, FINANCING OF SOCIAL SECURITY AND SOCIAL INSURANCE IN SOUTH AFRICA
Introduction
Social security in South Africa is a constitutionally entrenched right. Section 27(1)(c) of the
Constitution of the Republic of South Africa, 1996 provides that everyone has the right to have
access to social security, including appropriate social assistance for those unable to support
themselves and their dependants. In order to realise this right, the State must adopt reasonable
legislative and other measures within its available resources (s 27(2)). The financing of social
security schemes and social insurance is therefore closely linked to the State’s constitutional
obligations and fiscal capacity.
The Conceptual Framework of Social Security Financing
South Africa’s social security system consists of two main pillars: social assistance and social
insurance (Strydom, Roederer & Strydom, 2017: 575). Social assistance is non-contributory and
funded from general state revenue, while social insurance is contributory and funded primarily
through contributions by employees and employers.
Financing mechanisms reflect the nature of each scheme. Social assistance schemes are
redistributive and tax-funded, whereas social insurance schemes are based on pooled risk and
contributions from beneficiaries (Devereux, 2011: 12).
Financing of Social Assistance
Social assistance in South Africa is primarily regulated by the Social Assistance Act 13 of 2004. It
provides for grants such as the old age grant, disability grant and child support grant. These grants
are administered by the South African Social Security Agency (SASSA).
The financing of social assistance is derived from general tax revenue collected by the state
through the National Treasury. This means that funding comes from income tax, value-added tax
(VAT), and other forms of taxation. The funds are appropriated annually through the national
budget process in terms of the Public Finance Management Act 1 of 1999.
Because social assistance is non-contributory, beneficiaries are not required to have made prior
contributions. The scheme is therefore funded on a redistributive basis, where economically active
taxpayers support vulnerable members of society (Strydom et al., 2017: 579).
Financing of Social Insurance
Social insurance schemes differ from social assistance in that they are funded through compulsory
contributions by employers and employees. These schemes are designed to provide income
replacement in the event of specific contingencies such as unemployment, workplace injury, illness,
maternity or retirement.
Introduction
Social security in South Africa is a constitutionally entrenched right. Section 27(1)(c) of the
Constitution of the Republic of South Africa, 1996 provides that everyone has the right to have
access to social security, including appropriate social assistance for those unable to support
themselves and their dependants. In order to realise this right, the State must adopt reasonable
legislative and other measures within its available resources (s 27(2)). The financing of social
security schemes and social insurance is therefore closely linked to the State’s constitutional
obligations and fiscal capacity.
The Conceptual Framework of Social Security Financing
South Africa’s social security system consists of two main pillars: social assistance and social
insurance (Strydom, Roederer & Strydom, 2017: 575). Social assistance is non-contributory and
funded from general state revenue, while social insurance is contributory and funded primarily
through contributions by employees and employers.
Financing mechanisms reflect the nature of each scheme. Social assistance schemes are
redistributive and tax-funded, whereas social insurance schemes are based on pooled risk and
contributions from beneficiaries (Devereux, 2011: 12).
Financing of Social Assistance
Social assistance in South Africa is primarily regulated by the Social Assistance Act 13 of 2004. It
provides for grants such as the old age grant, disability grant and child support grant. These grants
are administered by the South African Social Security Agency (SASSA).
The financing of social assistance is derived from general tax revenue collected by the state
through the National Treasury. This means that funding comes from income tax, value-added tax
(VAT), and other forms of taxation. The funds are appropriated annually through the national
budget process in terms of the Public Finance Management Act 1 of 1999.
Because social assistance is non-contributory, beneficiaries are not required to have made prior
contributions. The scheme is therefore funded on a redistributive basis, where economically active
taxpayers support vulnerable members of society (Strydom et al., 2017: 579).
Financing of Social Insurance
Social insurance schemes differ from social assistance in that they are funded through compulsory
contributions by employers and employees. These schemes are designed to provide income
replacement in the event of specific contingencies such as unemployment, workplace injury, illness,
maternity or retirement.
