The Social Development Minister for South Africa, Lindiwe Zulu gazetted a new National Social Security Fund (NSSF) which would have offered disability and retirement benefits as well as unemployment benefits to all South African citizens.
However, this proposal would have had dire impacts on the investment industry of the country, leading to retirement investments as well as all other savings being funnelled into the NSSF, resulting in pension funds losing most of their members.
The South African treasury pointed out that the Green Paper was gazetted without Cabinet’s approval, thereby making it unofficial. The Treasury also indicated that it was merely a “soft proposal” that reflected the aspirations of certain stakeholders.
Withdrawal of the green paper after being gazetted
The Green Paper was first gazetted on August 18 and withdrawn on the 31st without any reason. However, it is believed that the withdrawal resulted from an outcry when South Africans realized they would have to pay up to 12% of their income into the new government-managed investment fund.
According to the National Economic Development and Labour Council (Nedlac), the Green Paper ignored inputs from the business sector. According to Zulu, the proposed fund was based on what she referred to as “social security principles of risk pooling and social solidarity”.
The government does not have the necessary fiscal credibility to follow through with the plan and not only did Zulu fail to consider this, but she also underestimated the backlash that would follow once the Paper was gazetted.
However, even if the Green Paper was withdrawn, Zulu has weakened already fragile investor confidence by proposing an uncosted policy along with eroding the fragile trust that exists between the South African government and the business sector.
The outcome of the meeting which was held by the Cabinet indicated that the necessary processes were not followed, and the government had subsequently not adopted a position on the contents of the Green Paper.