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(Reform) The South African Social Security System
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Transcript of (Reform) The South African Social Security System
SOUTH AFRICA - DEPARTMENT OF SOCIAL DEVELOPMENT
(Reform) The South African
Social Security System 05 December 2004
SOUTH AFRICA - DEPARTMENT OF SOCIAL DEVELOPMENT
SOUTH AFRICA - DEPARTMENT OF SOCIAL DEVELOPMENT
Contents• Socio-economic situation analysis • Structure of the social security system• Institutional Arrangements • Strategic shifts • Social Assistance• Social Insurance – Second Pillar• Comprehensive Social Protection• Concluding Remarks
SOUTH AFRICA - DEPARTMENT OF SOCIAL DEVELOPMENT
Poverty, inequality & Unemployment • Democratic government inherited an exclusive,
fragmented, discriminatory social security system• Income inequality high between “population groups”,
while it is now decreasing it is increasing within “population groups”
• 50- 60% of South Africans estimated as income poor• Unemployment high and increasing: 27% to 35%
and informal employment growing• Unequal and inequity in healthcare provision
SOUTH AFRICA - DEPARTMENT OF SOCIAL DEVELOPMENT
Inequality: Household Incomes
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Poorest 50 per cent -11% -16% 0% -5%
Richest 10 per cent 17% -0.30% 16% 28%
African White Coloured Asian
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Structure of the South African Social Security System
Non-Contributory Contributory
Voluntary MandatoryMeans tested Universal
Private pensionsPrivate insuranceMedical schemes
UnemploymentCompensation on work dutyGov. pensionRoad accident
Old age grantChild support grantPublic hospitals
Primary health care
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Lead Ministries
South African Government
Social Development
Health Labour Transport
Social Assistance S o c I a l I n s u r a n c e
Regulating “voluntary” and private pension
industry
Healthcare medical aid
Road Accident compensation
Unemployment Insurance,
Survivors & maternity benefits
National Treasury
Government employee pension
Assistance & Insurance
Income support
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Social assistance
• The non contributory system is stretched• 9 million of 43 million South Africans receive social grants• 2.2 million elderly gets old age grant, of 2.9 million elderly, • 1-1.3 million disabled adults receive disability grant• 5,6 million of 11 million children under 14 years in poor
house holds, access social assistance• Foster care is provided to over 130 000 children, and• Care dependency grant to 90 000 severely disabled children
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Gaps in Coverage of Social Assistance
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Capital income
Other transfers
Pension
Self employment
Agriculture
Remittances
Wage income
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Social Security Expenditure in SA: “social budget” (recent estimates)
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Expenditure 117.4 35 3.3 2.1 22.8 32 0 58
Voluntary: Not
regulated
Voluntary: Regulated
Mandatory: Social
Insurance
Mandatory: National
Insurance
Means tested: Social
Means tested: In-
kind
Universal: Social
transfers
Universal: In-kind benefits
SOUTH AFRICA - DEPARTMENT OF SOCIAL DEVELOPMENT
The layers of poverty
Livelihoods &Assets:
Precarious, seasonal,inadequate
Capabilities:Lack of information,
education, skills, confidence
Organisations of the Poor:
Weak and disconnected
Institutions:Disempowering and
excluding
Behaviors:Disregard and abuse, By the more powerful
Places:Isolated, risky, unserviced
stigmatised
The Body:Hungry, exhausted, sick
Poor appearance
Gender Relations:Troubled and
unequal
Social Relations:Discriminating and
isolating
Security:Lack of protection and
Peace of mind Source : Deepa Narayan, Robert Chambers, Meera Shah and Patti Petesch Voices of the Poor. Crying out for Change, page 249
SOUTH AFRICA - DEPARTMENT OF SOCIAL DEVELOPMENT
Strategic Shifts
• Move from inappropriate and inefficient means testing toward universal options– Social assistance has limitations , both in coverage
and administrative efficiency– Retirement provision limited, lack portability, not
sustainable and creates poverty traps– Health (administrative efficiency, access and equity)
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Comprehensive Social Protection
• Broader than social security
• Focuses on causality
• Incorporates developmental strategies
• Programmes designed to ensure collectively a minimum standard of living for all citizens
SOUTH AFRICA - DEPARTMENT OF SOCIAL DEVELOPMENT
Social safety net is expanding• Social assistance covers 18% of population and
will be 25% in two years time• Total cost to government will be R55 billion next
year, that is 2rd highest non-interest expenditure item education
• Reaching 4% if GDP and raises concerns, but against the need an poverty, coverage will continue to be limited
• Second Pillar therefore becomes an important issue for policy consideration, especially if next slide is anything to go by.
