The role of social security in South Africa

Article The role of social security in South Africa i s w International Social Work 53(2) 159 168 The Author(s) 2010 Reprints and permission: http://www. sagepub.co.uk/journalspermission.nav DOI: 10.1177/0020872809355394 http://isw.sagepub.com Edwell Kaseke University of the Witwatersrand, South Africa Abstract The article examines the role of social security in South Africa based on a review of secondary data. The author argues that the role of social security is to prevent and reduce poverty and to promote reintegration. The social security system needs to be strengthened in order to enhance effectiveness. Keywords poverty, social assistance, social insurance, social security, South Africa This article examines the role of social security in South Africa based on a review of literature. It begins by contextualizing social security provision in South Africa. It concludes by suggesting ways of enhancing the effectiveness of social security in South Africa. The provision of social security has become a major area of interest for social workers, particularly in developing countries like South Africa where poverty levels are quite high. In view of social work s concern with promoting social justice and human wellbeing, social workers should be concerned with the development of appropriate social security systems. In this discussion, I adopt the International Labour Organization s (ILO) concept of social security. ILO (2000: 29) defines social security as: The protection which society provides for its members through a series of public measures, to offset the absence or substantial reduction of income from work resulting from various contingencies (i.e. sickness, maternity, employment injury, unemployment, invalidity, old age and death of the breadwinner); to provide people with health care; and to provide benefits for families with children. Corresponding author: Edwell Kaseke, School of Human and Community Development, University of the Witwatersrand, Private Bag 3, WITS, 2050 South Africa. Email: Edwell.Kaseke@wits.ac.za

160 International Social Work 53(2) This concept of social security is also widely used in South Africa. It suggests that social security can take three major forms, namely social insurance, social assistance and universal benefits. Although South Africa embraces the ILO s concept of social security, its social security system revolves around social assistance and social insurance. Social insurance is complemented by private and voluntary arrangements. Triegaardt and Patel (2005: 124) observe that social assistance is the most significant social security strategy. The social security landscape in South Africa is unique in southern Africa in that social security provisioning flows from its constitution. Specifically, section 27(1c) of the South African constitution stipulates that everyone has a right to access social security, including social assistance. Although the constitution provides for a progressive realization of this right, the government is, nonetheless, accountable for ensuring it happens. The right to social security is, therefore, enforceable. For instance, the constitutional judgment in 2004 of Khosa & Others v. the Minister of Social Development & Others enforced permanent residents right to social security (Olivier, 2004). The scope of social security in South Africa The scope of social security in South Africa should be understood within the context of national efforts to create a democratic and just society following the demise of apartheid in 1994. Consequently, racial differentiation which characterized social security provisioning in the pre-1994 period has been removed (Triegaardt and Patel, 2005). South Africa s social security system consists of social assistance and social insurance, as follows. Social assistance South Africa has one of the most comprehensive social assistance systems in southern Africa. The social assistance system consists of means-tested grants to designated groups, namely persons with disabilities, older persons and children. Women aged 60 years and above and men aged 61 years and above receive an old-age pension valued at R1010 per month. Before 1 April 2009, men were accessing the pension at 65 years. Following the enactment of the Social Assistance Amendment Act 6 of 2008, there has been a gradual lowering of the age threshold for men. This should culminate in age equalization between men and women on 1 April 2010. Triegaardt and Patel (2005: 129) observe that the old-age pension is the largest social assistance programme in rand terms. The second programme in operation in South Africa is the child support grant (R240 per month) which is paid to the primary caregiver of a child up

Kaseke 161 to the age of 15 years. Before 1 April 2009, the age threshold was 14 years. Expansion of the age threshold will continue subject to the availability of resources. The aim of the government is that eventually the age threshold would be congruent with the definition of a child. Currently, a child is any person under the age of 18 years. The child support grant was introduced in April 1998 to replace the discriminatory state maintenance grants (Triegaardt and Patel, 2005). The foster care grant is another social grant. The foster care grant (R690 per month) pays foster fees to foster-parents who have legal custody of children under the age of 18 years. The other two social grants are the disability and care dependency grants, each valued at R1010 per month. The disability grant is for persons above the age of 18 who have a disability as determined by a medical board. The degree of disability should be such that it would not be possible for the individual to be self-reliant. The care dependency grant is for the parents of a child with a disability who requires additional care at home. Other family members looking after a child with a disability who requires care at home can also access the grant. This grant covers children up to the age of 18 years. In addition to these grants, the government provides food parcels worth R500 as social relief to the needy. This assistance is for a period of three months. Also, poor people receive free medical care at public institutions. In principle, no one can be denied treatment at public facilities because of their inability to pay. Social insurance There are three social insurance schemes in South Africa, namely unemployment insurance, the Compensation for Occupational Injuries and Diseases Fund and the Road Accident Fund. The unemployment insurance scheme is provided under the terms of the Unemployment Insurance Act 63 of 2001. It provides protection to workers, including domestic workers, against the risk of temporary unemployment. However, coverage is not extended to civil servants and non-south Africans in temporary unemployment. The scheme covers temporary unemployment occasioned by termination of employment, maternity, illness and adoption (Olivier, 2004). Contributions come from both the employee and employer and these are paid into the Unemployment Insurance Fund. The Compensation for Occupational Injuries and Diseases Fund pays compensation for work-related injuries and diseases. This compensation is in terms of the Compensation for Occupational Injuries and Diseases Act 130 of 1993. The scheme is funded out of employers contributions, which

