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Furious pushback on mandatory social security plan

Threats of lawsuits and insults. The government asked for public comment and got it in buckets.
One critic points out that the government ‘has a history of failed central management and looting of funds’. Image: Moneyweb

The Department of Social Development asked for comment around its green paper on Comprehensive Social Security and Retirement Reform – and got it loud and fast.

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

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“I think the pushback against this green paper is about as furious as we’ve seen on any campaign we have run,” says Dear South Africa campaign director Rob Hutchinson. “It’s an indicator of how out of touch the government is with the general population. However, it should be borne in mind that this is a green paper and still has to go through a lot of regulatory hoops before this becomes law – which it may not do.”

The green paper proposes setting up a new National Social Security Fund (NSSF) into which employers and employees will have to pay up to 12% of their earnings, with a ceiling 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 opt out of paying into this state-run fund,” says the Institute of Race Relations (IRR).

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

The plan amounts to State Capture 2.0 and will feed the ruling party’s patronage networks by allowing corrupt politicians to tap into large pools of private savings “while providing opportunities to create jobs for pals and family members in the enormous new bureaucracies that will have to be established for nationalising private pensions into the NSSF”.

‘More power to the state’

The Efficient Group’s chief economist Dawie Roodt says the proposal outlined in the green paper is a move in the right direction by trying to consolidate existing systems such as the Unemployment Insurance Fund (UIF), social security grants and the South African Revenue Service (Sars), but that the green paper implies an increase in taxes, with the state handing itself more powers to force working South Africans to save, while granting politicians more power over our savings.

“What’s being proposed is a kind of negative income tax, which is something famed monetarist Milton Friedman spoke about, meaning as you earn less and less you receive income from the state rather than paying it over in the form of income tax, but I don’t see this proposal as being affordable – nor do I see it being implemented.”

‘Illegal and invalid’

Trade union Solidarity says it has started a legal process to stop the proposed NSSF and mandatory state-controlled pension fund in its tracks. It has given the Department of Social Development 30 days to withdraw its green paper, failing which it will continue with its legal process.

According to Solidarity, the publication of the Green Paper in the Government Gazette was illegal and therefore invalid.

The organisation argues that the minister and her department failed to conduct an initial and a final impact study on the implications of the proposed legislation before it had been published, as required by law.

“It is not only the process that is flawed; the content is also irrational and unaffordable,” says Solidarity chief executive Dirk Hermann.

“The minister does not heed the provisions of the Constitution. She simply did not follow the correct procedures with the publication of the Green Paper and must withdraw it immediately. Ordinary hard-working people cannot handle additional tax pressures. The government also has a history of failed central management and looting of funds.”

Read:

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

“I think it’s unfair on the general public to fund these ludicrous proposals. We are already tax[ed] to the extent that a quarter of our salaries already go towards funding the government,” says one commentator.

Says another: “The fact that [President Cyril] Ramaphosa has not immediately, openly, and publicly repudiated the minister, only means that we should distrust his motive in this matter. The dishonesty of not distancing him from the thinking behind this idiotic policy can actually be construed as his concurrence with it. I have never seen any other weakling as a president who is unable to respond publicly when such an idiotic Green Paper is released under his watch.”

SA citizens are among the most taxed in the world, says another. “[I am] not prepared to pay more tax to assist an inept government, failing at every level!”

The green paper has drawn fire on multiple fronts, from Dr Lumkile Mondi, senior lecturer at the School of Economics and Business Science at Wits University, to Mike Schüssler of Economists.co.za, who says if implemented, these proposals would “improve” SA’s ranking to seventh most taxed country (in terms of personal income taxes) in the world.

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

The real solution …

What’s needed is massive job creation to reduce the number of people relying on social security (who now outnumber those who have jobs).

“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.”

He says the Covid-19 pandemic and the consequences of the economic lockdown have highlighted the urgent need for the appropriate social protection, particularly of informal and vulnerable workers.

“We need solutions to provide protection for these workers to provide support through unemployment and saving through to retirement as existing legislation and structures are not designed to cater for their needs.”

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

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COMMENTS   45

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ANC trying to install a new milking cow for its cadres. Embarrassingly obvious.Time to resist this criminal organisation. Complete tax payers strike is long overdue.

THe tax base is decreasing… so with the fewer tax payers… very easy to stage a revolt…. We know law enforcement does not exist… SARS / Kieswetters cannot really enforce much with a dysfunctional state security.

