Government has lost its way on social protection

overnment needs to take a long hard look at the way it is regulating the various aspects of the private sector’s provision of what can be considered social protection. What is happening at the moment is increasingly chaotic, undermining the ability of people who can, to a greater or lesser extent, provide their own protection against the unexpected.

The private sector provides medical schemes, products that cover you and your dependants in the case of death or your inability to work, and products that allow you to defer spending now to ensure that you have an income in retirement. These are all forms of social protection.

Professor Alex van den Heever, who holds the Chair in Social Security Systems, Administration and Management Studies at the University of the Witwatersrand and who spoke at two important conferences this week – those of the Institute of Retirement Funds (IRF) and the Board of Healthcare Funders – emphasised that private-sector products and services are an important part of overall social security.

GIf they are allowed to continue to lose credibility, not give value for money or simply become unaffordable – as is increasingly the problem with medical care – the pressure on the government’s wallet will increase.

And what is the point of forcing medical schemes to have reserves of 25 percent of annual contributions if this forces them to shrink your benefits and increase your contributions?

NO PROGRESS

It is absurd that it is now 2013 and we seem to be no further towards finding an integrated social protection system for this country than we were 10 years ago.

An interministerial and an interdepartmental committee have been dealing with this issue for 10 years and all we have is deathly silence.

Government virtually ignored the IRF conference, with no representatives from National Treasury or the South African Revenue Service present, while the Financial Services Board sent a replacement speaker for its chief executive Dube Tshidi. The speaker was simply illprepared and left the more than 1 000 retirement fund trustees befuddled.

Instead, the FSB was supposedly introducing its new head of pensions, Rosemary Hunter, and head of financial advisory and intermediary services, Caroline da Silva, to the media in Pretoria.

Hunter should have been at the IRF conference, as should her boss Tshidi. This is not a very auspicious start for a key person in an organisation that looks increasingly dysfunctional in parts. For one thing, they could have learned a lot about conflicts of interest and how they are perceived by many trustees ( See “Confusion at the FSB”, right).

Van den Heever issued a warning against government pressing ahead with its proposed new “twin peaks” regulatory regime, because he says this will undermine comprehensive social security reforms.

Another reason is that it may simply be a waste of time, particularly when it comes to the FSB taking over the regulation of market conduct of the entire financial services industry.

If it is already so inefficient in protecting consumers against the excesses of the financial services sector, to say nothing of its inability to halt straight theft and fraud, even when it receives ample warning, what makes anyone think it will perform any better in a new regulatory regime?

And this inefficiency is compounded by the fiasco of a justice system that cannot even manage to get convicted fraudster Arthur Brown, of Fidentia notoriety, sent to prison.

It is time for government to get its act in order.