Mbabane – The ongoing public discourse surrounding the proposed conversion of the Eswatini National Provident Fund (ENPF) to a Guaranteed Benefit (GB) pension scheme has been met with both support and skepticism.
In a direct response to a Times Sunday article where CANGO director, Thembinkosi Dlamini, said the ENPF proposed conversion model is not sustainable, ENPF Conversion Specialist, Miccah Nkhambule, has issued a comprehensive rebuttal, firmly defending the proposed model as a sustainable, inclusive social protection mechanism vital for EmaSwati.
Nkhambule, who is deeply involved in the technical design of the conversion, asserts that the core objective of the ENPF Bill 2025 aligns directly with the National Social Security Policy of the Kingdom of Eswatini: the alleviation of extreme poverty in a member’s post-retirement life by ensuring a predictable and stable income floor. He argues that the selection of a GB structure for a Pillar I mandatory social security scheme is not only justifiable but is the most effective model to achieve this national policy objective, given the unique characteristics and constraints of the Eswatini economy.
Nkhambule directly tackles the assertion that the GB scheme, where the benefit formula is enshrined in law, represents the most significant financial risk. He countered that there is no inherent flaw in a GB scheme, provided it is actuarially sound and rigorously monitored. He also pointed out that the current bill incorporates features that distinguish it from previous models, adding a substantial buffer for long-term sustainability.
Furthermore, Nkhambule argued against structuring the social security scheme as a Defined Contribution (DC) plan due to the inherent difficulty individuals face in managing complex, long-term finances. He stated that the financial lives of individuals closely mirror the GB environment, where certainty is paramount. He noted that past conversions from GB to DC schemes in SADC countries were only possible due to significant surpluses, and were often driven by corporate preferences for financial predictability rather than the best interests of the members.
A key point of contention addressed by Nkhambule is the suggestion that GB schemes are only suited for developed economies with stable demographics and deep capital markets. He systematically dismantles this argument.
“Developed countries are facing aging populations, which makes running a GB scheme expensive due to increasing dependency ratios. Even where stability exists, it is at an age level far higher than Eswatini, making the scheme actuarially more expensive. While long life expectancies make GB schemes expensive,”- said Nkhambule
The actuarial value of a liability is its predicted future cashflow, and it is common sense that the longer the predicted cashflows, the higher the capitalised value needed to guarantee them. Nkhambule stressed that no economy has a perfectly predictable capital market, but Eswatini funds have access to developed markets, underscoring the importance of pooling power. Crucially, he added that the ENPF aims to be a creator of jobs with monies of EmaSwati, rather than an exporter of jobs through foreign investments. He acknowledged that unexpected changes in mortality or life expectancy, demographic volatility, directly increase the liability of the national pension fund, but stressed that these shocks are accounted for at the scheme’s inception.
The design includes an expected normal funding level of above 100% from the start, and historical shocks like the Covid pandemic and investment shocks have shown that properly structured GB schemes can withstand such events. On the matter of investment risk, Nkhambule provided a clear distinction: unlike DC schemes where members bear the investment risk, the government must cover any funding gaps in a GB scheme if returns fail to meet actuarial assumptions.
He also emphasized that social security schemes are long-term, ongoing concerns, and short-term investment fluctuations do not threaten their long-term sustainability. The key to financial soundness, he explained, is not the individual assumptions but the combination of them. “As an example, a return of 10% and a salary increase of 8% will roughly yield the same actuarial result as a return of 8% and a salary increase of 6%. This example is critical since in the long run, the real return (return minus salary increase) is what matters,” Nkhambule stated
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