I will resign from my job, then no tax from me anymore.

Just how are taxpayers to revolt… ?

The e-tolls debacle is a tax revolt. So are the non-payment of municipal rates and taxes and tv licenses. The thousand upon thousands of “equitable share” households is a form of a tax revolt. Eventually, the last remaining taxpayers will revolt as they do in all collectivist nations. They simply disappear and follow the financial incentives to live at the expense of everyone else. The Debt/GDP ratio, budget deficit, unemployment rate, and the sluggish economy tell us that the tax revolution is gaining momentum. A tax revolt culminates in hyperinflation of the currency. You know the tax revolt was successful when the price of bread doubles every month.

Not sure if this will work. If companies appoint all their employees as independent contractors then surely the company is not required to pay taxes on behalf of “employees” on a monthly basis.

Now if the “contractors” submit tax returns annually then SARS will be deprived of its monthly tax contributions.

Are you not “shocked” that government has monies for SAA and not scrap eTolls. I’m certain there was cadres licking their lips to receive annuity payments for etoll collections. 5% goes to Lootuli house.

Wanted to reply @Sensei..

In terms of the ‘revolt’ not sure it applies to me but it does in my perspective

Looked at my last payslip before we emigrate in 8 days snd my PAYE was almost the same as my nett with leave days paid out.

Goodbye ANC – I will no more pay towards this thieving the so called government party that gives NOTHING back to any of its citizens – never mind myself My taxes will be paid to the UK government even though I have not lived there since the age of 4 but I am betting this is a more sure a bet compared
to what I am paying for at the moment.

Your departure is our loss. The ANC turns taxpayers into economic refugees. Populist ANC policies support the Revenue Services in the UK and Autralia.

It is great that civil society pushed back on this but when it comes to stubborn stupidity, our government can compete with the best in the world. Just two examples are South African Airways and Gauteng e-tolls. So I am afraid civil society stands in front of a giant.

You know at one stage I had confidence in Pravin Gordhan. He vowed to go after those not paying tax… willing to go after the guy that did not declare the 5cents.

Interestingly the party (ANC) he belongs to have virtual stolen all the capital stock in the country.

After this SAA and Etolls story (Pravin defended Etolls when he was the Minister of Finance) … I have lost complete trust in Pravin Gordhan…. He must be go.

The fiscus cannot afford the proposed social security plan.

We need growth, not never ending and unsustainable handouts that will entrench SA as a failed state.

The ANC is just a vector for corruption.

Agreed in full.

All people have the right to stupidity but some people abuse the privilege.

Ya well, agree. But further to stooopid they are disconnected. We are officially in the age of ridiculousness. I always imagine a story like this to be. Mutt, Jeff and co sitting around thinking of how they can change the world and Mutt says let’s screw the tax payer some more we will pretend we are doing good but we actually want more access to loot to rip them off. Jeff says good idea but wont they notice and is there a possibility that we will get caught and this will be noticeable because every employee and employer will be even poorer. Mutt says who cares that they notice we have the power and besides we have top cover because of the political party we belong to and will never even get charged. They then go to co + 10000 and all the nodding followers rubber stamp the ridiculous idea.

Seriously though, this also happened with the European Super League thing, another example of being totally disconnected from the fans in that case. This seems to be happening more and more and IMHO I think it happens because in recent years individuals have not been called out for being ridiculous. Media must also give more exposure to others that call it as it is.

Also the damage that is done by even giving an idea like this time is huge. Even though there is backlash and this MAY not happen, for example going forward I am going to make sure that I employ as few people as possible if at all because this will impact the employer more than the employee.

45% of earnings taxed by government then add:
VAT AT 15%
Fuel tax
Import tax
Sin Taxes
Sugar tax
Municipal taxes
Estate duties
Then add double pay entities because of government dysfunction like:
Schooling
Private security
Private hospital fees and medical aid

The list is endless
I bet if you diligently analysed your monthly income and expenditure you will find that top earners pay at least 60 % in taxes to the state.

Why should they stay in SA??????????

If we accept that the protection of property rights describes the difference between socialism and a market economy, then South Africa is the most socialist country on earth. Especially so, when we consider the fact that the taxpayer does not benefit from his contributions. In contrast with Nordic nations, taxation in South Africa is a form of expropriation without compensation because we receive nothing in return. We do not benefit, from what is supposed to be a transaction, while we suffer under acts of legalized plunder.