162 International Social Work 53(2) vary from employer to employer depending on the risks inherent in their businesses. Domestic workers are not covered by this scheme. The third scheme, the Road Accident Fund, is not employment-based and is therefore financed out of an obligatory fuel levy. The scheme provides protection against the risk of road accidents. Thus, it pays compensation to victims of road accidents. The role of social security Social security has traditionally taken a risk-based approach to social protection. Consequently, the role of social security has been to compensate beneficiaries for lost income because of exposure to contingencies. This loss of income can either be temporary, as is the case when the risk of unemployment strikes, or permanent as is the case with old age and death. This compensatory function has meant that an important role of social security is to prevent and reduce poverty. Poverty remains the biggest threat to human security in South Africa. Peters (2008) observed that people living in poverty in 2005, namely those whose household income did not exceed R700 a month, accounted for 58.7 percent of the population, that is, around 27.5m people. Poverty is most common among black people, women and in rural areas. This level of poverty takes place in the context of growing unemployment in South Africa. Unemployment was estimated to be 26.7 percent in 2005 (Statistics South Africa, 2005). Social insurance plays a pivotal role in preventing poverty. It is thus an anti-poverty form of social security, which prevents insured individuals from sliding into poverty in the event of being exposed to a social risk. The impact of South Africa s social insurance schemes is seriously constrained by the fact that only two principal risks are covered, namely unemployment and employment injury. This is notwithstanding the fact that maternity is part of unemployment insurance. It should be noted that the ILO Social Security (Minimum Standards) Convention No. 102 of 1952 provides for nine branches of social security, namely: unemployment benefit, old-age benefit, employment injury benefit, maternity benefit, sickness benefit, invalidity benefit, medical benefit, survivors benefit and family benefit. As can be seen from these, seven risks are covered. Thus, South Africa falls short in this regard. This indicates the absence of a comprehensive social insurance system, and this is in itself an impediment to poverty prevention. The impact of unemployment insurance as an anti-poverty measure in South Africa is undermined by the coverage gap (Mpedi and Fourie, 2008). This essentially means that protection only covers a limited number of workers who fit the definition of an employee in terms of the Unemployment

Kaseke 163 Insurance Act. Olivier (2004) observes that only 5 percent of unemployed persons receive unemployment insurance. He further observes that approximately 5m unemployed persons do not benefit from any social security scheme. This situation, however, is not unique to South Africa, as it is characteristic of employment injury insurance schemes elsewhere. For example, ILO (2000: 110) points out that the gravest shortcoming of employment injury insurance schemes is that many employees are not covered by legislation. This coverage gap also affects compensation for occupational injuries and diseases, given the fact that it does not extend coverage to persons in atypical forms of employment. Women are particularly vulnerable because they are largely engaged in atypical forms of employment, because of a long history of marginalization in the labour market. The low levels of benefits paid compromise the role of social security in the prevention of poverty. The Road Accident Fund, for instance, offers low benefits (Triegaardt and Patel, 2005) and the compensation of accident victims is not timely. This defeats the purpose of protecting people against the risk of accidents. The problem of low benefits also affects unemployment insurance. Mpedi and Fourie (2008) observe that unemployment insurance benefits are generally low. These low benefits cannot prevent beneficiaries from sliding into poverty. Migrant workers are particularly disadvantaged as they can only receive lump-sum benefits when they return to their countries of origin. Lump-sum benefits by their nature cannot contribute towards the prevention of poverty in any meaningful way. Social assistance is an important instrument for poverty reduction. South Africa uses social assistance to reduce poverty among vulnerable groups who are needy and without the means to support themselves. Although theoretically, social assistance raises the floor for those living below the poverty line, some of the grants provide income that is below the poverty line. There seems to be an inherent assumption that caregivers can supplement the grant with other sources of income. Many of the beneficiaries are, however, so poor that the grant is their only source of income. Smit (2008) argues that the child support grant is ineffective as a strategy for poverty reduction because of the low benefit. It is, therefore, not surprising that poverty among children in South Africa is still high, as about 22 percent of children up to the age of 14 years are poor (Peters, 2008). The disability grant, on the other hand, is much higher in value than the child support grant. However, its effectiveness is compromised by the medical model used to determine eligibility. This excludes many deserving people, particularly in the context of the HIV/AIDS pandemic. Linking the grant to the provision of other services essential for the wellbeing of persons with disabilities could enhance its utility.

