COMMISSION ON SOCIAL SECURITY

Facilitator: Cassim Saloojee, Chairperson, Parliamentary Portfolio Committee on Welfare and Population Development.

Speakers: Lucy Abrahams, Director-General, Department of Welfare.

Aubrey Tshalata, Executive Member of Nafcoc.

Petronella Linders,Divisional Coordinator for the South African      Federal Council on Disability.

Chez Milani, General Secretary, Fedusa.

Introduction to the topic:

The restructuring of the South African economy coupled with the apartheid legacies means that for many people access to the labour market is exceedingly difficult. The absence of a comprehensive social security system has meant that those without work or between jobs suffer incredible hardship. Furthermore, structural unemployment creates the need for a social security system to actively enable the entry of economically marginalised groups into the labour market. This is critical to encourage self-sufficiency and reduce long-term demands on state resources. Many commentators have proposed a basic income grant as one mechanism for cushioning the negative impact of labour market adjustments.

Summary of issues raised by Lucy Abrahams

Social Security is a side of welfare which is more about economic realities than social realities particularly in view of the fact that about 90% of the annual welfare budget goes towards addressing the fundamental economic problems of households.

In the current financial year, 1999/2000, government is spending in the region of R17bn on cash grants, transfers to individuals/households, and a further R1.45bn in transfers to governmental and non-governmental service providers.

Of the R17bn spent on cash grants, the largest proportion goes to older persons, women above 60 years and males above 65 years. Comparing welfare data to Census 1996 data, the number of old age beneficiaries amounts to about 1.8 million out of a total of 2.6 million people in that age bracket. In comparison, the proportion of disabled persons that receive transfers is much smaller, between 600 and 700 thousand out of 2.6 million. A relatively small percentage of the population of children between the ages of 0 and 18 receive child grants. There are various types of child grants. The child support grant is restricted to a very narrow age group of 0-7 years. Foster care and the state maintenance grants still apply to children beyond the age of seven.

Social security goes far beyond the provision of cash grants. The fundamental principle of the new welfare policy is to develop strategies which integrate grants and services in a social development approach to the portfolio. Cash grants are not necessarily developmental or sustainable in the long term.

There is currently a government task team which is lead by the national Department of Welfare and comprises representation from the Departments of Health, Labour, Transport and Finance. This task team is required to consider, inter alia, poverty gaps and vulnerable groups and to design a comprehensive package of social security services, which includes grants and services. There are two components to this project:

Situational Analysis:

This involves research into grants and services and conducting an analysis to determine inefficiencies, overlaps, inconsistencies, shortcomings and the social impact of South Africa's current social security system. While there are certain longer-term research projects and other restructuring processes underway, part of the research work should be finalised by April/May 2000.

Identifying options:

This involves considering various options or possibilities, both within the public and private sphere, which would address the problems identified in the situational analysis. A number of options and strategies are emerging, however there are no firm proposals at this stage. These options and strategies need to be debated firstly within government and then with the social partners in a forum such as Nedlac.

There is a very high level of government expenditure on social security. According to the Medium-Term Expenditure Framework projections, the Welfare budget could run into a deficit during the third year. Although debates and discussions should not be reduced to what is available in the fiscus, economic realities should be an important consideration. In addition, one cannot talk about a comprehensive social security system outside of the current macro-economic environment, economic growth and declining employment. There is a strong view within the Department of Welfare that a critical issue in the design of a comprehensive social security system is investment, both foreign and local. Without investment, larger numbers of citizens will end up on the welfare budget.

Government is also working on a project called the "Welfare payment and information service" which is a public-private venture to see how government can buy-in the necessary expertise to more efficiently manage the welfare budget and apportion risks more appropriately. This model is being applied in many countries and has three fundamental drivers:

• Efficiency gains and the reduction and elimination of fraud.

• Value addition.

• Electronic cash services.

The issue of a basic income grant emerged from the Presidential Jobs Summit held in October 1998. The concept of a basic income is not synonymous with a social grant. Basic income as a concept includes an appropriate package of grants and services. Universal access to services such as electricity, telecommunication, sanitation and others could be part of this package. The financial modelling will be done once appropriate options and strategies have been agreed. It may therefore be premature to attach a monetary value to the concept of basic income at this stage of the research. There are a number of options that could be considered, however, government would be reluctant to agree to a scheme which would have a perverse incentive for people to work.

Summary of issues raised by Aubrey Tshalata

Approximately one third, 35.2%, of all South African households, amounting to 18m people, are living in poverty. Of these, African households and households in rural areas, particularly rural households headed by women, are the most affected. Over half, 54%, of all South African children live in poverty.

Social and Economic Development are two interdependent and mutually reinforcing processes. Equitable social development is the foundation of economic prosperity and growth is necessary for social development.

