Sdumo Dlamini.  Picture: FREDDY MAVUNDA
Cosatu president Sdumo Dlamini. Picture: FREDDY MAVUNDA

CHANGES to provident funds are at the heart of the Congress of South African Trade Union s’ (Cosatu’s) opposition to the new Taxation Amendment Act.

The federation is set to go on a strike over the legislation signed into law by President Jacob Zuma in December.

However, questions have been raised over its hardline stance on the legislation when the majority of its members — public sector workers — are members of pension funds instead of provident funds.

The main difference between pension and provident funds is that when a pension fund member retires, he or she gets one third of the total benefit in a cash lump sum. The other two-thirds is paid out in the form of a pension over the rest of the member’s life.

A provident fund member can get the full benefit paid in a cash lump sum.

Cosatu’s expulsion of its largest affiliate, the National Union of Metalworkers of SA, at the end of 2014 gave public sector union the National Education, Health and Allied Workers’ Union top spot as the federation’s largest affiliate. Public sector employees make up the bulk of Cosatu-aligned union membership.

Cosatu president Sdumo Dlamini concedes the majority of Cosatu’s members are already on pension funds.

However, he says the government failed to communicate the legislative changes adequately and this resulted in panic even among workers in the public service, resulting in more than 85,000 resignations between 2013 and 2014 in anticipation of the legislation’s promulgation.

"Public servants viewed it to be referring to them as well … we are aware it does not affect public servants in the same way as those workers who receive a provident fund in the private sector."

The enactment of the law has also resulted in public sector workers recognising that they can only access one third of the money from their pension fund once they retire. Many of them are opposed to this. "They are now saying they would prefer a provident fund in the same way it worked prior to the legislation (being enacted)."

Mr Dlamini says public sector workers were also not initially consulted on whether they preferred a pension or a provident fund — and the enactment of the law has re opened this debate.

He tracks the genesis of the federation’s opposition to the law to the early 2000s, when it called for a comprehensive social security package. Cosatu said at the time such a package should be in place before pension reforms were introduced.

But this did not happen, despite a government task team set up to work on this. Subsequent talks outside of the National Economic Development and Labour Council (Nedlac) had failed to bring about agreement between the Treasury and Cosatu on the legislation.

Mr Dlamini says Cosatu’s internal problems were not to blame for the legislation being passed without the federation’s input — it had submitted parliamentary and public submissions on the bill when required. According to Cosatu’s organisational report at its congress in November, its parliamentary, legal, research, and fiscal and monetary co-ordinators had resigned.

Mr Dlamini denies that there were 40 meetings at Nedlac on the Taxation A mendment A ct. However, the other two labour federations in Nedlac, the Federation of Trade Unions of SA and the National Council of Trade Unions, had agreed to it and said there was enough consultation.

Mr Dlamini concedes that Cosatu is on its own in its opposition to the law at Nedlac, but says all its unions will stand together on the issue. "If it affects one of our members, it affects us all."

SA Democratic Teachers’ Union general secretary John Maluleke says the law "betrayed the trust of workers". Nearly 37,000 teachers resigned last year due to the coming law, even though they were already on pension funds, not provident funds and were, therefore, little affected by the amendments, he says.

Opposing the new law was not a "political campaign", but a campaign against the "unilateral action" by the government.

Cosatu is finalising a section 77 notice to embark on a full-scale strike over the law.