Billions of pension contributions missing in South Africa
Municipalities have been racking up billions in unpaid pension contributions to their employees, forcing hundreds of workers to push back their retirement and keeping young people out of the job market.
In the Mafube Municipality, more than 100 workers who planned to retire have now been forced to keep working after R500 million of their pension fund contributions went missing, City Press reported.
In a landmark judgement, the Bloemfontein High Court held four officials personally liable to pay back R14 million.
South African Municipal Workers Union (SAMWU) General Secretary Dumisane Magagula explained on Newzroom Afrika that municipal workers are in a “desperate situation”.
Although pension funds have been deducted from workers’ pay, they are unable to claim benefits once they retire since their contributions are not properly paid over and municipalities do not make their employer contributions.
“Close to 60% of municipalities do not pay over pension funds,” Magagula said.
“It’s been decades that municipalities have not been able to do the right thing, and nothing has been done.”
“Municipalities owe workers billions of rands that were deferred through the pension fund. Pension funds are sitting with a huge responsibility of having to pay out benefits, but they have not received contributions from municipalities.”
As a result, municipalities have given workers who cannot retire fixed-term contracts so that they can keep working, although Magagula stressed that this is only a temporary solution.
This also does not account for employees who cannot continue working due to their health, for example.
Considering that South Africa is faced with a youth unemployment crisis, this situation is especially dire.
The unemployment rate for people aged 15 to 24 years has reached an unprecedented 60.2%, placing young South Africans among the most economically marginalised populations globally.
Magagula explained that this not only keeps young job seekers out of the system, but it is also questionable how effective workers aged over 70 really are, especially for labour-intensive work.
“This arrangement is only done as an excuse for the failure of the municipality,” he said.
He added that these workers have been “robbed by municipalities and short-changed with a fixed-term contract while millions are not accessible to them”.

According to Magagula, this problem dates back to the early 2010s and spreads far beyond the Mafube Municipality.
It also includes the Kopanong Municipality in the Free State, as well as others in the Eastern Cape and North West.
This problem is also not only limited to pension fund contributions. In many cases, municipal workers’ medical aid contributions are not paid despite being deducted from their salaries.
Magagula explained that there are two main reasons for this problem. In the first place, municipalities have very little revenue.
However, he said the second reason is that the little money they do get from equitable shares is mismanaged.
“When they receive money, on the very same day, they pay service providers. They pay their friends so that they keep them running,” he claimed.
In the end, this money is diverted “back into their pockets”.
He said these payments are made even though municipalities often have Eskom debt and owe their employees pension contributions.
Magagula added that this issue will not be resolved until there are consequences for mismanagement in municipalities.
This mismanagement has an impact that extends far beyond municipal workers.
For example, last year, Eskom requested a 36% increase in electricity prices, which the utility said was partly due to the government’s failure to control delinquent municipalities.
At the time, municipalities, including those governing some of the country’s biggest cities, owed the utility R85 billion, which could rise to an estimated R200 billion in the 2028 financial year.
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