164 International Social Work 53(2) Smit (2008) also views the low age restriction as militating against the effectiveness of the child support grant as a poverty reduction measure. The low age restriction is due to fiscal constraints. While the recent extension of the age restriction to 15 years is an important milestone, the exclusion of children between the ages of 16 and 18 years remains an issue of great concern. Lack of access to the grant for children in this age bracket adversely affects their life chances, even though the grant is a modest one. The old-age pension is arguably the major source of income for rural people in South Africa (ILO, 2000). The old-age pension reaches 80 percent of its intended beneficiaries (Asher and Olivier, 2003). By their nature, social assistance schemes are selective in order to ensure that benefits are directed to the neediest members of society. This selectivity is also justified on grounds of limited state resources. The consequence of this is that meanstesting has the effect of excluding some poor people. The old-age pension is a passive social safety net that requires potential beneficiaries to present themselves at a benefits office. Those unable to reach the offices or unable to produce the documents are invariably excluded from eligibility for the grant. This, therefore, explains why some poor people slip through the net. Despite its shortcomings, the old-age pension is an effective measure for poverty reduction. Asher and Olivier (2003) observe that this effectiveness is reflected in the fact that the poverty gap for the elderly has been reduced by 94 percent. The authors further point out that the grant constitutes more than half of the income for a third of the rural households in KwaZulu-Natal. This is in line with the observation by Cichon and Hagemejer (2007: 176) that benefits paid to individuals effectively support whole families. The authors further remark that there is thus a redistribution that occurs within households, making it possible for family members to access basic social services such as education and health. There is also a link between the old-age pension and the informal social security system, in that many recipients of the grant in rural areas use part of the grant to contribute to stokvels (rotating savings schemes). This enhances income security among rural poor people. The elaborate nature of South Africa s social assistance system is indicative of the role of social security in promoting redistributive justice. This is particularly pertinent for South Africa, given its high level of inequality. Ervik (2008: 133) observes that in South Africa the richest 20 per cent of the population controls 70 per cent of national income. However, the redistributive role of social assistance in South Africa is limited because the grants do not reach many of the poor people. A broader coverage of poor people is therefore essential if redistributive justice is to take place. Social security also plays an important role in the prevention of risks that create income insecurity. However, in South Africa, this role is not receiving

Kaseke 165 sufficient attention, as the social security system is oriented towards compensation. For instance, the primary focus of the Compensation for Occupational Injuries and Diseases Act is compensation. Millard (2008: 143) is of the view that little is done about the prevention of accidents and rehabilitation and reintegration. This is notwithstanding the existence of the Occupational Health and Safety Act 85 of 1993 and the Mines Health and Safety Act 29 of 1996. Employers need to prioritize the issues of health and safety so that compensation becomes of secondary importance. The lack of prioritization of health and safety issues is aggravated by the fact that the Compensation for Occupational Injuries and Diseases Act no longer provides for employees to sue their employers for negligence (Olivier, 2003). Employers are thus unlikely to prioritize health and safety issues. This can only undermine the preventive role of social security. In addition to prevention, the rehabilitation of injured workers is also critical. At present such rehabilitation tends to be largely medical and serves to help injured workers to regain the use of their limbs. Rehabilitation should lock on to the notion of reintegration, which is an important function of social security. Injury and unemployment remove workers from the labour market. It is, therefore, important for social security schemes to reintegrate workers. Mpedi and Fourie (2008) argue that there are no active labour-market policies in South Africa which could enable those receiving unemployment benefits to re-enter the labour market. They contend that labour-market policies are passive, as the social security system focuses on the payment of benefits. Consequently, many beneficiaries remain outside the labour market for longer periods than would have been the case if there had been active policies in place which would have training and job placement programmes for those receiving benefits. Strengthening South Africa s social security system South Africa is keenly aware of the shortcomings of its social security system and the need to revamp it. It was for this reason that a Committee of Inquiry into a Comprehensive System of Social Security for South Africa was set up. It issued a consolidated report entitled Transforming the Present Protecting the Future in 2002. An important recommendation arising from this committee was the need to go beyond the narrow concept of social security and adopt a broader vision of social protection. A social protection strategy would encompass social security, employment creation, strengthening of livelihoods and access to basic social services. Such an approach would make a bigger impact on the prevention and reduction of poverty and inequality.

