Wednesday, January 26

Angry Backtracking on Mandatory Social Security Scheme

The Department of Social Development asked for comments on its green paper on comprehensive social security and retirement reform, and it did so loud and fast.

Of the more than 17,000 comments received by the participatory democracy platform Dear South Africa, 99% were against what many perceive as just another tax on a war-weary middle class.


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“I think the rejection of this Green Paper is as furious as we’ve seen it in any campaign we’ve run,” says Rob Hutchinson, campaign manager for Dear South Africa. “It is an indicator of how disconnected the government is from the general population. However, it should be noted that this is a green book and still has to go through many regulatory hoops before it becomes law, which may not happen. ”

Read: Mandatory social security plan proposes another tax on the middle class

The Green Paper proposes the creation of a new National Social Security Fund (NSSF) in which employers and employees will have to pay up to 12% of their income, with a maximum limit of R276,000 per year or R2 760 per month. “This payment will be mandatory, effectively a tax. South African workers will not be able to choose not to pay into this state fund, ”says the Institute for Race Relations (IRR).

The main beneficiary of the proposed NSSF will be the ANC, says the IRR.

The plan equates to State Capture 2.0 and will fuel ruling party sponsorship networks by allowing corrupt politicians to tap into vast amounts of private savings “while providing job opportunities for friends and family in the huge new bureaucracies that will have to be established. “. for nationalizing private pensions in the NSSF ”.

‘More power to the state’

Efficient Group chief economist Dawie Roodt says the proposal outlined in the Green Paper is a move in the right direction in trying to consolidate existing systems, such as the Unemployment Insurance Fund (UIF), security grants Social and the South African Revenue Service (Sars). But that the Green Paper implies an increase in taxes, with the state giving itself more powers to force South African workers to save, while giving politicians more power over our savings.

“What is being proposed is a kind of negative income tax, which is something the famous monetarist Milton Friedman talked about, that is, as you earn less and less, you receive income from the state instead of paying it in the form of income tax, but not “I do not see this proposal as affordable, nor do I believe it is being implemented.”

‘Illegal and invalid’

Union Solidarity says it has started a legal process to stop the proposed NSSF and the mandatory state-controlled pension fund in their tracks. You have given the Department of Social Development 30 days to withdraw your Green Book, otherwise it will continue with its legal process.

According to Solidaridad, the publication of the Green Book in the Official Gazette is illegal and therefore invalid.

The organization argues that the minister and her department did not conduct an initial and final impact study on the implications of the proposed legislation before its publication, as required by law.

“It is not just the process that has flaws; the content is also irrational and unaffordable, ”says Solidarity CEO Dirk Hermann.

“The minister ignores the provisions of the Constitution. You simply did not follow the correct procedures with the publication of the Green Paper and you should withdraw it immediately. Ordinary, hard-working people cannot bear additional fiscal pressures. The government also has a history of failed central management and looting of funds. ”


SA retirement funds at a tipping point

The Dear South Africa campaign provides insight into the anger of ordinary South Africans over the proposals.

“I think it is unfair for the general public to fund these ridiculous proposals. We are already taxes[ed] to the extent that a quarter of our salaries are already used to fund the government, ”says one commentator.

Another says: “The fact that [President Cyril] Ramaphosa has not immediately, openly and publicly repudiated the minister, it just means that we should be suspicious of his motive in this matter. The dishonesty of not distancing you from the thinking behind this idiotic policy may actually be construed as your compliance with it. I have never seen another weakling as president who cannot respond publicly when such an idiotic Green Paper is published under his supervision. ”

South African citizens are among the most taxed in the world, says another. “[I am] I am not prepared to pay more taxes to help an inept government, failing at all levels! ”

The Green Paper has come under fire on multiple fronts, from Dr. Lumkile Mondi, Senior Lecturer in the Faculty of Economics and Business at Wits University, to Mike Schüssler of, who says yes implement, these proposals “would improve.” SA ranks seventh in the most taxed country (in terms of personal income taxes) in the world.

Read: A universal basic income grant is not the solution

The real solution …

What is needed is massive job creation to reduce the number of people who depend on social security (who now outnumber those who are employed).

“A job is still the best form of security,” says Dr. Stephen Smith, senior policy advisor at the Association for Savings and Investment SA (Asisa).

“Social security is a safety net when all else fails.”

It says that the Covid-19 pandemic and the consequences of the economic blockade have highlighted the urgent need for adequate social protection, particularly for informal and vulnerable workers.

“We need solutions to provide protection to these workers to support unemployment and savings until retirement, as the existing legislation and structures are not designed to meet their needs.”

Listen as Alexander Forbes’ John Anderson shares his thoughts on the proposal with Fifi Peters (or read the transcript here):

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