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Government’s pension reform U-turn

Monday, 15 February 2016   (0 Comments)
Posted by: Author: Hlengiwe Nhlabathi
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Author: Hlengiwe Nhlabathi (City Press)

Government is set to scrap certain clauses of the Tax Amendment Act to appease labour federation Cosatu, which made threats to withdraw support for the ANC in the upcoming local government elections unless President Jacob Zuma repealed the law.

Confirming for the first time that government would perform a U-turn, Minister in the Presidency Jeff Radebe told City Press in an interview on Friday that all signs pointed towards finding a way of "postponing” the implementation of some of the law’s disputed aspects.

Instead, the focus would be placed on fast-tracking the implementation of comprehensive social security as a safety net for workers.

Zuma had asked Radebe to facilitate a resolution to the impasse between Cosatu and Treasury.

Radebe said: "We are taking into consideration the issues that have been raised by the stakeholders. We are now trying to urgently find a solution. It does appear we need to find a way of postponing the implementation of some of the clauses that are in dispute so that the process of effective implementation is within the context of this overall security system. We are at the point now of finding the appropriate mechanisms. In the meantime, National Treasury and ourselves are in discussion.”

Zuma did not make any special announcement on the pension reforms during his state of the nation address on Thursday, except to acknowledge Cosatu’s concerns and explicitly state that a solution had to be sought.

He is said to have been unaware of how strongly other stakeholders felt about this amendment act before he signed it into law in December, and he had "explained himself” to Cosatu.

Meanwhile, Radebe said Finance Minister Pravin Gordhan may make an announcement regarding the amendments during his budget speech on February 24.

"It is possible that we might have found an amicable solution to the matter by then,” he said.

The federation, which raised issues about a widening trust deficit between itself and the ANC-led government, adopted a two-pronged approach in dealing with matter – to fight and negotiate at the same time. It urged its members to hold pickets that would culminate in a mass march in a bid to force Zuma to repeal the new pension law.

After meeting Cosatu leaders last week Friday, Radebe said government was looking at legal means to shelve or place a moratorium on specific clauses that troubled Cosatu. Ongoing meetings were being held to urgently find a solution before the law could come into effect on March 1, he said.

"There are two points that are being debated. The first is whether there was effective consultation within the Nedlac [the consensus-seeking body between government, business, civil society and labour] process and the National Treasury.

"The second is that some stakeholders were under the impression that this act will be resolved within the context of the existence of a social security system for South Africa.”

The new tax law would enforce the annuitisation of two-thirds of provident fund savings on retirement from March 1. At the moment, provident fund members are able to cash in their accumulated savings as a lump sum when they retire or resign. The annuitisation threshold has been increased from R75 000 to R247 500.

The significance of this change is that low-income earners whose savings are below the threshold do not require annuitising.

Cosatu, which warned of the catastrophic effect of leaving the law unchallenged, has accused Treasury of having sneaked the law through Parliament without considering the fact that no progress had been made in implementing social security systems, which was mainly the responsibility of the department of social development.

The fact that there was no Nedlac report sent to Parliament on discussions around the pension reforms placed Treasury in a compromising position, as it proved there had been no meaningful consultation, despite the state initially insisting all processes had been followed.

Radebe stressed that the new law could now not be repealed, but certain sections could be removed.

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