• Introduction• Thank you once again for inviting me to the annual conference

of the IRF. • The poverty profile of South Africa published by Stats SA

indicates that just more than 26% of the population up to recently lived below the food poverty line which is at R305 (2008-2009). 39% were below the lower-bound poverty line of R577 per person per month and 52% below the upper-bound poverty line.

• South Africa is considered to have the world’s most unequal income distribution with a Gini coefficient measuring .67. It is worse than 33 other developing countries.

• The issue of poverty and unemployment continues to remain a challenge for the government. The informal economy has grown apace over the last decade. However, the number of informal sector workers cannot be precisely determined.

• How did we get to this situation? “die Here het geskommel en die dice het verkeerd geval vi’ ons / daai’s maar al”, het Adam Small gesê. This the outcome of the choices we made as a society and those that we continue to make.

• I will discuss the impact of the lack of social and economic equality and then take us through the choices we have been making, our perspectives on them and the current trajectory.

• While the theme of this conference suggests a “New Dawn: “A New Dawn: Lighting the future Towards A comprehensive Social Security”

• I wish there were signs that could make me more sanguine than I am. •  • The Impact of Social and Economic Inequality•  • Even until the early 1990’s, economists were arguing that income

inequality was good for economic growth

• However, this theory has been largely contradicted by recent studies: Benabou (1996) summarized the main results from 23 studies on the effect of inequality on growth and concluded that “initial inequality is negatively correlated with long-run growth, and the magnitude of the effect is that a one standard deviation decrease in inequality raises the annual growth rate of GDP per capita by 0.5-0.8%”

• Does income inequality promote economic growth?– There is a school of thought which suggests that income inequality can

have a positive impact on the economy.

– Conley (2009) argues that “since the Scottish Enlightenment conservatives have argued that inequality is the engine of progress; differential rewards lead to ingenuity, industriousness and innovation”

– Turok (2010) also suggests that inequality may provide individuals with incentives to work harder or more

• Despite these lines of arguments, there appears to be little evidence to support such theories

• There is some evidence from rigorous studies to suggest that there is a relationship between income inequality and health and social problems.

• Kawachi et. al. explore the hypothesis that income inequality is related to mortality rates in the United States. They find that income inequality does impact mortality rates, although primarily as an instrumental variable. They posit the following chain of causality: income inequality has a significant impact on social capital, and social capital has a significant impact on mortality rates.

• Kondo et. al. sought to determine whether there was any association between income inequality and health indicators. Their analysis shows that individuals living in areas with high income inequality have a higher risk of premature mortality independent of their gender, age and socio-economic status. Furthermore, they also determined that income inequality was related to poor self-reported health status.

• Whitworth assesses if there is any relationship between inequality and certain types of crime such as robbery, burglary, violence, vehicle crime and criminal damage, at the sub-national level across England. His study adds to an already existing body of literature which shows that in the US, there are positive associations between inequality and homicide across states and metropolitan areas; that inequality is positively associated with violent crime but unrelated to property; and that in SA, a small area level study revealed that there is a positive link between local inequality and both burglary and vehicle theft.

• The Myths about Social Grants System• The media without fail in the views of opinion writers and editorials,

every year does not waste the opportunity of casting aspersions on the country’s system of social grants. Neither do the middle class, senior officials within government and politicians. The latter just do behind closed doors and in their meetings.

• The grants make people lazy: Despite the fact that this argument is older than social security itself. The very people who argued that apartheid caused poverty, now argue that it is laziness compounded by the social grants system

• This is bad they say: despite the undisputed evidence of positive socio-economic impacts

• They are breeding more and more, despite the facts to the contrary that show that our fertility rates are declining. One well known and ‘educated’ leader in our society responded, to our evidence that the majority of young girls are not having children for the grants, “I do not believe in the science of your evidence, I believe the anecdotes.”

• The system is unsustainable - As if they have presented evidence. The educated are the only people who are allowed to argue without prove or present them in numbers that defy logic. Ask Mike Schussler. The evidence shows that the system is in the medium and long run sustainable.

• They need education as the only source out of poverty. As if poor people are stupid and do not know that. As if they can live on education alone. In fact they are expected to suffer hunger till they are out of poverty

• South Africa’s social protection trajectory • In broad terms, that is if we define social security as a set of measures

that include social security as well as basic services that significant progress has been made in some quarters for which credit must be given.

• Access to free basic services in the form of water, electricity, sanitation the evidence is indisputable

• The 2013 General Household survey shows that 12,8 million (86,4%) households had access to piped water in 2013 compared to 9,4 million (79,9%) in 2005.

• In terms of other services, the percentage of households connected to an electricity supply from the mains increased consistently from 77,1% in 2002 to 85,4% in 2013.

• The percentage of households with access to improved sanitation, that is flush toilets or pit toilets with ventilation pipes, has increased consistently from 62,3% in 2002 to 77,9% in 2013.

• Access to no fee schooling has grown at an impressive rate• The provision of public works that is redistributive in nature is provided

at a remarkable scale

• What is my assessment of social security: defined as social assistance and social insurance?

