’ funds for the year amounted to R5.53 billion, including R36 million in the unallocated contribution account. This account contains funds that have been received but cannot be traced back to contributors within 90 days. A total of 22,049 members had been transferred to the unclaimed benefit fund, with a total benefit value of R122 million.

The PSSPF was established in 2001 and provides retirement, disability, death and funeral benefits to employees in the sector.

The problems with non-compliant employers date back nine years and probably beyond. In 2012, there were approximately 350 complaints to the arbitrator related to the PSSPF, but, by 2016, they had slowed to just over 100. In 2016, the fund engaged with more than 1,000 non-compliant employers, resulting in 390 IOUs amounting to R 275 million. Of this amount, the fund had received R145 million, which was then allocated to members’ accounts. At that point, the fund entered into litigation with non-compliant employers.

Growth of private security

PSiRA has nearly 2.6 million individual security officers and over 11,000 security companies on its registry.

Manabela Chauke, CEO of PSiRA, said there has been a 14% increase in the number of registered active security officers and a 33% increase in the number of registered active security companies over the past eight years. .

One of the goals of PSiRA is to ensure that companies comply with the PSSPF to ensure that security officials are not exploited.

The PSiRA’s annual report for 2020/21 shows that the authority carried out 6,055 compliance inspections of security companies and, of these, 466 employers (8%) were found to be non-compliant against the PSSPF.

If this sample is extrapolated, does that mean that up to 880 employers are potentially non-compliant when it comes to their employees’ pension funds?

As of the end of March this year, 900 cases of misconduct were pending against security service providers for allegations of non-payment of the statutory minimum wage to employee security guards.

There were 917 outstanding misconduct cases against security service providers for allegations of non-compliance with the PSSPF. DM168

This story first appeared in our weekly Daily Maverick 168 which is available for R25 from Pick n Pay, Exclusive Books and airport bookstores. For your nearest dealer, please click here.



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