Minister’s tactics show how government works in silos

TONE HAS TO WONDER WHETHER ZULU’S PROPOSAL WILL NOT BE A DAMP SQUIB

here is broad agreement that a social security system is needed to cater for workers who cannot access private pension funds. There are millions in this category who face retirements of destitution reliant on a pitiful state pension.

The question is the best way to address this. An indication of its intractability is the fact that the National Economic Development and Labour Council (Nedlac) has been discussing it for four years, with no agreement on key issues. The green paper released last week by social development minister Lindiwe Zulu was largely based on a 2012 discussion paper and even included outdated figures, though it says that it has taken into account views expressed in Nedlac.

Disturbingly, the document does not have the endorsement of the central player in the arena — the Treasury — and therefore no assessment has been made as to its affordability for a financially constrained fiscus. It has also not been tested against tax policy.

The green paper does not have cabinet approval and has been published by Zulu and her officials in the department of social development for consultations. It proposes to create a statemanaged National Social Security Fund (NSSF), which would be funded by a tax of 8%-12% of qualified earnings up to a threshold of R276,000 per annum and state subsidies for low earners.

Zulu could be accused of being precipitous in publishing a document without the approval of cabinet or the buy-in of the social partners in Nedlac. That seems to be her modus operandi — launch an issue into the public domain to stimulate debate, mobilise support and hasten its introduction. She used the same tactic with the basic income grant, which is on the government’s radar.

Perhaps Zulu was tired of the lack of progress and took the bull by the horns to bring debate into the public domain rather than having this take place behind Nedlac’s closed doors. If so, she got what she wanted. The debate and public outcry over more taxes has reached fever pitch. But to do so when it does not have government and Treasury backing is irresponsible and creates the impression that this is government policy. It will confirm perceptions of the dysfunctionality of a government that operates in silos with no co-ordination.

For one thing, retirement provision is a Treasury responsibility and does not fall under the department of social development. The document has a lot of contradictory proposals, which have not been properly thought through and is regarded by the Treasury as an aspirational wish list rather than a workable scheme.

One of the objections raised is the proposal to fund the NSSF by means of taxes, which prompted immediate condemnation by trade unions on behalf of what they said were their overtaxed and financially stretched members. Another objection is to the fact that the fund would be managed by the state, which has not excelled in the state entities it owns, and that a huge, inefficient bureaucracy would be created. Another objection is that workers would be paying to both their employer-created pension funds as well as to the state fund.

The life industry’s response has been muted but it has highlighted the need to protect existing retirement assets. One of its concerns is that the R276,000 threshold is too high and will erode the businesses of key industries that look after trillions of rand worth of savings on behalf of workers.

The business sector has suggested the possibility of creating a fund to cater solely for those in the informal sector without any pension provision, leaving the existing retirement arrangements in the private sector untouched. This would be ideal but raises the question of funding. One of the reasons for having a mandatory fund on all employees is that it benefits from pooling, which provides support to low-income earners.

One has to wonder whether Zulu’s proposal will not be a damp squib, creating a lot of hot air that ends up with nothing concrete. While the process of getting social security reform on the road has been tortuously slow, it is far better to start from a firm foundation than to fly half-cocked.