S.Africa's Nene open to UIF contribution reduction - CNBC Africa

S.Africa's Nene open to UIF contribution reduction

Southern Africa

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Finance Minister, Nene could bring good news to strained employees if the proposed UIF contributions reduction goes through: PHOTOS: GCIS

South Africa’s Finance Minister is seeking public comment on a proposal to temporarily reduce contributions to the UIF.

The Unemployment Insurance Fund (UIF) contributions by both employees and employers could be revised down while keeping benefits unchanged.

The Minister of Finance in his 2015 maiden Budget Speech proposed to reduce the remuneration threshold against which the contributions are calculated from the current monthly amount of 14,872 rand to 1,000 rand.

(READ MORE: Finance Minister Nhlanhla Nene’s 2015 budget speech)

“Given the challenging economic environment that has led to downward revisions in economic growth, a reduction in unemployment insurance contributions will provide significant support to households and employers,” read a Treasury statement.

“The reduction is proposed to take effect on 1 April 2015, and would be reconsidered for the next fiscal year, shortly before 1 April 2016. If implemented, both employers and employees will be required to pay a maximum of 10 rand each per month, down from the current maximum of 148.72 rand.”

The minister invites public comments to be submitted by 20 March 2015.

The minister will also consult social partners within NEDLAC. All comments received, including any proposals from the consultation process within NEDLAC, will be considered before a decision is made.

According to the statement, the minister’s proposal would provide much-needed support to the economy, putting about 15 billion rand back into the pockets of workers and employers.

The contributions reduction would draw down on the UIF’s accumulated surplus which currently stands at more than 72 billion rand.

“Because this intervention will draw down on the accumulated surplus, it will stimulate the economy without requiring national government to issue additional debt,” added the statement.

The Unemployment Insurance Contributions Act of 2002 enables the Minister of Finance to adjust the contributions made by employers and employees, while the Unemployment Insurance Act of 2001 enables the Minister of Labour to adjust benefits.