Concerns raised around govt proposal for mandatory pension & insurance system

The Social Development Department said that the COVID-19 crisis had amplified existing structural gaps which called on government to review and take drastic measures to come up with a plan.

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JOHANNESBURG - Major red flags are being raised around government's new plan to implement a mandatory pension and insurance system that will see employers and employees paying up to 12% of their earnings into a state-run national social security fund.

The green paper proposal is now open for public comment until December.

The proposal is outlined in the Comprehensive social security and retirement reform document.

It aims to ensure that all workers have access to effective social security arrangements. However, government acknowledges that if poorly designed or implemented, it could have consequences for the economy and future generations.

There are many questions around this proposal, like how will the invested money be managed? How will contributors know if their money will be guided into the right places? And of course, many are wondering whether this is just another a mechanism for our corruption-ravaged government to raise cash.

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The Social Development Department said that the COVID-19 crisis had amplified existing structural gaps which called on government to review and take drastic measures to come up with a plan.

Professor Adrian Saville, from the GIBS Business School, said that the proposal raised some serious concerns.

“Who is going to look after the investment contributions? How do we know that those investment contributions will be shifted and stewarded into the right places? And unfortunately, this comes at a time when you still have a very cynical and jaundiced South African investor and taxpayer. We don't yet have resolution on key issues, including the allocation of funds under the Zuma administration,” he said.

Wayne Duvenage from the Organisation Undoing Tax Abuse is among the many skeptics when it comes to this proposal.

“We were always concerned about how they’d do that. Whether they are going to get the best returns, whether there are fingers in the till? We've seen state funds badly managed across the country for many years now,” he said.

In the 89-page green paper, government states that the proposal requires careful consultation with the public, community organisations, business and trade unions along with the retirement fund industry and regulatory bodies.

It also said that if approved, these reforms would be implemented over the short to long term period.

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