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Green paper on social security reform withdrawn

‘This is a policy discussion that has been under development for a long time within parts of government’ says Dr Stephen Smith – senior policy advisor and member at Asisa.

FIFI PETERS: Well, it seems that government has changed its mind for now on how it seeks to provide income security for the unemployed, the disabled and the retired. It has now withdrawn the green paper issued for public comment, where the idea of a national security fund was planted. Dr Stephen Smith, the senior policy advisor and member of the Association for Savings and Investments South Africa (Asisa), joins us to discuss this. Dr Smith, thanks so much for your time. Do you know why the green paper was pulled?

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DR STEPHEN SMITH:  Good evening, Fifi, and good evening to your listeners. No, I think government must answer that question themselves. There was some reporting this afternoon that claimed it hadn’t been correctly understood. But I think they really have to answer that.

FIFI PETERS: I suppose it goes without saying that this is a welcomed development from your industry.

DR STEPHEN SMITH: I think we need to understand, firstly, that this is a policy discussion that’s been going on for a long time. It’s not flash-in-the-pan policy. It’s been under development for a long time within parts of government. We first saw some of it appearing in budget documentation in 2004, and unfortunately there have been periods of long silence. People have forgotten that this was on the agenda.

I think what we mustn’t do is be afraid of difficult conversations.

We have to have these conversations. And with the paper being pulled, maybe there’s a better way of getting into this conversation around things like the National Social Security Fund (NSSF). Remember the paper other than National Health Insurance, which has taken on a life of itself, has three really big ideas. One is (around) the NSSF, another is a basic income grant, and the third has to do with consolidation and streamlining within the policy and implementing institutions in terms of social insurance funds.

Read: Government pulls green paper on mandatory social security

So on a number of fronts, these issues are not dependent on the green paper. The BIG or Basic Income Grant discussion is something that is live and happening, and there is work being done in the policy space on that.

Business is  doing its own work on this. A lot of the paper which deals with consolidation – how you align benefits across various funds, how you improve efficiencies, or reduce fraud. Those are things that are not dependent on the green paper and are perceived the power of an elected government to do.

Similarly, I think in the area of retirement reform, which is really the space in which the National Social Security Fund seeks to play a role, Asisa has advocated for work in the area of coverage for low-income workers.

Read: A universal basic income grant isn’t the solution

We know that there is good participation for those who earn above R350 000; the participation rate is about 90%. And then for those earning just about the tax threshold – which is R90 000 a year to R350 000, about 70%. And then for those who are earning a wage at the level of the national minimum wage, which is R45 000 up to, say, R90 000, which is the tax threshold, only about a quarter of those workers are included in anything. That chooses work that can proceed.

So you must see this as an umbrella document that tries to group a lot of different elements together. It doesn’t mean that the elements within there can’t be worked on in the meantime.

FIFI PETERS: But now that this green paper has been pulled, what do you think happens next? Do we have another period of silence, as has been the case since 2004?

DR STEPHEN SMITH: No, it’s not entirely 2004. There were a number of documents released across 2004 to 2007. I think the National Planning Commission documents of 2012 – they’d left them to the system.

But really the discussion document, which was before Nedlac, that’s never been in the public space. I think Nedlac correctly said that all parts of society have to begin with this conversation equally, which is really about a social compact and understanding of how you solve the people’s risks during their lifetime, and that’s what needs to happen here.

So I think the conversation will be had. I think that some elements of the way things have been explained the media probably misunderstood, referencing a contribution to the …. as a tax is technically incorrect. But maybe that’s the way people felt about paying over to a public fund.

Those are the elements that I think need to be cleared up in the discussion that will no doubt follow.

FIFI PETERS: For those who did see it as a tax, what in your view is the proper way to look at it?

DR STEPHEN SMITH: Well, the whole idea is that you can, within a pension system, combine various elements, whether they be pay-as-go, which means that the younger generation are funding the older generation, those who are drawing benefits, a defined contribution which means that you are accumulating money for yourself for your own defined benefit, where your benefits are specified either based upon your final salary or what the average is of your earnings over your life.

I know governments typically will mix these up in various proportions in various countries to produce what they regard as a good strong social security net.

So, for example, in the United States you would have a combination of a pay-as-you-go system with a voluntary defined contribution system. In Australia and Chile they have a means-tested basic pension plus a mandatory defined contribution. And in France it’s famed as a …… [7:19] very heavily on that intergenerational pay-as-you-go system, where the one generation is funding the other.

So there are various ways of achieving it. What’s up for discussion is what should South Africa [do] with our unique circumstances, and maybe it’s a discussion for all of us to have as South Africans.

FIFI PETERS: Hmm. Hopefully it’s not a discussion that goes on for too long without the action, given the urgency that a lot of people are finding themselves in, Dr Smith, because of the pandemic.

But we’ll leave it there for now. So thanks for joining the show. That’s Dr Smith, the senior policy advisor and member of the Association for Savings and Investments South Africa.

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Labour, Treasury and Business have been with Social Development at Nedlac for five years and have publicly disagreed to this proposal. This is not a misunderstanding. They need a rethink not a rewrite.

A basic income grant does not start paying out on retirement, so this is not an issue of the young generation’s contributions funding the old. A 25y would also receive money from comrade zulu’s fund (after government has stolen and wasted an appropriate portion along with the investment managers’ fees).

So another Corrupt ANC scam was exposed, then withdrawn (due to negative publicity). It will no doubt reappear at some future date in another “guise” in a further attempt to fool the citizens.

“This is a policy discussion that’s been going on for a long time”.

An exact example of where government in SA is absolutely NOT acting in the interests of the people.
A small handful of communists want something so they abuse their power to try and get it.

There’s not governance here, just the ANC pushing and pulling and prodding until SA is driven into the ground, and the cadres + select friends & fam are wealthy.

End of comments.

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