Employers and domestic workers can contribute a national domestic workers' pension fund operated through mobile-based platforms for easy registration and tracking contributions. (File photo)
The Progressive Domestic Workers Union of South Africa (Prodwusa)’s recent call for the establishment of a dedicated pension fund for domestic workers is an indictment of our nation’s failure to adequately value and protect a vital segment of our workforce.
For too long, the hundreds of thousands of South Africans, primarily women, who provide essential services in our homes have been relegated to a future of potential destitution in their old age. This is not merely a labour issue; it’s a matter of social justice and economic prudence.
While many South Africans enjoy the security of retirement savings, domestic workers, who contribute significantly to our economy and our daily lives, are often excluded from such protections. As Prodwusa secretary general Thato Reitumetse Maleka states, a pension fund is about “justice, economic fairness, and ensuring domestic workers are no longer ignored”. The union’s proposal deserves serious consideration, and it requires a nuanced and compelling response.
The core of the issue lies in the structure of domestic work itself. Often characterised by informality, low wages and no standardised employment practices, it presents unique challenges for traditional pension models. But we can, and must, devise a system that acknowledges these realities while upholding the fundamental right to a secure retirement.
To achieve this, South Africa needs a national domestic workers’ pension fund with the following key features:
- Shared responsibility: A model, where both employers and domestic workers contribute, is essential. This ensures both stakeholders have a vested interest in the fund’s success and promotes a sense of shared responsibility. Prodwusa’s suggestion of aligning contributions with a percentage of the minimum wage offers a practical starting point.
- Accessibility and efficiency: The system must be easy to navigate for both employers and employees. We must move beyond cumbersome bureaucratic processes and embrace technology. Mobile-based platforms offer a solution. By enabling seamless registration, contribution tracking and account management through mobile phones, we can overcome barriers related to access and digital literacy.
- Smart incentives: To ensure widespread employer compliance, the South African Revenue Service must play a proactive role. Offering tax rebates or reductions to employers who contribute to the fund is a vital tool. But, to maintain fiscal prudence, these incentives should be capped at a specific monetary amount per employee per year. This approach balances the need to encourage participation with responsible fiscal management. The simplicity of using the employee’s pension fund number as a contribution reference will also streamline the process for employers to claim these tax benefits.
- Robust governance: The fund should be established and mandated by the government. But the day-to-day management of the fund, including investment and administration, could be entrusted to vetted private fund management companies under strict regulatory oversight. This public-private partnership model can harness the efficiency and expertise of the private sector while ensuring government oversight and accountability.
- Portability: The fund must be fully portable, allowing domestic workers to maintain their accumulated savings regardless of changes in employment. Their unique pension fund number will remain constant throughout their working lives.
- Mobile-based platform: A dedicated mobile application will serve as a central hub for registration, contribution tracking, account statements and educational resources for both employers and employees.
Furthermore, the fund should be designed to complement and integrate with South Africa’s social security framework. While the state’s older persons pension provides a safety net, it is often insufficient to maintain a decent standard of living in retirement. The fund can serve as a supplementary pillar, allowing domestic workers to build a more substantial retirement nest egg. Links with the Unemployment Insurance Fund, for example, could be explored to streamline administration and ensure that workers maintain continuous social security coverage throughout their working lives.
The objections raised by entities such as SweepSouth regarding the cost to the fiscus are not to be dismissed lightly. But we must adopt a long-term perspective. The social and economic costs of failing to provide for the retirement security of nearly a million workers — increased reliance on social grants, perpetuation of poverty and the erosion of social cohesion — far outweigh the necessary investment in a well-designed pension fund.
Moreover, the fund has the potential to generate significant positive economic ripple effects. By providing domestic workers with greater financial security, we can boost their consumer confidence and spending power, stimulating local businesses and contributing to economic growth.
A more secure retirement also reduces the burden on the state’s social welfare system in the long run, freeing up public resources for other developmental priorities. Additionally, the accumulated money in the fund can be strategically invested to further drive economic development and create opportunities.
The government, employers and domestic workers must participate in a constructive dialogue to bring this vision to life that will stand as a testament to our commitment to social justice and a more equitable future for all South Africans.
Lindani Zungu is a Mandela Rhodes scholar pursuing a master’s in political studies while serving as the editor-in-chief of a youth-oriented publication (Voices of Mzansi) in South Africa.