SOUTH AFRICA - DEPARTMENT OF SOCIAL DEVELOPMENT
Social Insurance
• 2nd Pillar or Contributory system has many gaps• Pensions, Medical schemes, Death and disability provisions are by nature mostly voluntary •In the employment sector a large portion of the population is not covered for structural reasons and there is a growing informal sector• Move from voluntary toward mandatory systems being considered• Consolidation and integration of delivery institutions
SOUTH AFRICA - DEPARTMENT OF SOCIAL DEVELOPMENT
Pensions - Retirement
• The system is unique, but also an anomaly• Pension funds account for R600 billion of
institutional investor assets, the major provider of the equity listed on the JSE.
• Pension fund contributions from 80 per cent of the formally employed amount to R54,3 billion a year
• South Africa rates fourth in the world for pension fund assets, after UK, Switzerland and the Netherlands.
• In terms of private pension fund assets to GDP, South Africa is first in the world.
SOUTH AFRICA - DEPARTMENT OF SOCIAL DEVELOPMENT
Pension, Retirement challenges• According to FSB, there are 11 million members,
i.e. 80% of workforce• 1,7 million retired, but there are number of
duplications.• Portability does not exist• Limited mandatory system is problematic• The concern is how to improve and utilise the
retirement provision• Increase in informal employment poses a
challenge• Consumer protection is increasing
SOUTH AFRICA - DEPARTMENT OF SOCIAL DEVELOPMENT
Private Cover(contributory)
State-sponsored Retirement Fund
(contributory)
Voluntary retirement
cover
(low-income and informal
sector)
Universal State Pension (non-contributory)
Mandatory retirement cover
(suggested: for those earning more than the tax threshold)
Above tax threshold contributors
Below tax threshold contributors
Low-income groups and the
indigent
Retirement and Old Age
SOUTH AFRICA - DEPARTMENT OF SOCIAL DEVELOPMENT
Health
• 80% of citizens access public health care at cost lower than that of 20% using private healthcare
• 14 million South Africans fall outside of the present means test for subsidized access to public hospital care.
• Only around 7 million of this group is presently a member of medical scheme
• Reforms are underway to create a national health insurance system, starting with a single system for public sector employees
SOUTH AFRICA - DEPARTMENT OF SOCIAL DEVELOPMENT
Private Medical Scheme
Cover(contributory)
State-sponsored Medical SchemeIntroduced phase 2
(contributory)
Voluntary cover
phases 1 - 3
Mandatory for medical scheme or
PSCFphase 4
Universal per capita subsidy phases 2-3 non-contributory (general tax funded with additional funds
provided via a redirection of the employer tax subsidy)phase 4 contributory (mandatory)
Voluntary phases 1 - 2
Mandatory phase 3
Middle- to high-income
Low-income and informal sector
Low-income groups and the
indigent
Non-contributory or voluntary
All phases
Health
SOUTH AFRICA - DEPARTMENT OF SOCIAL DEVELOPMENT
Health care
• Common Features– Consideration from a holistic point of view
• Integration of public and private
– Universal minimum subsidy– Mandatory environment starting with higher
income groups and large employers– State sponsored voluntary options– Civil service mandated
SOUTH AFRICA - DEPARTMENT OF SOCIAL DEVELOPMENT
Unemployment• Broader measures than conventional safety-net• Move to extend social insurance where feasible
has started with low income domestic and farm workers
• Indirect social protection – creation of an active labour market through public works programs
• Regulatory regime is being enhanced.• Limitations, as informal employment is
increasing
SOUTH AFRICA - DEPARTMENT OF SOCIAL DEVELOPMENT
Concluding Remarks
Reform for a Comprehensive social protection package
SOUTH AFRICA - DEPARTMENT OF SOCIAL DEVELOPMENT
Way forward
• Setting of a poverty line• Prioritise development/institutional capacity to
deliver • Policy determination/co-ordination in
Organisational framework for social security and protection
SOUTH AFRICA - DEPARTMENT OF SOCIAL DEVELOPMENT
Pillar 1• Income poverty Minimum income support (1)
• Capability poverty (universal/eligibility criteria)– Free and adequate publicly provided healthcare– Free primary and secondary education– Free water and sanitation (lifeline)– Free electricity (lifeline)– Accessible and affordable public transport– Access to affordable and adequate housing– Access to jobs and skills training
SOUTH AFRICA - DEPARTMENT OF SOCIAL DEVELOPMENT
Pillar 2
• Social insurance & private sector regulation (3)• Reform of Scope and Governance structures for
social insurance funds• Private sector regulation and enforcement
– COIDA, – RAF, – Health insurance, – Unemployment insurance, and– Retirement funds
SOUTH AFRICA - DEPARTMENT OF SOCIAL DEVELOPMENT
Institutional framework
• Creation of inter-departmental policy coordinating structures in the following areas:– Old age and retirement, Disability, Maternity
benefits and support and Children• Creation of a Social Security Agency to provide
holistic view and institution to look at double dipping• Realisation of market failures and need for
government intervention