‘Twin peaks’ regime will hinder social reform, professor says

Government’s proposed “twin peaks” regulatory structure for the South African financial services industry will hinder overall social security reform required to give all South Africans a safety net in times of financial necessity.

The warning was made last week in a panel discussion on “Exploring a Comprehensive Social Security System in South Africa” at the annual conference of the Institute of Retirement Funds, by Professor Alex van den Heever, who holds the Chair in Social Security Systems, Administration and Management Studies at the University of the Witwatersrand.

Van den Heever says a new ministry and department of social security should be created, combining all aspects of social protection for all South Africans. Since the decision to refer social security reform to an inter- government department, “nothing fast has happened”, with reform being slowed by the vested interests inherited from the apartheid system, he says.

“Until there is one coherent department of social security, it is unlikely that South Africa will progress with social protection reform,” Van den Heever says.

He says the “twin peaks” proposals for the financial services industry, which place market conduct under the Financial Services Board and prudential regulation under the Reserve Bank “make no sense in the context of social protection reform”.

Concerns over delays in the reform of the splintered social protection systems were echoed by other panelists: Sam Tsiane, who was speaking on behalf of trade union federation Cosatu and the National Union of Metalworkers, and Personal Finance associate editor Bruce Cameron.

Tsiane says that the governmentappointed Taylor Commission, which reported on social security reform more than 10 years ago, has effectively been ignored.

Van den Heever says the current structure is fragmented and is a hangover from the apartheid system, which created a system solely to benefit whites. He says everyone requires social protection, which can either be provided by the private sector through things such as life assurance and medical schemes, or by the state.

Currently, the state structure is split between numerous departments, such as the Department of Health (medical care), the Department of Labour (workmen’s compensation and unemployment insurance), the Department of Social Welfare (social grants, including child and old age grants), the Department of Transport ( the Road Accident Fund), and the National Treasury (financial service industry regulation).

Van den Heever says National Treasury, which has been the main author of government’s social security reform proposals, is not competent to drive social reform. “It is not its function to look after social security. Its job is to look after government finances,” he says.

Tsiane says social security reform is being delayed by unresolved differences between different government departments based on both turf protection and principles.

He was also critical of the