• In respect of social assistance, the grants, South Africa’s social protection trajectory over the last 70 years has been 1 step forward, two steps back:

• From the 1942 Beveridge Plan to the National Party limited extensions• From 1992 Social Assistance Act which was comprehensive for social

assistance to 1997 reform of the Child Maintenance Act• From the Taylor Committee’s proposals to the 2004 Treasury paper on

Retirement Reform – Even World Bank rejected the proposals as falling within its model. The World Bank has retreated even more since then

• From the Social Development proposals on Strategic considerations for Social Security to a failed Inter-departmental Task team of Social Security

• From a compromised set of proposals by an Inter-departmental Task Team to a hollow Social Protection plan in the National Development Plan

• From the NDP to the current Medium Term Strategic Framework

• What about social insurance • Let’s look at social insurance and specifically retirement reform• The topic and my contributions to it have become rather stale – but we

need to be vigilant: A national retirement system is being fashioned trying all manner of tactics to avoid it.

• First by confusing savings in private arrangements with statutory social security and so we have many experts.

• Have the costs come down over the years? Do we have better protection today than what we had a decade ago?

• Can we trust senior public servants to develop the best policies that put the interest of the poor first and sacrifice their own interests?

• The intention to mandate compulsory savings will only hurt the poor. I acknowledge that the fear of corruption is not without merit if we have a national system. Too many government institutions have failed to engender the public trust when it comes to managing public money. This should not be a reason to pretend that scandals have in the current environment: Such as the Fidentia debacle, poor investment of the provident funds from South African Clothing Workers Unions, and non-payment of contributions to funds such as the recent case here in KZN, etc.

• A national contributory scheme is in the interest of society, as it will provide the benefits of lower costs, spread the risks, provide for uncertainty that the market cannot, etc. But the prospect of such a system I must now confess remains dim. I was in fact told in government that this thing will not happen in our lifetime.

• The unemployment insurance fund continues to hoard funds taken from the poor for unemployment but keeping most of it back for the next generation. The fund now has reserves exceeding R80billion?? When it recently reformed to extend to the period of benefits, it only spread the same amount of benefit over a longer period of time, with the result that the hoarding will continue. The only beneficiaries remain fund and investment managers

• How does healthcare provision and health insurance square up? Have we made progress? Between 1994 and today we had a significant decline in the number of medical schemes, which is very good. However private healthcare is being dominated by a few players. The numbers of people accessing medical schemes have not increased in any meaningful manner. Under the guise of National Health Insurance we dropped the proposal for a risk equalization fund that could have significantly increased and failed to spread the benefits of tax subsidies more equitably.

• So the question that goes a begging is whether we are building a more equal social and economic society?

• Not if we take roads that have been in the public domain for decades and privatize it through e-tolling. There is nothing wrong with toll roads – the principle of user payer is sound from a public finance perspective. But when you Toll roads that has been public for decades then we are effectively barring the poor from it, and introduce what amounts to regressive taxes.

• Paying for water has become a way of rationing the poor and get them to pay

• Lack of rental stick social housing is a way in which the state abandons its responsibility for temporary housing

 •What are the prospects?•Let’s first look at the political economy of social security globally – Under what conditions do governments and or societies concede to broad, inclusive and comprehensive social security?•There appear, from my perspective to be 7 conditions•Crisis of situations inevitably leads governments to and then to avert the deepening thereof expands social security: Industrialisation, WWI, WWII, financial crisis•Authoritarian governments under threat who buy time when coercive power fails – Apartheid government is a typical example – deracialisation of social grants, The Arab spring•The link between heterogeneous societies and social security•Path dependency: The development trajectory, Colonial heritage, Extent of industrialization•Policy transfer/diffusion: Lesotho, Botswana, colonial heritage•Game theory – how do interest groups allocate resources•Competition in the political system: Democratic institutions, Civil society

• The prospect for South Africa in my view does not look very good, and this is apparent in the NDP and the Medium Term Strategic Framework

• What then needs to be done?• I’d like to offer some thoughts on what more needs to be done from a

social security perspective to increase social and economic equality• The Elite – we will have to make concessions but that is like asking

turkeys to vote for Christmas. And the thinking of those tasked with policy formulation is: Why would I as a senior official in government want to put my 13% medical aid contribution into a national health fund and go to the local Hospital – The Elite will have to change, but will it?

• The political balance of power will have to be more equal – Sweden is a classic example of where the balance of power in the early days of social security ensured for a more equal society.

• Legal instruments will have to be used going forward – Our constitutional injunction that obliges the state to provide social security will have to be used. Thus far the main thrust to expand social security has been the matter of discrimination and the economic argument. We have not argued that it is a matter of human rights that a person earning an income about a certain threshold has the right to be a member of a social or national health insurance system. Or that a person with an income above a certain threshold has the right to membership of a state provided retirement system. Or that the failure of private retirement funds that result in financial distress of families and their children, is by right the failure of the state to have ensured the statutory provision of a national retirement system.

• Conclusion• We have over the last 7 years not seen any significant social policy

intervention that suggests a move to a more equal social and economic dispensation in the realm of social security. If anything, we have lost our way.

• I am encouraged by the ideas and research being spearheaded by the IRF, what makes me wonder though is why you would want to work yourself out of a job and or existence. But I shall keep an eye on the developments.