state fund earnings sassa

Photo: GCIS

Revealed: ANC wants workers to ‘give 12% of earnings’ to new state fund

A state fund paid for entirely by earnings from millions of workers? That’s very ANC. Here’s what you need to know about the contentious proposals.

state fund earnings sassa

Photo: GCIS

We can’t imagine this is going to go down too well with many South Africans – and Lindiwe Zulu is likely to face a raft of staunch criticism in the days to come. The minister has submitted a green paper from the Social Development Department, proposing that all qualifying workers should pay ‘up to 12% of their earnings’ to a new state fund.

New state fund: Why does the government want ‘up to 12%’ of your earnings?

The National Social Security Fund (NSSF) would be used to support people claiming disability and unemployment benefits. However, with the ANC government not exactly brimming with cash at the moment, the next solution is to garnish the salaries of the working public. Of course it is! Here’s what we know about the proposals so far:

  • The final contribution rate will be informed by the funding approach agreed following consultations.
  • The government should subsidise the contributions of low-income workers.
  • Contributions will be made MANDATORY for millions of workers.
  • Employees earning below an income threshold (R22 320 per month) are not be obliged to contribute to the NSSF.
  • The NSSF will be governed by a Board, which will have ultimate responsibility for the supervision of the fund.
  • The obligation of the board members will be to focus on the best interest of the Fund, and not any personal views.

The NSSF will take ‘millions of public contributions’

Lindiwe Zulu set out the terms in an 89-page document. This has a long, long way to go before it gets anywhere near an official rollout – and what the minister sees as ‘social solidarity’, others are likely to brand as a contentious cash-grab. After all, an ANC, state-managed fund that takes earnings from citizens is not an easy sell to a cynical public.

“The key reform proposal is the introduction of a National Social Security Fund (NSSF), a centrally-managed public fund to provide retirement, survivor, disability benefits, and unemployment benefits. The proposed fund is based on social security principles of risk pooling and social solidarity.”

The most notable gap in our social security system is the absence of a mandatory contributory public social security fund. All employers and employees will be obliged to initially contribute between 8-12% of qualifying earnings up to a ceiling, based on the Unemployment Insurance Fund (UIF) ceiling, which is currently at R276 000 per annum.

Where does the new state fund go from here?

However, there are also plans to reach out to every possible employee outside of fixed employment: A simplified
contribution arrangement for self-employed individuals and informal workers will also be established for the NSSF.

Interested persons and organisations are invited to submit any substantive comments or representation by no later than 10 DECEMBER 2021. If you support or oppose this bill, you can find the submission details here.