Social development minister Lindiwe Zulu has hastily withdrawn the green paper on reforming the country’s welfare structure released two weeks ago that, among other recommendations, proposed a 12% tax on incomes to fund a state-controlled social security fund.
The Department of Social Development (DSD) released the paper on August 18 for public comment, but it met with stinging criticism from some sectors of the public, business, and significantly from National Treasury, which said it had not been adequately consulted.
The paper did however receive support from some civic organizations, particularly those pushing for the introduction of a universal basic income grant (BIG), as well as from trade unions.
In a statement on Wednesday, the DSD said the proposals in the green paper had been “misunderstood” and “misinterpreted”. The department said it would re-release the paper “soon” when the confusion had been addressed.
“Some of the technical aspects of the proposals were not well understood and many have misrepresented the proposals, particularly on the National Social Security Fund,” the department said. “It has become apparent that some of these areas need further clarification to avoid any further confusion.”
The paper proposed setting up a National Social Security Fund into which employers and employees would pay up to 12% of their earnings, with a ceiling of R276,000 per year. It would also see a consolidation of the various welfare funds like Unemployment Insurance Fund (UIF) and social benefits paid for maternity, illness, disability and death.
South Africa’s social welfare net is among the largest in the world, but with unemployment of close to 40% and nearly half of citizens living in poverty — a situation worsened by the pandemic and partly to blame for the riots and looting in July that led to more than 350 deaths — the gaps in financial support for the poor and jobless became more apparent, upping the political pressure on President Cyril Ramaphosa to loosen the taps on spending.
That pressure led to the reinstatement of the R350 Social Relief of Distress grant after it ended in April, and it will remain in place until March 2022, but with a steely caveat from the Treasury that it would not commit to any permanent expenditure policy that would mean deviating from the fiscal policy of cutting spending and bringing down the budget deficit and public debt.
The surprise release of the green paper seemed to fly in the face of those commitments, so the fleet-footed rebuke from the Treasury came as no surprise. Some analysts also read the move as defiance by Minister Zulu of Ramaphosa.
Workers’ group, the South African Federation of Trade Unions (Saftu), criticised the withdrawal of the paper.
“The paper was a huge step in the right direction. The only problematic provisions of the paper were those that were provisioned to levy the remunerations of workers,” Saftu said in a statement. BM/DM