Financial services group Momentum has flagged the rising cost of complying with several SA laws, including the contentious amendments to the Employment Equity (EE) Act.
The company in its annual report published on Wednesday said it was operating in a dynamic regulatory landscape characterised by diverse and highly complex regulatory, legal and tax requirements, which are driving increased compliance costs, system complexity and operational strain.
“On the regulatory front, the implementation of the Regulation 28 amendments and the two-pot retirement system was successfully managed, creating new opportunities to deepen client engagement around retirement planning,” the company said.
“However, evolving regulations — including anti-money-laundering laws, the [National Health Insurance] Act, the proposed Transformation Fund, fee increases by the department of home affairs for database access, amendments to the EE Act, the implementation of the Joint Standard on Cybersecurity and Cyber Resilience as well as the Joint Standard on Outsourcing by Insurers increase regulatory compliance costs, operational complexity and reinforce the need for ESG strategy alignment.”
The Pretoria high court last month dismissed an urgent application by the National Employers’ Association of SA (Neasa) to suspend the government’s new employment equity regulations.
Neasa, which represents about 7,000 employers in different sectors, and business lobby group Sakeliga initiated a legal challenge in July seeking an interim order to suspend the employment equity regulations pending a review application.
Employers will now have to report based on the new regulations, which have numerical targets for employment sectors.
Minister of home affairs Leon Schreiber in June ushered in regulatory change with a staggering 66-fold jump in fees for digital identity verifications. Fees for a single real-time verification check increased from 15c to R10, effective from July.
Enhanced resilience
The new joint standard aims to enhance cyber resilience by embedding cybersecurity into organisational strategies, going beyond mere regulatory compliance.
Momentum, worth R42.2bn on the JSE, said it continued to engage proactively with regulators and industry bodies on key issues, including the SA Reserve Bank stop-order directive, which could disrupt premium recovery in emerging markets, and the revised financial sector transformation targets under the updated EE Act.
Momentum, one of SA’s largest diversified financial services companies, offers a range of products including life and nonlife protection, investment, long-term savings and healthcare administration through its Momentum, Metropolitan and Guardrisk brands.
The group extended its presence beyond SA to four African countries through Momentum Africa. The company said it was optimistic about prospects in its home market, where it is facing stiff competition.
Despite a challenging operating environment, we remain cautiously optimistic about SA’s economic outlook.
— Momentum
“Despite a challenging operating environment, we remain cautiously optimistic about SA’s economic outlook. Declining inflation, a more stable electricity supply and ongoing structural reforms are expected to support greater macroeconomic resilience over the medium to long term,” Momentum said.
“However, global market volatility, geopolitical instability and fluctuating commodity prices may still pose risks to progress. While growth is expected to remain modest, improved fiscal discipline and consistent reform implementation should gradually strengthen economic stability and investor confidence.”
One of the risks flagged by the group is claims experience and persistency, with the company saying SA’s critical infrastructure faced a growing risk of failure.
“The collapsing water supply and other failing infrastructure could exacerbate the impact of weather-related events on insured properties and assets,” Momentum said.
“Supply chain disruptions, rising shipping costs and delays place pressure on parts availability and inflation. Although mortality and morbidity experience has generally been positive, the weakened economy and difficult external environment continue to place pressure on policyholder persistency.”
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