Speech by Zwelinzima Vavi, COSATU General Secretary, to the 4th Nedlac National Labour Constituency Retirement Funds Conference, 6 November 2012
Thank you for honouring me with your invitation to address this most important conference. We are gathered here to discuss the future of the working class, in a very literal sense. While we normally focus on the serious problems workers face here and now, at their workplaces and communities, it is no less important to discuss potential problems workers will face in the future when they stop working.
But we cannot discuss retirement policies outside the context of the general socio-economic problems we face today - the triple crisis of unemployment, poverty and inequality in South Africa.
Workers rightly expect to benefit from the deferred wages which they invested all the years of their working life into their retirement funds. But the stark reality is that millions of workers will not be receiving anywhere near enough from their pension or provident funds to live a decent life when they reach retirement age, and will need to depend on other forms of income.
Millions are not working at all. The StatsSA Quarterly Labour Force Survey revealed last week that in the third quarter of 2012, the official unemployment rate rose to 25.5% of the labour force, up from 24.9% in the second quarter. The more realistic expanded definition of unemployment, which includes people who have stopped looking for work, increased to 36.3% from 36.2% in the same period.
The total number of people without work is 4.67 million - one quarter of the working population - the highest total since records started in 2008, up from 4.47 million in the second quarter.
That means at least 4.67 million people are not working and therefore not accumulating anything in a retirement fund! Millions more have worked only sporadically, or in precarious or casual jobs where their employers, such as labour brokers, have not made any provision for retirement funds or indeed any other benefits for their employees.
They will be joining the 3.5 million South Africans over 60 years old who are currently dependent on just the state pension of R1200 a month. While we appreciate the huge improvements made by ANC governments in the allocation of social grants and pensions, an income of R1200 a month can only be described as below the poverty line, no nearly enough to live a decent life.
Compare that to Stephen Koseff, CEO of Investec, who made R47 600 000 in 2011, R4 000 000 a month, which is more than 30 000 times as much as the state pension of R1200. That is the unequal society we live in.
That is why we cannot look at the problems confronting the retirement funds in isolation from the broader issues of social security policy, to find ways to ensure that no-one is condemned to a life of poverty and hunger either during their working life or after they retire.
We will never resolve all the particular problems we will be debating here this week, without the full implementation of what the ANC Policy Conference defined as the ‘second phase of the transition', what the COSATU Congress defined as a ‘Lula moment'.
This requires an activist interventionist state that is clearly biased towards the working class and the poor. It must transform the failed economic structure we inherited from the years of colonialism and apartheid, which is over-dependent on the export of raw materials and is dominated by a few massive multinational monopolies concentrated in the mining and banking sectors.
It must promote and protect locally based manufacturing industry and renovate our aging economic infrastructure. This is the only way we are going to make a reality of the five priority promises of the ANC 2009 election manifesto, on decent work, education, health, crime and rural development.
Developments in Brazil and other Latin American countries have shown in practice that policies to reduce poverty, create employment and speed up economic growth can start to turn the tide. They have confounded those who say there is no alternative to the neoliberal, free-market system of capitalism which is based on the super-exploitation of workers and lies at the heart of our crisis of unemployment, poverty and inequality.
Of course the policies implemented in Brazil cannot be implemented mechanically in South Africa but they give us hope that there is an alternative. In particular we can learn that economic growth and poverty reduction are not conflicting but complimentary priorities.
Brazil`s successes in fighting inequality and poverty by improving social protection and social transfers, developing public education and making provision for minimum wage policies, has coincided with faster economic growth. The reason is clear - higher wages and social grants stimulate demand for goods and services and create a market for new businesses, which in turn employ more people and increases economic growth.
Social security reform is therefore not only vital for the role it can play in reducing the intolerable levels of poverty, but is an essential component of the overall programme for the second phase of the transition.
This is why we are becoming increasingly concerned at the outrageous length of time that it is taking government to produce its long awaited comprehensive social security policy document. Our concerns are heightened by indications that the Treasury wants to propose piecemeal reforms of retirement funds outside the context of the comprehensive social security reform, about which we are extremely worried.