It is a pure act of redistribution of property, while it is common knowledge that property forms the basis of any economy. This transfer of long-term productive assets to fund immediate consumption leads to the deindustrialization of the economy, transforms the formal economy into an informal one, and causes rampant unemployment, inequality, and poverty. The free market empowers people with job opportunities, while socialism destroys jobs and creates more inequality.

If we add up all the various infringements on property rights, it becomes clear that the state is waging a war of expropriation on the most productive citizens. Every single taxpayer has a 60% BEE partner. Every business and individual shares 60% of his hard-earned money, his property, with a BEE partner who contributes nothing and extracts everything. This is separate from the effect of formal BEE schemes, cadre-deployment, and employment equity.

Taxation is a form of retribution or punishment, aimed at a specific class of citizen, in South Africa. The taxpayer takes this punishment in his stride, for the time being.
It is only a matter of time before the taxpayer, who finances the process of expropriation, realizes that there is no freedom and liberty under socialism, that the constitution and the legal framework protect the plunderers, and that he is an unpaid slave to the unemployed masses.

SA is largely socialist… They’ve just been really good at calling it other names.

I’ve said this for a long time and been looked at funny by friends and family.

We’re NOT a liberal society anymore.

African leaders are too greedy. They tax people to death, and give nothing or little in return. The result is sustained and persistent decline. Eventually, the smart citizens catch on and either emigrate or engage in tax evasion.

You are very close to the mark; when factoring every conceivable tax in RSA, remember there is carbon tax, CGT and more coming to a theatre near you. An investment specialist told me that South Africans can end up losing 69 cents to every Rand earned to to South African taxation. If we (the milkee) were getting real returns for our taxes from the milker, then it would be a whole other kettle of whales. Unfortunately we are getting less and less ROI with evermore taxes being introduced. This from a purely logical point of view is the downward spiral.

Funny how they can come up with “Free Stuff” but NOTHING constructive.

Its a hopeless case. A government of national unity (excluding) the most esteemed anc “freedom fighters” is the only possible way SA can ever create some jobs.

The have no ability. They can even think about creating jobs. They don’t know where to even start.

So its up the the voter. It has always been.

Yes exactly. That is why the ANC is and will stay in power. You and I cannot (are unable to) fathom the depths of cranial inability of SA’s voters. It is equal to that of the ‘freedom fighters’ since the are in essence the very same poepel (people).

The thing that makes annuities work is time in the market and investment growth, compound interest. This new tax will go directly from our pockets to the poor. No time in the market. It is just redistribution of wealth.

chris let me correct you, a small portion will go to the poor, the rest……..

It’s a distraction. They do this every now and again to take everyones focus off something else.

Agreed.

And it gives the “vota” something to vote for. Like something they promised.

Monopoly Capital that funded CR17 and voters of ANC must go ahead with this nonsense and leave the rest of us out of it.

This is pure nonsense.

This will move the tax revolt up a gear …….from 5th to 6 th !

By capping contributions to the first R276k of earnings, this scheme achieves exactly the opposite of easing income inequality.

Johnny is our average state employee on R500,000. Pays 12% of 276 therefore 6,7% extra, money Johnny probably does not have spare.
Mary is our average corporate hired help or director general on R2.5m. Pays 12% of 276 therefore 1.3% extra, basically she can buy half a Gucci handbag less per year.

These communists cannot even get communism right! the new tax should be on everything over 276, not the first 276

correct. Its like the sugar tax. Next time you are in Spar look what the manual labourers buys to drink: Coke, the one full of sugar. All the affluent people I know don’t use sugar. Hence they are taxing those least able to afford the tax. The criminal conspiracy called the ANC is a bellwether for stupid legislation and dumb policies. Your local freedom fighter is not necessarily your best government.

This is one of the most extreme vote catching schemes dreamed up.

In her dumb way she will stir interest among the 30 million uneducated.

You have to question the real motive behind the unprocedural release of a purported policy document which will never fly.

Anyone with prior notice of the green paper was well-positioned to short the rand, which promptly shot out to 15.40. Maybe Luthuli House – now that cadrepreneurs are reluctant to reveal themselves as donors – has found a new way to fund its payroll, in which case expect another bombshell every month.

