The government could not be trusted to manage the new proposed state pension fund that would increase taxes by up to 12%.
Economists, civil organisations and opposition parties slammed the plan to tax taxpayers up to 12.5% more to fund the plan, citing a lack of trust in the government and the extent of corruption.
This week the Department of Social Development under Minister Lindiwe Zulu published its Green Paper on Comprehensive Social Security and Retirement Reform. It proposed the creation of a National Social Security Fund (NSSF).
This NSSF would provide pension, disability and unemployment benefits.
“That it’s to be administered by government worries me,” said economist Mike Schussler, sentiments echoed by Wayne Duvenhage, CEO of Organisation Undoing Tax Abuse (Outa).
Duvenhage said: “This is also no secret when it comes to general public sentiment, especially on the back of state capture, the ongoing bungling and misuse of state funds for many years now.
“Add to this a number of poor and dubious investment decisions made by the Public Investment Corporation (PIC) who are supposed to look after government pensioners’ interests, along with the problems related to the UIF payments during the pandemic crisis, the Road Accident Fund debacle (which is proposed to be incorporated into this new fund); these are just some of the red flags that raise serious concerns.”
Corruption Watch’s Karam Singh, head of legal and investigations, said: “A major threat to the realisation of these policy proposals, as has been the case in relation to the realisation of basic socio economic rights over the last 27 years, as enshrined in the Constitution, is corruption.”
Trust aside, commentators questioned the economic sense of the proposal, saying the tax base was already stretched and that, if implemented, these ideas would chase taxpayers out of the country and make South Africa less attractive to foreign investors.
“Ideally it’s wonderful to have, but where is the money going to come from?” asked Azar Jammine, chief economist at Econometrix.
Schussler said that asking up to 12% extra in tax was “a tough ask” on the formal middle-class that was already paying for welfare beneficiaries.
He estimated that someone currently earning R276 000 a year would be asked to pay the same tax as someone currently earning R600 000.
He said it would discourage people from investing in private pensions and reduce spending power, causing chaos in the retail and wholesale sectors.
“It will be disastrous for the industry,” he said.
“We had the eighth largest pension fund in the world. There were more than 11 million accounts in 2017. If we have something successful, why not build on it?” he suggested.
“Put a small amount like 5% and later 7.5% and leave it there.”
Schussler asked: “Why do we want to keep on taxing when we should be creating more jobs and therefore more taxpayers? We should aim to have fewer people receiving welfare.”
He called the proposal “unsustainable”.
Duvenhage added that, in general, there was a low savings rate in South Africa which left many people unable to survive in their retirement years.
“This, in turn, adds more pressure to the state’s ability to provide for their citizens.
“Thus, while the state’s intention with this Social Security Fund appears to be noble ‒ in that it will force people to save and assist with more relief in other situations of need ‒ the reality is that there are far too many questions and issues that need to be addressed and changed in this proposal if it is to be acceptable.”
He reaffirmed that to the public at large, its biggest hurdle was the public’s lack of trust in the government to manage such a fund.
The IFP said it had strong reservations about the green paper.
“Ïn particular, based on the track record of the Department of Social Development and government in general as pertains to the management of public funds,” said the party’s social development spokeswoman Liezl van der Merwe.
Good Secretary-General Brett Herron said it supported a basic income grant.
“Our economy is not creating enough jobs and no adult can be expected to live their lives without access to any income.
“Our constitution creates the right to social security and we can no longer ignore the pervasive poverty and desperate conditions that people are living in.
“We must provide an income guarantee ‒ it is not possible for any adult to live without income.”
Herron said the party still needed to study the green paper to understand the proposal for a public retirement fund.
Both Outa and the IFP said they would make submissions before December while the green paper was open to public comment.
The DA wrote on its Facebook page that it “has rejected and will oppose the ANC's ridiculous proposal to tax South Africans an extra R3 000 a month for those earning R275 000 a year”.
“Taxpayers should never bail out the ANC for bankrupting the state.”
Jammine added that the fact that many such proposals did not see the light of day was “a saving grace”.
Anyone wishing to comment on the green paper may send a written submission to The Director-General: Department of Social Development, 134 Pretorius Street, HSRC Building, Pretoria; Private Bag X901, Pretoria 0001. For attention: Mr John Tebeila, Acting Director: Retirement Reform. Email: [email protected] Tel: 012 741 6820. The closing date is December 10.
The Independent on Saturday