Some of the objectives and priorities for developing a comprehensive social security system include:

• Poverty alleviation and prevention
• Social compensation
• Income distribution
• Enhancing the management of schemes and funds
• Developing and maintaining an integrated information technology platform to manage the system more appropriately and effectively
• Cashless payment methods
• Development of an integrated population register
• Decreasing the number of fraudulent recipients
• Reviewing social assistance grants to ensure efficiency

Possible strategies include:

• Developing a savings culture
• Addressing administrative inefficiencies
• Developing strategies to improve collection and recovery from contributors
• Trade Unions should invest workers money in a prudent and efficient manner
• A strategy to create reserves in social security funds should be developed
• All South Africans need to contribute to a social security fund regardless of their income level
• In funds such as the UIF, replacing the current flat rate for unemployment and other benefits with a graduated scale which aims to provide a higher replacement ratio to low income earners and a higher replacement ratio for high income earners

A basic income grant should not be a disincentive for searching for employment. A comprehensive social security system is needed to give effect to the constitutional right to social security for all. However, it should not create dependency but should instead provide temporary relief and promote employment.

Summary of issues raised by Petronella Linders

There have been many policy developments which recognise and accommodate the specific needs of rural people, women, youth and disabled people. However, barriers, particularly in accessing basic social security, continue to exist.

A comprehensive social security system should enable the members of the community constituency to become an integral part of the mainstream economy.

Key principles that should be taken into consideration include the following:

• Persons with disabilities, similar to the nature of other sectors within the community constituency, do not form a homogeneous group.
• Limits should not be placed on a person's ability to perform work. It is these barriers, established by society, that prevent certain categories of people from accessing certain benefits.
• Employment should be promoted and assistance should be provided to maintain employment.

Strategies that should be adopted to develop a comprehensive social security system:

• The Jobs Summit agreement must be implemented
• Poverty alleviation funding from the Department of Welfare should be used to enhance long-term economic empowerment of people
• The Employment Equity Act should be implemented, together with the technical assistance manual developed to assist employers in complying with the provisions of the Act, so that designated groups are able to access jobs
• Social security cannot be seen only as a welfare issue. Government departments need to address the issue of social security collectively
• South Africa cannot afford to maintain the current expenditure on cash grants. Consideration should be given to changing the paradigm from a welfare perspective to a developmental perspective which promotes economic empowerment

Summary of issues raised by Chez Milani

(These are more fully captured in an paper presented to the Commission which may be obtained from the secretariat on request)

Social Security should be seen as a top national priority, together with unemployment and other priority issues.

The parameters of a comprehensive social security system are broad. A pragmatic approach to social security should be adopted to ensure that objectives are attainable. Social security should be encouraged and government should provide a regulatory framework for a social security system. Government cannot shift its responsibility to provide social security to the private sector. The following should be included in a comprehensive social security system:

• Government provides social security and services in the form of a public service. The public service should be restructured and increased in size to ensure efficiency and delivery of services
• Public-private partnerships should be encouraged but not at the cost of employment
• The private sector should also provide social security services, e.g. hospitalisation, schooling

The cost of a basic income grant should not be seen as a burden on the fiscus or elsewhere. The intention is to promote social upliftment and enable people to have the means to improve their standards of living, which also affects economic growth. Various practical elements still need to be investigated and considered to ensure that the targeted recipients for such a grant will benefit.

Before progress can be made in developing a comprehensive social security system in South Africa, government must provide parties with a situational analysis of the existing social security system, and recommendations to address its shortcomings. This is essential for progress towards realising the Jobs Summit agreement on social security.

Summary of discussion

The community constituency stated that accurate statistics were essential in order to identify the number of recipients that should receive government grants for effective budgeting.

Government stated that there was also other information for decision making that was important, such as an instrument the HSRC has for poverty mapping.

Business stated that macroeconomic affordability must enjoy top priority in any comprehensive social security system. It must also be subject to careful scrutiny by Parliament as to what levies are being imposed on people to make sure that priorities are being addressed within the budget. BSA is fundamentally opposed to a central large social security fund which meets all needs commonly associated with social security. This would be a major inhibitor to economic growth and job creation. There should, as far as possible, be separate funds for separate risks. It supports the traditional 3 tiers of social security - the social assistance which is means tested and traditionally pay as you go; the social insurance which is funded by contributions (the suggestion is that it should be defined contribution rather than defined benefit driven) and lastly, privately provided benefits.

The Department of Labour stated that mechanisms to inform people of their right to social security benefits, particularly in rural areas, should be improved. Government stated that the Department of Welfare had recently embarked on two new strategies, in addition to radio, for improving communication.

Labour stated that mechanisms should be established to monitor and prevent the abuse of benefits, particularly the provision of basic services to communities.

Government stated that the Ministry of Welfare and Population Development would be convening a National Consultative Process in Pretoria the following week and that on 14 October 1999 specific consideration would be given to safety nets, social insurance schemes and savings. All interested persons were welcome to attend.

Key remarks by the facilitator

The discussion on a basic income grant should be carried out at a number of levels throughout the country and should be seen in context of deep poverty, particularly within rural areas. Unemployment cannot be addressed without addressing poverty.