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We the people: Understanding labour’s vital role in South African retirement funds

The role of labour in the growth of retirement funds in South Africa cannot be overstated, says Advocate Makhubalo Ndaba, a fellow of Harvard University’s Advanced Leadership Initiative and Atleha-edu workshop facilitator.

The country’s retirement system includes state-provided grants, occupational pensions, and private savings. Together with trade unions, labour is the collective custodians of the hard-earned money of millions of South Africans. As the labour force grows, so do our pension funds.

As a result, organised labour’s role in the growth and sustainability of pension funds in South Africa also includes ensuring proper fund management and financial literacy among workers. This holistic approach empowers more workers and beneficiaries to make decisions regarding their funds.

Advocacy and policy influence

The labour movement has a rich history of fighting for workers’ rights, including securing adequate retirement benefits. The struggle against apartheid and the transition to democracy saw trade unions, like the Congress of South African Trade Unions (COSATU), emerging as powerful advocates.

Collective bargaining is one of the most direct ways unions contribute to the growth of retirement funds. By negotiating better terms with employers, unions ensure that more resources are allocated to pension schemes. Unions often participate in the governance and management of these funds. This most often impacts the board’s representation and investment strategies. To ensure that the investment decisions align with the interests of workers and that the funds adopt a more prudent investment strategy, labour unions have had to upskill in policy and advocacy matters.

The importance of financial literacy for labour

This ongoing involvement in hands-on pension management means labour has had to embark on financial literacy initiatives to ensure its decisions are underpinned by solid learnings.

Since labour makes up a significant allocation of all pension fund contributions in South Africa, it has become critical that labour, trustees and stakeholders are financially literate and understand their responsibility and role within the pension ecosystem.

Member education is also a vital component. Whether this is through workshops, collaborations with financial institutions or NGOs like Atleha-Edu, well-managed funds combined with educated labour members will become a game-changer for the industry.

The average person finds pension funds complicated, distant and not related to present reality. Giving clear communication, regular updates and success stories, and showcasing the tangible benefits of active participation in pension funds will motivate labour to participate more. Showing workers how their contributions are growing over time will engage and motivate a new generation of members. In this way, labour will realise its important role within the South African economy.

Through its financial contributions, labour stands as a cornerstone of South Africa’s pension system. The contributions made by employees and employers form the bedrock of our pension fund industry. Organised labour’s involvement in governance, further ensures that these funds are managed transparently and effectively.

We must understand and appreciate the role labour plays in pension funds in South Africa, as we continue to strengthen our pension system while providing a foundation of stability and security for generations to come.