Honourable Minister in the Presidency, Mr Trevor Manuel
Honourable Ministers in attendance from African countries and elsewhere
President of the International Social Security Association (ISSA), Madame Corazon de la Paz-Bernardo
Secretary General of ISSA, Mr Konkolewski
Senior Executives from the International Labour Organisation (ILO) and Organisation for Economic Co-operation and Development's (OECD) Chief Executive Officers and Senior Social Security Managers
Honourable delegates
Ladies and gentlemen,
It is my honour to provide you with an overview of the South African system of social security: its genesis, the current system and our envisaged trajectory towards a more universal and inclusive system of social security coverage.
Before I present the overview I wish to pay homage to my predecessor, Dr Zola Skweyiya, who three years ago stood before this august audience in Moscow and invited you to South Africa. He could not join us today but has sent us a message of support.
Many of you are all too familiar with our history of a long protracted struggle against Apartheid and shared with us the joy of that glorious day when our icon, Nelson Mandela, was released. His release has indeed set this beautiful country on a new course, including the shape and form of our social security system. Under Mandela’s wise and visionary leadership our social security system has given meaning to a spirit of human solidarity and dignity.
It is well known that industrialisation in the 1850s, with all its attendant benefits, was for many peoples of the world disruptive. A new world was born and the boundaries between nation states collapsed as the integration of economies took shape. The discovery of diamonds and gold in Colonial South Africa made it part of that rush for wealth accumulation. Interestingly, South Africa’s first forms of social insurance were introduced soon after Bismarck’s social insurance schemes in Germany, and similar reforms in the Nordic countries of Sweden, Norway and Denmark.
These were in the form of compensation for occupational injuries in the mining industry. During this period, South Arica too had very basic forms of social assistance in the form of poor relief benefits provided in part by the state, churches and other charitable organisations.
Like many other countries South Africa was not spared from the ravages of the Great Depression and the first World War. While both black and white South Africans fought as part of the Allied forces, black people were treated as an underclass. Against this backdrop of colonial exclusion and racism, the African National Congress was founded in 1912, to intensify the struggle for liberation.
The end of the First World War saw the introduction of Military Veterans’ benefits. South Africa introduced state provided old age pensions in 1928, disability benefits in 1934 and child care benefits in the 1940’s. Alongside these social assistance programmes, work based social insurance schemes grew at a not-so- modest pace as private pension funds competed vigorously for the savings of income earners. South African pension funds are today amongst the biggest in the world.
The second World War was of course a significant turning point in the Western World in so far as social security was concerned. The Beveridge Plan became a blueprint for most Anglo-American countries such as the USA, Australia and Canada. Continental Europe by then had made significant strides in setting up social security systems.
South Africa too faced choices of introducing a system of comprehensive social security in the 1940s but sadly the system of racial oppression, which later made apartheid South Africa the pariah of the world, hindered such wise developments. During this period, the state old age pensions and disability pensions were extended to black people, but at lower amounts as that provided to whites.
Between 1940 and 1960, the growth of state provided social security was very limited and therefore, private insurance grew. At the same time, the apartheid government saw it necessary to introduce the 1956 Pension Funds Act to regulate the private market that provided pensions, disability and survivor benefits.
By 1961 the repressive apartheid regime’s agenda culminated in the arrest of the leaders of the liberation struggle lead by, amongst others, Nelson Mandela. The post 1962 period witnessed both a lull in the expansion of social security as well as in political activities as our leaders languished in prison. Our ever yearning spirit of struggle did not wane and in the 1970s the struggle gained renewed impetus.
The State, in trying to placate the restless disenfranchised majority of black people, started to increase social benefits to black people and by 1978 sought to introduce a mandatory retirement scheme. The unionised workers, who later formed the Congress of South African Trade Unions, COSATU, and other union federations, rejected a mandatory pension system which gave no franchise to black people.
Resistance to an illegitimate regime was escalating and the system was bound to crumble. By the late 1980s the Apartheid state could no longer bear the strain of the struggle, as the ANC in exile and the internal Mass Democratic Movement with solidaristic support from many countries in the world and many of you in this audience, intensified the liberation struggle.
The system eventually cracked and in 1994 we had our first democratic elections. The ushering in of democracy laid the basis to deracialise social assistance and deliberate government action to ensure that all South Africans receive the benefits that they were entitled to, irrespective of race.
The national democratic revolution of 1994 required nothing less than a total and comprehensive overhaul of all the organs of state, beginning with a brand new Constitution. The constitution was intended to entrench a clear set of values, and establish very specific rights around which all citizens could rally. It is through this approach that the right to access to social security is guaranteed in section 27 of our National Constitution.
For this reason we have, since 1994, embarked on an extensive programme to attack poverty on all fronts. The provision of social security was, and continues to be located within a broader Anti-Poverty strategy. Our approach has been to complement social assistance grants with free primary health care for all, compulsory education for all those aged seven to thirteen years, subsidised housing and basic services such as electricity, water and sanitation for the poor.
Since 1994, through deracialising the provision of benefits and changes to legislation to allow more children access, the social assistance system grew exponentially. After a relatively modest growth from 2,5 million people accessing social assistance grants in 1994 to 3,7 million in 1999, the turn of the century saw us ratchet up access so that today, more than 14 million people are being provided with income that allows them some respite from absolute poverty.
