Withdrawal of Zulu’s ‘asinine’ social security tax plan welcomed

The withdrawal of the Green Paper on Comprehensive Social Security and Retirement Reform has been welcomed by all quarters after the Department of Social Development published it on 18 August 2021 in the Government Gazette without much consultation.

Civil organisation, Organisation Undoing Tax Abuse (Outa), also welcomed the withdrawal, saying the move was not surprising.

“This underlines the need for more meaningful consultation. We trust that minister [Lindiwe] Zulu has recognised her mistake of not consulting more widely and deeply when it comes to introducing such policies that have a significant impact on society and the economy as a whole.”

Wayne Duvenage, CEO of Outa, said the announcement of the green paper caused significant controversy, due to the wide-ranging and largely negative impacts that it would have on various areas.

“It also ignored a Nedlac [National Economic Development and Labour Council] report on social security structure and furthermore did not go through the necessary Cabinet or National Treasury engagement processes.”

The green paper had proposed a new National Social Security Fund (NSSF) that would have made it mandatory for all employers and employees to contribute up to 12% of their earnings, depending on how much they earn.

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Far too many questions about social security green paper

He said while the state’s intention with this fund appeared to be noble in that it would force people to save and assist with more relief in other situations of need, the reality is that there were far too many questions with this complex issue that required a lot of expert input across a number of sectors, especially as it involves a fund that would be managed by the state, whose track record in managing citizens’ funds and taxes is not very good.

Professor Jannie Rossouw from the Wits Business School also welcomed the withdrawal of the green paper.

“It was the pipe dream of an incompetent minister. We cannot trust government with our money.”

The Democratic Alliance (DA) had launched a public campaign to put pressure on the department to scrap its “asinine proposal”.

“South Africans are already facing unprecedented economic pressures in an environment with low economic growth and the highest unemployment rate in the world.”

“The ANC has, once again, shown that they do not have the interests of ordinary South Africans at heart,” DA MP Geordin Hill-Lewis said in a statement.

“They cannot pay their own taxes, yet want the poor to hand over the little money they have to government just so it can be wasted on pointless blue light brigades and bloated civil servant salaries.”

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Why did the department withdraw the green paper?

The department announced the withdrawal of the green paper on Tuesday night in a short statement that seemed to deflect the criticism on the paper by saying that people did not understand the technical aspects.

According to the statement, the department decided to withdraw the paper “to provide better clarity on some of the matters entailed in the paper.

“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. It has become apparent that some of these areas need further clarification to avoid any further confusion.”

The department said in the statement that it expected to release the paper as soon as these issues have been addressed, but critics said it showed how out of touch government was with the people of South Africa.

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Contentious issues

The paper proposes a fund backed by government that will provide for retirement, disability and unemployment benefits, as well as a universal income grant for the working-age population to lift them out of poverty, regulatory reform of the pensions and life insurance industry, an extension of Unemployment Insurance Fund (UIF) benefits and a road accident benefit scheme.

Criticism of the plan centred around mistrust in government’s ability to administer the proposed fund and that already over-burdened taxpayers would have to foot the bill. The Public Servants Association said it regards this proposal as another attempt by government to get its hands on over-taxed workers’ hard-earned money.