Ina Opperman
Business Journalist
4 minute read
20 Aug 2021
5:12 pm

Zulu’s plan to give away more of other people’s money keeps raising scepticism

Ina Opperman

The Green Paper on Comprehensive Social Security and Retirement Reform is already causing confusion because it contains so little detail, such as how it will be funded.

JOHANNESBURG, SOUTH AFRICA – FEBRUARY 24: Lindiwe Zulu during ANC’s economic transformation committee media briefing at Luthuli House on February 24, 2019 in Johannesburg, South Africa. The ANC c economic transformation committee chairperson, Enoch Godongwana, confirmed that the ANC supports government's plan to unbundle power utility Eskom into three entities for it to be sustainable. (Photo by Gallo Images / Sowetan / Thulani Mbele)

Among other concerns, some experts have expressed little trust in Minister of Social Development Lindiwe Zulu to run the proposed new National Social Security Fund (NSSF) as outlined in the Green Paper on Comprehensive Social Security and Retirement Reform.

The paper proposes a fund backed by government that will provide for retirement, disability and unemployment benefits, as well as a universal income grant for the working age population in order to lift them out of poverty. There will be regulatory reform of pensions and the life insurance industry, an extension of UIF benefits and a new road accident benefit scheme.

Muvhango Lukhaimane, the pension funds adjudicator, says it a policy matter and therefore her office would not have much to comment on the substance of the matter.

“What concerns us, as a complaints tribunal, is that if the message is not packaged correctly, it often leads to unintended consequences, such as members withdrawing from funds because they do not want to be impacted by changes without proper understanding of the impact of the mooted changes on them. For now, it is early days.”

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Little confidence

Independent tax lawyer Johan Troskie says he has little confidence in the minister and her department to implement something that will actually work based on past failures such as the food parcel project she wanted to keep in her department last year.

“There will probably be questions about corruption, but few people will be against such a comprehensive social security plan, in principle, as we live in a country with high poverty and unemployment. The problem lies in how this grandiose plan will be financed. Government seems to think that the tax base is inexhaustible.”

Troskie is worried by this attitude of government and says the tax base has already reached its limit and a tax revolt will follow if people have to pay even more.

“It is for this reason that government did not make any tax changes for the past two years because it knew that it could not be collected.”

In addition, the tax base is shrinking, with many small businesses closing down and people losing their jobs. He believes government should instead understand how critical the tax base is and focus on growing it.

“It should be part of the understanding of the income structure of the country and how to change it to encourage investment, which can create more jobs that will expand the tax base so that we can afford it. The green paper contains no comment about the structuring of a system to expand the tax base.”

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Controversial proposals

Pension fund lawyer and expert Rosemary Hunter, speaking in her personal capacity, says the most controversial proposals in the paper are the establishment of an NSSF that everyone will have to belong to and that all of us earning above a prescribed minimum amount will be required to contribute to, as well as the provision for a universal basic income grant.

She finds both proposals appealing on the face of it, but feels she cannot comment on their viability.

“One proposal in the green paper that I like very much is the proposed establishment of a ‘master social security register’, the creation of a ‘consolidated public interface for social security’ (CPISS) and the establishment of a ‘clearing house’ system.”

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Even public servants don’t want it

The Public Servants Association (PSA), which represents more than 235,000 public servants, said in a statement it rejects government’s plan for comprehensive social security and retirement reforms “with the contempt it deserves”.

The PSA regards this proposal as another attempt by government to get its hands on overtaxed workers’ hard-earned money.

“Government could not even honour the 2018 public service wage agreement and yet expects its employees to buy into these plans that will erode their income even more.

“Given the ongoing corruption and embezzlement of money in South Africa, the PSA will leave no stone unturned to stop this ludicrous plan of government to establish another entity that politicians will loot without shame. The matter related to retirement reforms is the responsibility of National Treasury and not part of the mandate of the department of social development.”