In 2002 we decided to prioritise the extension of social assistance programme, because it is redistributive and represents the most important pillar in improving human development and social integration of all our communities.
In this respect we have learned much from our colleagues in Latin America: Brazil, Mexico, Chile and Columbia. Although means tested, our social assistance programme continues to be the most effective means of alleviating the effects of poverty and has been fundamental in the creation of a more decent society.
During 2010 we will spend about 90 billion rands which is almost 13 billion US Dollars, on social assistance, which is about 3.4 per cent of South Africa’s gross domestic product (GDP). These resources will provide income support for more than 10 million children, 2.6 million older persons beneficiaries and 1.3 million people with disabilities.
While we have made significant progress in social assistance provision, our social insurance component has lagged far behind. At present, our social insurance arrangements are fairly limited and confined to unemployment insurance, compensation for occupational injuries and diseases, and third-party compensation in the event of road accidents. Our Unemployment Insurance Fund focuses mostly on providing income during short periods of unemployment. In the area of social insurance we have much to learn from our colleagues in the Middle-East, and Anglo-phone and Franco-phone African countries.
We also have a Compensation Fund which provides income and healthcare benefits to workers who are injured on duty or suffer occupational diseases. Our Road Accident Fund is funded out of fuel levies and pays benefits in the event of motor vehicle accidents.
With regards to our pension system, South Africa is anomalous compared to countries at a similar level of development. Despite a history spanning more than 120 years, we have still not developed a mandatory pension system. More than 2,8 million formal sector workers remain outside the system of cover. The existing private system, while closing a significant gap, is systemically unsuited to the task of providing adequate pension coverage for all citizens.
A similar situation persists in the health sector, where the majority of the population relies on tax-funded public healthcare services, in the absence of national health insurance. The insurance role is currently played by private medical schemes, accessed as part of the employer mandate or voluntary individual enrolment.
Although the private sector provides important coverage, there is clear recognition in the country that private arrangements alone cannot ensure the depth and quality of protection possible in the absence of formal social security measures.
In light of this, my party, the ruling party, the African National Congress, has made recommendations for the reform of our social security system. Over the next three years, I will work with my colleagues, as part of an Inter-Ministerial Committee, to undertake some of the most significant reforms of social security. Among the key proposals under consideration are the following:
- The institutional framework for social security provision will be overhauled to improve coherence, efficiency and responsiveness. To this end we have been tasked by the recent National General Council of the ANC to establish a Department of Social Security to consolidate policy development and minimise the dispersion of policy development that currently occurs in different departments.
- In view of the challenges of stigmatisation and the extent of exclusion errors created by means testing, the same NGC also instructed us to work towards the universalisation of the state old age pension.We will, in addition, research the costs and benefits of universalising child support benefits and the disability grants.
- We will address the biggest defect in our social security system by introducing a mandatory retirement, with provision for survivor and disability insurance for all South Africans. We will have to learn to save like our colleagues in the Far East such as China, Japan and others.
- In addition, we will extend the benefit periods for unemployment insurance and give consideration to a universal accident benefit covering occupational, road and other accidents for all South Africans. These mandatory benefits should be consolidated and provided through a government sponsored National Social Security Fund - a true solidarity fund.
- In total, contributions toward social security benefits, including unemployment insurance, should be approximately 12% of gross incomes subject to income ceilings. The contribution should be split between two percent for unemployment, six percent for retirement and four percentfor risk benefits.
- In addition to mandatory contributions, supplementary benefits should be offered by accredited private providers chosen by contributors, subject to more proactive supervision of the industry and greater enforcement powers for the regulatory authorities.
- In order to enhance access and the quality of service delivery we will set up a single social security public interface, a single social security registry and a more specialised adjudication arrangement.
- A uniform governance approach should be followed by all social security delivery agencies. We would want to have a social partner model for the oversight of social security generally to improve institutional responsiveness to affected stakeholders.
These reform proposals are detailed in a Consolidated Government Document that government will release soon.This document will initiate a public consultation process which will provide an opportunity for all South Africans to engage and contribute to the final policy formulation that will inform the reform agenda. South Africans will have a robust engagement next year; something a democratic society welcomes.
In conclusion, it is important to reflect on how much progress we have made as a country.We have had a sad history of exclusion, in all respects, but as South Africans we have prevailed.
We have made much progress and our system of social assistance today is the envy of many. We have proved that there is no contradiction between a growth agenda and an expansion of coverage of social security. We have debunked the myth that there is a trade-off between growth and social security. Our expansive system has proved that social security, if well managed, is affordable. We will continue to work towards a more inclusive system of social security, for all South Africans, for all Africans and for all the citizens of the world.
I thank you and trust that our deliberations will be most fruitful as we collectively advance the course of social security for all.
I thank you, and I wish to thank the ANC for its foresight and commitment to solidarity based policies, other Civil Society Organisations for keeping social security in the public agenda, former Minister Skweyiya, my Director General, Vusi Madonsela and the whole team at the DSD, who have played a significant role in building our social security system.
And last, but not least, I wish to thank the ISSA and its members. We have derived significant benefits from our membership of this great organisation, particularly in accessing the extensive research and publications on social security systems across the world, and the various platforms you have created, such as this World Forum in which we can interact with experts and colleagues from all over the world. It’s been great for us being a member of the ISSA.
I thank you.
