Having Two Dominant Retirement Funds Highly Risky for Local Economy, But…. – CBE Governor


By Ntokozo Nkambule

The Central Bank of Eswatini (CBE) Governor, Dr. Phil Mnisi says having two highly dominant Pension Funds is risky for the Eswatini economy.

According to the Financial Services Regulatory Authority (FSRA) Quarterly Statistical Bulletin Q3 2022, the local Retirement Funds industry is highly dominated by the Public Service Pensions Fund (PSPF) and the Eswatini National Provident Fund (ENPF).

There are 71 retirement funds licensed by the FSRA, with most being dominated by the statutory funds i.e., PSPF and ENPF who command approximately 84% of the market share. PSPF commands a market share of 73%, while ENPF holds 11%.

The CBE Governor notes that the interconnectedness of the country’s economy exacerbates the issue. He, however, posits that the two pension funds are playing an important role as they use Asset Managers to manage and invest those funds into the local economy, thereby benefitting the country.

Mnisi disclosed this during the 2023 Governor’s Annual Monetary Policy Statement under the theme ‘Ensuring Price and Financial Stability under a Volatile Economic Environment’.

The FSRA concurs with the Governor on the danger of this concentration.

“This level of concentration poses a risk to the sector since a failure of either of the big Funds will have a significant impact on the financial sector as the retirement funds sector is intertwined with the broader financial system and the real economy through investments and issuance of loans to other companies, as well as through the holding of debt and equity instruments issued by various entities. The top 11 retirement funds account for 93 % of the sector’s assets,” notes the FSRA Quarter bulletin.

Furthermore, Mnisi averred that as the CBE and the industry in general they would like to see more funds from the various retirement funds being invested domestically. He, however, cautioned that those funds must be channeled into feasible and investible projects.

“We would like to see more funds allocated to the local economy, by Asset Managers so that the country can experience growth as well. It pleases us to know that the industry is having these discussions. However, we cannot just bring these funds into the local economy, we must ensure that there are investible instruments and projects that will yield equitable and profitable returns,” he noted.

There are, however, positives to be drawn as there has been an increase in local investments by retirement funds through their Asset Managers into the local economy.

“It is noted that there is an increasing trend on local investments as the local assets holding had increased from 46% as of 30 September 2021 to 49% as of 30 September 2022. The increase in local asset holding has also filtered through to the asset managers as the review of their asset allocation showed an increase in domestic holdings,” notes the FSRA bulletin.

According to the FSRA quarterly bulletin, the retirement fund industry held assets of E40.4 billion as of 30 September 2022, a slight decrease of 0.24% from the previous quarter was observed whereas a 0.5% year-on-year increase was observed.


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