For example, there is a proposal for mandatory preservation of retirement funds, which would prevent workers from drawing funds before retirement. While this may be correct for workers in secure, permanent employment, it cannot be justified when there is no income support for the majority of workers who lose their jobs or are unemployed or in precarious forms of employment.
Treasury is also calling for the unitisation of provident funds when workers retire, a complex and explosive issue, which cannot be addressed without thorough consultation.
The Treasury must stop making these counterproductive interventions, and discuss them in the context of comprehensive reforms. There seems to have been extensive consultation between Treasury and the Financial Service Sector since 2007, both on their piecemeal proposals, and the pending policy paper, yet organised labour has been excluded from this process, apart from the recent minimal and superficial engagement on the retirement reform papers.
This is an insult to workers, since decisions are being taken about them on critical issues of interest, including how their pensions, which are deferred pay, are managed. I therefore hope that this conference will agree that the Treasury must work with the Inter-departmental task team to speed up the release of the comprehensive policy proposals and suspend any further discussions on piecemeal changes.
I am sure that the other federations will also share COSATU's concerns around the Financial Services Laws General Amendment Bill, which is currently before Parliament. It has provisions which aim to absolve financial regulatory institutions such as the Financial Services Board (FSB) from "any loss sustained by, or damage caused to, any other person as a result of anything done by or omitted by that person in the exercise of power or the carrying out of any duty or the performance of any function under or in terms of this Act..."
This seems to mean that the FSB would be exempted from any legal action brought against them by retirement fund members for recourse for past, present or future negligence or wrong-doing. The proposed amendments affect millions of pension fund members, potentially to their detriment, as it might remove any recourse. The implications of such proposals are very serious and must not be allowed to be legislated without a thorough public discussion on the matter and detailed engagement with organised labour.
We note their promise of amending the document and incorporating the proposals from labour and other stakeholders, and we hope to see those changes in the final document.
We should therefore insist that the bill be tabled at Nedlac for tripartite engagement on its provisions, and for it to be amended so that it strengthens, not weakens, the interests of retirement fund members.
We should commission an urgent legal opinion on the possible negative consequences of the proposed bill on members and mobilise for a programme of mass action, including a national strike, if satisfactory steps are not taken to remove potential prejudicial provisions and to strengthen safeguard measures for the interests of retirement fund members.
Another issue which I hope you will be debating is the ANC policy proposal for a portion of pension funds be prescribed for investment in developmental projects. The ANC discussion paper on state-owned entities and development finance institutions argues for the state to "regulate a substantial part of retirement and life assurance funds to be invested in state-owned enterprise and/or development financial instruments".
This is in line with a long-standing demand for all financial institutions, not just retirement funds, to be obliged to invest a proportion of their funds in projects which will bring benefits to South Africa as a whole and not just profits for shareholders.
Several summit meetings of government, business, labour and civil society have adopted similar resolutions but they have remained on paper and never been implemented.
Of course retirement funds must be managed responsibly in order to protect the interests of the pensioners, but COSATU has totally rejected the Democratic Alliance's suggestion that that developmental projects are "speculative" and finance institutions should invest pension funds solely on short-term returns.
Their spokesperson, David Ross, cynically said that "this proposal could be seen as a tax on pension funds," and that "it could reduce benefits for pension fund members".
I believe that on the contrary, it is in the long-term interest of all South Africans, including pensioners, for investment to be directed into areas such as education, healthcare, public transport, the green economy and all the basic services which are crying out for more investment.
I agree with Economic Development Minister, Ebrahim Patel, that "by investing in developmental projects, retirement funds benefit through a stronger economy, which in turn keeps fund members employed and contributing for longer".
We should surely reject the blinkered view that only investments that make a quick profit should be considered. European and American pensioners are today paying the price for such short-sighted investment policies in real ‘speculative' investments in property and banking, which led to the financial meltdown, rather than in economic infrastructure and manufacturing industry.
South Africa must avoid the same mistake of relying purely on the market to determine where money should be invested. In the long run this is far more risky than investing in the future of our country and in projects which will create employment and reduce poverty.
We face immense challenges in making South Africa a far more equal society. This conference can help to get us all on the right road to economic transformation, job creation, poverty reduction and wealth redistribution, by adopting and campaigning for policies that will rescue us from the crisis we confront. I wish you a successful conference!
Issued by COSATU, November 6 2012
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