Social development minister Lindiwe Zulu's green paper on comprehensive social security and retirement reform, released this week, came as a surprise to many, and has not been well received. Reactions range from warnings about its unworkability and unaffordability, to exasperation that an ANC cabinet minister is once again floating an expensive populist idea that is way beyond the pocket of most South Africans.
Cas Coovadia, CEO of Business Unity SA, said: "We would urge government to consider a balanced approach between the public and private sector's role in a social security system. Any proposed system must build on what we have and must be considered within the context of the serious fiscal crisis South Africa is in."
Even Cosatu, which has long pushed for comprehensive social security reform, rejected the proposals as an additional tax (8%-12% is pencilled in) on workers already battling to make ends meet amid Covid-19 lockdowns and a low-growth economy.
Adding controversy to the unenthusiastic reception is that is has brought to the fore yet again the glaring lack of co-ordination in President Cyril Ramaphosa's government. The minister's proposed reforms appear to be based on incomplete discussions at the National Economic Development and Labour Council. Now that they are out for public comment, she'll be hoping the discussion survives a very shaky start.
As with other expensive ANC plans the Treasury has been conveniently left out of the loop. According to Treasury deputy director-general Ismail Momoniat the proposals are not policy, and would need to meet certain conditions. He said: "Many of the proposals certainly require a lot more discussion, assessment, before they can be considered to be proposals that can go to cabinet.''
The risks to the fiscus are huge, as they are to the pension fund industry
Yet it seems incredible that a far-reaching measure such as the minister is proposing should see the light of day before the Treasury has made an input, even a deciding one. For example, the minister says the contributions to be made on behalf of low-income workers, who will benefit upon reaching retirement, will be subsidised by the state, a staggering commitment to make. And the scheme proposed is a defined-benefit fund, which benchmarks future benefits against inflation, and not against the performance of the fund. This paints the state into a corner in which it would have to grant increases in benefits without necessarily being able to fund them.
Of course the risks to the fiscus are potentially huge, as they are to the pension fund industry in SA. No matter: it relegates the private sector to a footnote, hinting that the government would move to handicap funds it ruled were charging excessive fees; it appears oblivious that the majority of South Africans can hardly pay their bills now; and it seems airily ignorant of the deep and abiding distrust South Africans have in the government's ability to manage anything, let alone more of their hard-earned money.
As it is, the Treasury is working on proposals that will make it easier for workers to withdraw part of their pension savings before retirement,
From a policy perspective, one could argue South Africans do need to be encouraged to provide for their retirement while they are working and earning a salary. And there is a role for the state. In part, this can be achieved through well-targeted tax incentives, and more punitive penalties for blowing one's pension savings every time one changes jobs.
With its poor timing and lack of a broader mandate, even within the cabinet, the green paper again suggests a government and its ministers who spend a lot of time and effort dreaming up new ways to add to the burden of working- and middle-class people in SA. Or perhaps this is just another example of populist flag-waving to play to the factions.
Who's to say the fund will not be just another bloated state-owned enterprise, wasting taxpayer rands with impunity, and paying deployees enormous salaries, all the while citing the needs of the poor to camouflage the heist? The record so far is not encouraging.
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