No, no, bring it on. We pay our domestic and our gardener R8,000.00 each per month for four workdays per week, Monday to Thursday, from 09:00AM to 14:00PM. When I enquired from them what they would do if a R7,500.00 BIG were implemented, both said they would immediately stop working as their taxi fee for getting to work and back is over R2,000.00 per month – they would be stupid to work if they get more money for not working and would rather chill at home. My daughter, with an honours degree, earns R26,000.00 per month gross. After tax and other deductions she has a net income of just over R14,000.00. Deduct from that the operating costs for her car (she is required to have her own transport with a vehicle allowance that falls far short of actual operatiing costs), work clothes (they are expected to dress “smart business” and be presentable), etc., she has about R8,000.00 left for accommodation and living expenses. She reckons she will make full use of that largess, immediately cease work, study full-time for her Masters and perhaps even a PhD, and then hit the road to Australia or some other destination. And as for the taxpayers, never before in mankind’s existence would such an ever dwindling few have done so much for so many.

I do not think your daughter will “qualify” for this grant, and nor will mine.

Mmmmm….. I think u need to get a second opinion on yr workers claim of spending 2k on taxi to work and back monthly….. Seems very excessive – almost like u been taken for a ride..

The usual diversionary tactic from the ANC.

Before every election and after every disaster they pull these stunts – and the people fall for it.

Remember before the last local election farmers were to hand over 50% of their farms. Nothing came of it.

This is propagated to draw the attention away from the record of the highest unemployment in the world.

You are right, they are playing for the crowd, but therein lies the problem.

It is the mindset of the voting majority that is displayed here. What does it say about the intelligence and attitude of the average voter if they fall for these stupid attempts at socialist redistribution of productive assets? They know that this is ultimately what the voter wants, and only employment opportunities will prevent the voter from grabbing these benefits either through the ballot or by violent means.

Mugabe postponed the landgrabs until he lost the election. Then it was a free-for-all. The majority will get what they want. Understand the needs and mindset of the voting majority, and you are able to predict the future of your nation and the value of your assets.

It is not the job of Government to provide social security. It is the job of Government to protect its citizens through implementing and enforcing prudent laws that promote safety and enforce contracts between individuals; and to defend the country in the event of war or civil unrest. Virtually all other aspects of Government (with a few exceptions) are best left to private individuals and or businesses who can perform these tasks far more efficiently and cost effectively.

Social Security should be the prerogative of the individual working towards and saving for their own future, the extended family and institutions like charities and religious groups who canvass for donations (not taxes).

GET YOUR GRUBBY PAWS OFF MY MONEY!

As Thatcher said: ” Socialism is a lovely system until you run out of other people’s money…”

From an organisation that hasn’t paid its own staff for the last 3 months and their 25 years of mega-corruption, their single solution – give us more of YOUR money. This is like giving an alcoholic the keys to the bar. A pox on them

The Corrupt ANC are at it again!! They have dreamed up another feeding trough after looting everything else. It never stops . . no shame . . just continue to defraud, loot, thieve, etc. And of course, no one gets held accountable for anything . . no one ever goes to jail. Just endless court cases which spawn interdicts, appeals, reviews, rescission applications, ConCourt applications, conspiracy theories, medical incapacities, . . .

They need more money to plunder !!!! Has anyone read about the S.I.U. raiding the Lottery offices??? Running out of plundering avenues

The timing of this from the ANC camp that it did is like the kid that leaves a floater in the jacuzzi because his turn is up.

It reminds me of one of Zuma’s very last floaters : free university. Once announced, politically impossible to reverse.

South Africa is and will forever remain a joke.

The concept has sound foundations – Using the model created in Singapore, HOWEVER, it will never be accepted and if Enforced will never work- it can only gain acceptance and traction if it is managed/ controlled/ outsourced to the private sector- as Singapore does.
The traction is gained for both the investors( employees & employers) and the entire country as a whole , if the funds are appli4ed to such as Singapore does, creating civil infrastructure/housing for fund income generation, that in turn is plowed back into the fund for more construction investments – all at the same time proving a sustainable employment scheme for millions of workers and solving a housing crisis and creating wealth for retirement – the perfect circle …. but ONLY if controlled and managed and invested by a private sector facility with fudicary accountabilty ….

Enough is enough.
That we are all ‘gatvol’ is a massive understatement.
It Falls on deaf ears Always does.

End of comments.

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