Busi Mavuso: A job is still the best social security in these times

For more than a decade, the SA economy has struggled to breach the 2% growth mark and hasn’t been able generate nearly enough employment for an ever-expanding labour force.

Worsening the situation, the “knowledge” economy has increased efficiencies, providing limited job opportunities in the sectors that have managed to expand, while our schooling system produces poor outcomes in key subjects such as maths and science.

Covid-19’s effect over the past 18 months is another major blow to our employment prospects. These factors also place significant pressure on the limited number of people employed in the formal economy while the fiscus is at risk from a narrowing tax base.

Against this backdrop, the green paper released on a new social-security reform programme would be debilitating to workers.

The green paper proposes a fund to be set up and run by the government, with employees compelled to contribute between 8% and 12% of their earnings. That would impose an additional financial burden on already stressed employees, some of whom have had to see their incomes cut as a result of the Covid-19 pandemic.

In some industries, a return to their previous earnings looks an ever-distant prospect, given expectations of yet another wave of infections by year’s end.

Given the theft that took place through government coffers under state capture, few would trust the government to run this fund.

As much as we’ve seen our socioeconomic problems, including inequality, intensify in these past difficult months, this plan will eat further into disposable income levels in the country and weaken consumer confidence.

Wherever you are on the merits of the makeup of our economy, the reality is that consumption makes up the bulk of it. And low confidence among the declining number of employed South Africans has been a significant factor in our economic prospects.

The plan hasn’t yet been adopted by the cabinet, but it was interesting to read in Business Day last week that the National Treasury had not tested the proposals against the country’s fiscal and tax policies.

In the same piece, the retirement and savings industry warned that any new socialsecurity reform programme should not disrupt the existing plans that are crucial to its own funding and the country’s infrastructure needs.

Union federation Cosatu and some other unions, understandably, have slammed the plan as an additional tax on their already overtaxed members.

We must consider that this proposal comes as the country is weighing the introduction of a national health insurance to provide universal health access, which may require tax increases if we are to ever reach that point.

There’s certainly a need for appropriate social protection, particularly of informal and vulnerable workers, with the state saying there are about 6.2million formal-sector workers excluded from private occupational and voluntary schemes — a significant number.

These are huge concerns on all counts, none more so for me than our worrying unemployment data. Stats SA is to release second-quarter unemployment figures this week after a record high of 32.6% in the first quarter.

Expectations are for a further deterioration, and one can only deduce that the third quarter’s numbers will be worse because of the July unrest.

Zambia has a fund similar to that proposed that shows it will prove difficult to cover workers in the informal sector.

A 2017 Southern African Institute for Policy Research report states that Zambia’s social-security system faces many structural flaws that mark it as largely “unsuccessful”, despite attempts at reform.

“The issue with the informal economy is that it is highly dynamic and multifarious, characterised by high employment turnover, unpredictable income levels and unregulated employment arrangements. The nature of the informal economy makes it seemingly impossible to design a programme tailored to fit this irregular institutional structure,” the report says.

In Zambia, 86% of all employed people work in the informal sector, predominantly in agriculture and household work.

SA’s pension system is skewed towards the formal sector, excluding most individuals who are employed in the informal sector.

The current social security system manages to cover only 16% of all employed people.

The best form of security is a job, and the best way to create jobs is through encouraging investment.

Any future social security reform programme should build on and not disrupt the existing contractual savings and life insurance arrangements of both public and private sector employees.

The green paper contains significant proposals to restructure the social security system. They are complex and will not result in immediate change, as Stephen Smith, a senior policy adviser at the Association for Savings and Investment SA, told Business Day last week.

How do we turn the SA economy into one that grows and creates employment? I’ve laboured on the point for some time now, but the economic recovery plan that was adopted by parliament last October has job creation as its central tenet. The plan has a target to create more than 800,000 jobs in the medium term and a list of objectives to be achieved within a certain time frame.

This week’s Stats SA jobs data will illustrate the depth of our jobs crisis and the consequences of the lockdowns.