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By Marthinuz Fabianus, Managing Director

As alluded to in the previous two articles, various attempts have been made over the past 20 years to come up with proposals to operationalise the NPF. In last month’s newsletter, consideration was given to the noble reasons for the provision and need for a NPF as provided for in the Social Security Act (SSA). In this edition, we make a high level attempt to explore and appreciate the conceivable and apparent reasons why previous attempts and proposals by Social Security Commission (SSC) to introduce the NPF stopped in their tracks. We have reasons to argue that no impactful efforts have been made whatsoever to consider the reasons and take appropriate lessons from the previous failed attempts. If the reasons have been looked into and are available, we believe these should be made known by SSC as part of any new attempt being embarked upon regarding the NPF.

For the purpose of this edition, we have peripherally considered some of the more conceivable reasons which we briefly highlight below:

It is to be considered that the SSC board is a tripartite body consisting of government, labour and employer representatives. It is conceivable and to be appreciated that the diverse interests of the tripartite body, add to it the organisational interests of SSC and other interested parties, make it difficult for consensus to be reached on the policy framework of a complex institution like the NPF.

In considering a suitable or largely agreeable model for the operation of the NPF, some of the important aspects for finding lack of agreement are:

  • Costs and contribution levels;
  • Type of scheme (i.e. defined benefit or defined contribution);
  • Total or part exemption or non-exemption of occupational schemes;
  • Regulatory ambit (separate new regulator or NAMFISA);
  • Administrative capacity of SSC etc.;

More specifically from a government’s point of view;

  • Government sometimes drives political policies which may not at times be congruent with national policies.
  • Most of the previous proposals purported to have been preferred by government were premised on defined benefit models, which is believed would commit government (tax payers) to increasing contribution liabilities which have to be carried by future generations.
  • Often there have been disjointed efforts, with no budgetary plans and projections made as an indication of government’s readiness as employer, to participate in the NPF.
  • The nature of governments’ mandate to drive social justice makes it difficult not to exercise control over NPF affairs etc.
  • The inclusion of the informally employed;
    • Government’s stand has always been that an NPF that excludes informally employed is a non-starter.
    • Yet, studies show that most countries hailed for their successful social security systems do not include informally employed persons in contributory schemes, except on a voluntary basis etc.
  • From a labour (union) point of view;
  • There is an expectation of high benefits against low contributions (cross subsidisation).
  • Largely indifferent to actual complexities and challenges that can hamper the sustainable or effective operation of an NPF etc.

From an employer’s point of view;

  • Exemption should be granted to occupational schemes subject to meeting certain criteria.
  • Costs and contribution levels should be sustainable and kept under check.
  • Concerns about institutional capacity and inefficiencies of SSC going by the current poor administration of MSDF and ECF.
  • Governance structures and independence of regulatory body.
  • Prudential investment of funds etc.

As stated, most (if not all) previous and current consultants to the SSC on the NPF were foreign experts. These experts have preconceived views about suitable pension fund models based on first world experiences;

  • They do not consider institutional inefficiencies of our public entities.
  • Do not consider our lack of institutional capacities.
  • Generally do not fully appreciate our labour demographics and income disparities etc.
  • First world social protection schemes cannot reasonably be replicated successfully in third world countries;
    • First world countries have developed their social protection schemes over many years.
    • Have well developed institutional capacity to manage these schemes.
    • Have different labour demographics etc.

Finally, the laborious task to overhaul the statutory environment to accommodate the NPF has not received coordinated attention. There is a need to prepare a thorough assessment of the impact a proposed NPF would have on the statutory environment to fully appreciate its extent.

In the next edition, a rationale will be presented on the basis of the approach we propose for the operationalisation of the NPF. The conclusion to our mind is a fresh, yet seemingly obvious but practical solution based on our existing unique current country strengths and successful experience of managing pension funds, that we believe should provide a wining solution to the tripartite partnership of government, labour and employers etc.

Important notice and disclaimer
This article summarises the understanding, observation and notes of the author and lays no claim on accuracy, correctness or completeness. Retirement Fund Solutions Namibia (Pty) Ltd does not accept any liability for the content of this contribution and no decision should be taken on the basis of the information contained herein before having confirmed the detail with the relevant party. Any views expressed herein are those of the author and not necessarily those of Retirement Fund Solutions.




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