166 International Social Work 53(2) This approach mirrors the objectives of social policy, which revolve around reducing poverty and inequality and combatting social exclusion (Hall and Midgley, 2004). Social assistance as part of the broader social protection framework has the potential to create a more inclusive society because of its redistributive capacity. If properly funded and administered, social assistance can be a powerful instrument for promoting social integration. This is in line with the observation by the ILO (2006) that social security is instrumental in creating social cohesion and social peace, which are also prerequisites for economic growth. Strengthening the social security system in South Africa depends largely on extending coverage. This will be the surest way of implementing the right to social security (Kulke, 2007) and it is closely linked to efforts to promote economic growth, the kind of growth that can generate employment. This serves to increase the base of contributors for social insurance. The biggest challenge, though, is how to extend the coverage of social insurance amid growing unemployment and the growth of informal employment. The current global financial crisis can only make a difficult situation worse. This notwithstanding, there is potential for extending the coverage of social insurance to persons in the informal economy (Lund, 2002). However, the nature and scope of social protection should reflect the specific needs and circumstances of claimants. In view of the limited scope of social insurance in South Africa, there is a need to widen the base of risks that are covered. For instance, there is no public pension scheme in South Africa, neither is there a national health insurance scheme. The government, however, has announced its intention to introduce these. There is also scope to build on the efforts of communities to provide social protection on a self-help basis. These community efforts need to be strengthened as they represent the only source of social protection for some groups of the population. They are also are an important complementary form of social protection. These informal and semi-formal community schemes can evolve into formal schemes (Olivier et al., 2004). Extending social security coverage also entails expanding the reach of social assistance to cover those that are currently slipping through the net. However, in order to guarantee effectiveness, there is a need to continue addressing some of the problems bedevilling social assistance, notably corruption and maladministration (Kalula and Carolus, 2008). The ultimate aim should be to ensure that those who are supposed to receive grants do indeed receive them and that grants are appropriately directed to poor people. At the same time, it is important to guard against promoting dependency on grants. Consequently, the government should put in place measures that enable poor people to exit poverty. Thus, the provision of social assistance should be part of programmes that empower the beneficiaries of social security benefits to

Kaseke 167 achieve self-reliance. This developmental function will enhance the effectiveness of social security as an instrument for poverty reduction. Conclusion The discussion shows that South Africa s social security system plays an important role in the prevention and reduction of poverty and inequality. However, the categorical approach towards claimants and the system s lack of comprehensiveness limit its capacity to prevent and reduce poverty. The prospects of increasing the base of contributors to social insurance through the expansion of formal employment are not bright, at least in the short term, given the global recession. It would appear, therefore, that greater reliance on social assistance will continue in spite of the fact that expanding social insurance would exert pressure on the small base of taxpayers. The situation calls for heightened political will and solidarity between taxpayers and poor people. Social workers have a role to play in this regard, as they can engage in lobbying and advocacy with and on behalf of poor and marginalized people. References Asher, A. and M.P. Olivier (2003) Retirement and Old Age, in M.P. Olivier, N. Smit and E.R. Kalula (eds) Social Security: A Legal Analysis, pp. 233 99. Durban: Lexis Nexis Butterworths. Cichon, M. and K. Hagemejer (2007) Changing the Development of Policy Paradigm: Investing in a Social Security Floor for All, International Social Security Review 60(2 3): 169 96. Committee of Inquiry into a Comprehensive System of Social Security for South Africa (2002) Transforming the Present Protecting the Future, Consolidated Report. Pretoria: Government Printer. Ervik, R. (2008) International Normative Standards and Pension Provision: The World Bank, ILO, Norway and South Africa in Comparative Perspective, in M.P. Olivier and S. Kuhnle (eds) Norms and Institutional Design: Social Security in Norway and South Africa, pp 125 35. Stellenbosch: Sun Press. Hall, A. and J. Midgley (2004) Social Policy for Development. London: Sage. International Labour Organization (ILO) (2000) World Labour Report 2000.Geneva: ILO. ILO (2006) Social Security for All: Investing in Global Social and Economic Development, a Consultation, Discussion Paper No. 16. Geneva: ILO. Kalula, E. and D. Carolus (2008) International and Comparative Benchmarks, in M.P. Olivier and S. Kuhnle (eds) Norms and Institutional Design: Social Security in Norway and South Africa, pp. 63 72. Stellenbosch: Sun Press.

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