Social Security in South Africa

SOCIAL SECURITY IN SOUTH AFRICA

Introduction

The national social protection system in South Africa comprises the following major elements:

A national pension system which combines means tested tax-financed flat rate pensions in case of old age and disability (the so called social pensions of R520 per month) providing benefits to presently about 72 per cent of the elderly with private or occupational pension schemes or provident funds as second tier benefits;

a system of grants for families with children;

an employer financed employment injury insurance scheme (COIDA);

a road accident fund (RAF) financed from fuel taxes;

a government employee pension scheme (GEPF);

an Unemployment Insurance Fund (UIF) which is actually a short-term benefits scheme and which provides in addition to unemployment benefits (maximum duration of benefit payment 26 weeks) other short-term benefits (notably maternity and sickness benefits);

a health care system which is undergoing substantial reform with a view to ensuring appropriate financing for essential health care services through regulation of the private sector, restructured public sector and the introduction of a social health insurance scheme.

2 Coverage gaps and inconsistencies

The national social protection system still has crucial gaps, inconsistencies and overlaps. The main problem areas are the following:

Unemployment

The UIF covers less than 40 per cent of the Labour Force and provides at any given point in time benefits to less than 6 per cent of the unemployed, as it excludes major categories of workers (such as domestic and seasonal employees, government employees and all own account workers in the informal sector. Some of the coverage problems are addressed in the

draft new UIF law. It will effectively try to cover all employees with a formal or stable work contract. The informal sector will remain uncovered.

Retirement provision

The private old age pension system provides benefits with insufficiently Reliable replacement rates and vesting and portability problems. In general the industry would require an upgraded regulatory framework.

Disability provisions still have minor coverage gaps. There are some overlaps between COIDA and other invalidity benefits provided by the DoW and the private sector.

There are no effective survivor’s benefits for the population younger tha pensionable age and not covered by private pensions or by survivor’s rights under UIF, RAF and COIDA arrangements.

Health care

In principle every resident has a right to primary health care under th public system, although private insurance provides overlapping cover fo those who can afford not to, and do not choose to, use the public system.

Health insurance is frequently financed by employers, although recently individual health insurance has been encouraged and is growing. Coverage for hospital care is also provided by the public system, free for those with incomes below a certain level and fee paying for those above that level. But in practice hospitals are frequently unable to collect their fees from persons who are not poor but who are not covered by private insurance. Private insurance provides overlapping coverage for hospital care. But it is subject to an annual financial limit on claims and the public system is used by those who have exhausted their private insurance entitlements. Private insurance coverage might be effectively unavailable for the elderly and bad risks.

Families and children

No child benefits are available for children older than 7 years and under school leaving age.

The most glaring gap, however, is the lack of general provisions which would provide a cash benefit of last resort to the poor. The fact that this gap still exists is most probably due to the fear that such a scheme might be financially unsustainable in particular in view of the high unemployment, high poverty rates, and high level of involvement in the informal economy among African South Africans. This leaves large numbers of South Africans in harsh poverty with little means of escape.

3. Current activities being undertaken by the welfare department

review of disability policy

2. development of policy for a comprehensive social security system.

Issues for consultation

Who should benefit from a publicly funded social security system?

What comprises an appropriate social safety net and how should it address poverty, retirement, job loss and disability?

Who should contribute to the provision of such a safety net and how can solidarity principles be promoted?

What is the appropriate role of private arrangements and what impact do these have on non-wage costs, do they undermine the state’s ability to fund effective public provision

How do social grants contribute to greater equity and poverty alleviation?