Hundreds of Gugulethu residents queuing outside SASSA offices for their disability grants. Minister Lindiwe Zulu on Wednesday August 18 released a Green Paper that outlines government’s thoughts around reforming the social security system. Picture: Phando Jikelo/African News Agency (ANA)
Hundreds of Gugulethu residents queuing outside SASSA offices for their disability grants. Minister Lindiwe Zulu on Wednesday August 18 released a Green Paper that outlines government’s thoughts around reforming the social security system. Picture: Phando Jikelo/African News Agency (ANA)

South Africa’s social security regime needs to move toward social equity

By Opinion Time of article published Aug 28, 2021

Share this article:

by Monde Ndlovu

South Africa’s social security regime has taken another path, after many years of consultations and government interventions.

The question of social transformation has taken root in a variety of ways in the country through the Ministry of Social Development, and the extensive work done by government in prioritising social security.

The choices that have been before the government since 1994 have not been simple to make, from the groundbreaking Constitution to socio-economic interventions.

South Africa today has reached another crossroad, where difficult choices need to be made in rebuilding the social fabric of the country, moving from social security to social equity.

Government’s Green Paper

Minister Lindiwe Zulu on Wednesday August 18 released a Green Paper that outlines government’s thoughts around reforming the social security system.

At the core of the paper is the recommendation to establish a new fund, called the National Security System Fund. The government managed fund is intended to provide retirement, disability benefits and unemployment benefits.

The Green Paper suggests that the country does not have a mandatory contribution within the system outside of the Unemployment Insurance Fund (UIF) and taxation for workers.

According to the Green Paper, out of the 15 million formally employed workers, 6.2 million of them in the low-income bracket together with informal workers and sectors are excluded from private occupational and voluntary schemes.

The social security system as stated by the paper highlights the massive increase in social security beneficiaries from 5.8 million in the early 2000s to 18 million currently.

According to the World Inequality Lab Report, the richest 10% of the population own more than 85% of household wealth, while half the population has more liabilities than assets. Statistics SA also reveals that our current population is around 60.2 million, with an economically active population of 39 million.

This context paints a challenging tapestry of how the country needs to rethink its social security system and how it interfaces with economic opportunities.

The ever-increasing high unemployment rate directly impacts the social security system because it is forced to absorb and cushion civilians whose financial independence is compromised.

The paper continues to note that workers in their retirement age battle to maintain their standard of living due to lack of savings and high costs associated with the management and administration of funds which erodes savings.

This also makes civilians vulnerable to poverty because they struggle to maintain their lives in old age, in addition to life-changing moments that need immediate interventions.

The green paper therefore suggests that taxpayers should contribute towards this new fund by making these contributions mandatory between 8% and 12% of earnings, up to the current Unemployment Insurance Fund (UIF) ceiling of R276 000 annually.

Money mindset

The mandatory contributions have good intentions and holds the correct view on developing a savings culture among workers, however financial behaviour in the country reveals other underlying challenges.

According to Statistics SA, households have a savings rate of 0.7%, and according to the Reserve Bank household debt to income is 77.1%.

If two-thirds of household income services debt and only 0.7% goes towards savings, the countries socio-economic landscape needs an urgent over hall to sustain even these new suggestions by the green paper.

Fostering a new savings culture within the country will need more investment in financial education as a cornerstone, followed by other key economic opportunity building blocks in shaping the lives of people.

The South African Savings Institute together with the Department of Social Development and black lobby groups need to assist the government urgently in this regard.

Social Security to Social Equity

Section 27 of the SA Constitution states that: “everyone has the right to have access to social security, including if they are not able to support themselves and their families, appropriate social assistance”.

There is no doubt that the country’s social environment needs security and safeguarding, however, we need to move toward social equity.

Placing the financial burden on taxpayers to fund the new fund needs deeper discussion considering some of the realities experienced by taxpayers. Social equity means removing all barriers to socio-economic prosperity and breaking away with the past.

In a different economic environment, the mandatory contributions would work effectively, however the taxpayer is currently overburdened and has little or no faith in government that seeks to manage this new fund.

The B-BBEE Commission should consider removing the socio-economic development element and replacing it with social equity, which in turn should focus on annual contributions to the social security system, and in particular this new fund.

The management of the fund should work with black-owned fund managers and companies to drive the transformation agenda.

A professionals leadership panel would work well in assisting the government in appointing the board and management of this fund if it existed.

Equity over security, in transforming the socio-economic environment of the country is needed,and the social security system should be called the social equity system.

* Ndlovu is Head of Advocacy and Thought Leadership at the Black Management Forum.

** The views expressed here are not necessarily those of Independent Newspapers.

IOL

Share this article: