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07 August 2024 Photo Supplied
Dr Cecile Duvenhage
Dr Cecile Duvenhage is a lecturer in Personal Finance and Microeconomics, Department of Economics and Finance, University of the Free State (UFS), and the Editor and Co-Author: Personal Finance (Van Schaik Publishers).

Opinion article by Dr Cecile Duvenhage, Lecturer: Personal Finance and Microeconomics, Department of Economics and Finance, University of the Free State, Editor and Co-Author: Personal Finance (Van Schaik Publishers).


On 29 July 2022, the National Treasury released the 2022 Draft Revenue Laws Amendment Bill for public comment until 29 August 2022 to introduce the “two-pot” system for retirement savings that was flagged in the National Budget. The Revenue Laws Amendment Act was the first law approved by Parliament in 2023 and signed into law, giving effect to the new system and setting the implementation date. The Pension Funds Amendment Bill was approved by Parliament in May 2024. It introduces changes to the Pension Funds Act and includes funds not regulated by the Pension Funds Act in the new system. President Cyril Ramaphosa officially signed the Pension Funds Amendment Bill into law on July 21, 2024

The two-pot retirement system in South Africa (to be implemented on 1 September 2024) divides retirement savings into two distinct components: 1) the savings and 2) the retirement pot:

1) Savings Pot: About one-third of the contributions go into this pot that is designed for short-term financial goals and emergencies. Members will be able to access a portion of these savings before retirement if necessary, and can withdraw from it once a year (minimum withdrawal amount of R2 000) under specific conditions. 

However, according to the Citizen (22 July 2024) 30% of pension fund members in the Old Mutual Stable fund will have less than R2 000 in their savings pot and will not be able to claim. Informal sector workers often lack coverage, and traditional family-based care for the elderly is breaking down as urbanisation increases. Therefore, this system seems to benefit the middle-income group and (again) fail the poorest of the poor.

Keep in mind that access to the savings pot’s money has implications on both the tax that the individual pays and legal requirements during divorce proceedings. More specifically:

• Withdrawals are subject to taxation at the individual’s marginal tax rate
• Retirement fund administrators must be notified when divorce proceedings are initiated to ensure that no payments are made from the savings pot during the legal process. This ensures that the division of assets is handled correctly according to the legal requirements.

2) Retirement Pot: The retirement component ensures that the bulk of retirement savings – two-thirds – remain untouched until retirement age as stipulated by the fund. This preservation is crucial for securing long-term financial stability post-career. These funds are strictly preserved until retirement age, ensuring long-term financial security. Upon retirement, members can access these funds as a regular income stream, like a pension annuity.

Is it wise to take a portion of your pension?

There are also two sides to the Pension Funds Amendment Bill. Individuals and Financial Companies welcome this new law, as it allows the Financial Sector Conduct Authority (FSCA) to start approving rule amendments – submitted by various funds before 31 July 2024 – once gazetted.

Discovery was the fund to react the quickest with its proposed amendment rules. Some of the other retirement funds and administrators still have a substantial amount of work to do before they will be able to pay claims, including ensuring administration readiness and integration with SARS. SARS anticipates a R5 billion revenue windfall from taxing two-pot retirement system withdrawals in the next financial year. Thus, the government expects many hundreds of thousands of South Africans to access the savings component of their retirement funds as soon as the two-pot retirement system goes live.

Making use of the government’s lifeline – to protect the dignity of those in need and overcome financial stress – can be understood given the economic constraints facing individuals such as high unemployment, excessive debt, and inflation.

However, a wiser approach by the government should be to address the consequences and not the causes of citizens’ financial dignity. Given that less than 6% of individuals in South Africa can retire “without worries”, individuals should also have a good understanding that this “lifeline” is no quick fix for financial stress.

Hidden costs and other implications

Members of South African pension funds may generally access their pension pot from the age of 55. If you withdraw before the age of 55, there will be tax implications. This means that the withdrawal will be taxed similarly to your salary or other income. Any withdrawal is included in your gross income for the year, potentially pushing you into a higher tax bracket.

There will also be hidden costs in the form of penalties as stipulated by the member’s fund. The Institute of Retirement Funds Southern Africa has indicated an administration fee ranging from R300 to R600 on each withdrawal.

South Africa has a progressive tax system, where tax rates increase as taxable income rises. It is designed to be fairer by imposing a lower tax rate on low-income earners and a higher rate on those with higher incomes. Therefore, the amount that a member will get out depends on his/her marginal rate. Should a member be paying 45% tax on his/her taxable income (when earning more than R512 801 per year), a member might end up only getting slightly more than half of the withdrawal amount – once your tax-free benefit at retirement is exhausted.

Some further long-term benefits can be jeopardised when a member withdraws from the retirement savings. These are:

1) Tax-Free Benefit at Retirement: Keep in mind that withdrawals may reduce the tax-free benefit you enjoy at retirement. Up to R550 000 of the lump sum you take in cash at retirement may be tax-free, but this benefit can be eroded if you frequently withdraw from your savings pot before retirement.

2) Lost Tax-Free Growth: Additionally, withdrawing from your savings pot means losing out on tax-free growth. Savings in your retirement fund grow free of tax on interest income, dividends, and capital gains.

Apart from the tax implications, some pension providers will charge fees for withdrawals. Therefore, it is advisable to check with your pension administrator to understand any costs involved. In addition, withdrawing from your savings pot will reduce the remaining balance.

Early withdrawals can significantly affect your retirement savings. Every R1 withdrawn at age 35 could equate to as much as R30 less at retirement 30 years later.

“Two pots” may spoil the broth

Statistics from the Nedfin Health Monitor (2023) reveal that 90% of South Africans have inadequate savings for retirement, and a significant 67% of people in the country have no retirement savings beyond what they are putting into their employer-provided pension funds – which is often too little to be able to retire comfortably. The general rule of thumb is that individuals start saving as soon as possible, as much as possible, for as long as possible.

There is a saying that “too many cooks spoil the broth”. My personal view is that individuals need to be careful that “two pots” do not spoil the broth.

Although the system aims to balance immediate financial needs with long-term security, there is simply no way that individuals can eat their cake and have it. If the two-pot system is regarded as a bailing-out system, worry-free retirement remains a challenge for many. There is still a lot of thought needed for the two-pot system. Policymakers should consult the pension systems of the Netherlands, Iceland, Denmark, and Israel – which are regarded as having the best pension systems globally – to get an understanding of how adequacy, sustainability, and integrity are prioritised.

News Archive

Former top politician talks at UFS School of Management
2007-04-25

Dr Matthews Phosa, the non-executive chairman of EOH and former politician, presented a guest lecture to a group of MBA students at the University of the Free State's (UFS) School of Management. At the lecture were from the left: Mr Tate Makgoe (Free State MEC for Finance), Ms Nontobeko Scheppers (MBA student), Dr Phosa, Prof. Helena van Zyl (Director: UFS School of Management) and Mr Setjhaba Tlhatlogi (MBA student).
Photo: Stephen Collett

Exploring some of the myths and opportunities cyber space offers

Mathews Phosa

Introduction

It is no longer business as usual. Globalisation poses new challenges as well as opportunities to business, education and society in general. Many of these new opportunities are alive with paradoxes and tensions between local sustainability and global market opportunities. The growth in new communication technologies challenges us to critically explore some popular myths, opportunities and define possible responses.

Cyberspace is often described as the new frontier – not only in the race for newer and faster technologies, but also in education. Any user or provider of services who does not explore this new frontier will soon be considered using “outdated” and will be accused of using obsolete methodologies. Cyberspace, like the spaces embodied in continents, is something that should be claimed and conquered.

Cyberspace and specifically access to information, including online education is hailed as the great equaliser. It is now claimed that everyone will have equal access to “Knowledge”. Cyber education  for example is celebrated as “education-without-borders”, but as Bauman states, while it does change borders and access, it creates new “haves” and “have-nots”.

 

To put it in a nutshell:  rather than homogenizing the human     condition, the technological annulment of temporal/spatial distance tends to polarize it.  It emancipates certain humans from territorial constraints and renders certain community-generating meanings     exterritorial – while denuding the territory, to which other people go on being confined, of its meaning and its identity-endowing capacity.
(Bauman 1989:18; emphasis mine).

Virtual environments and the possibilities offered by the World Wide Web are new spaces that are being colonised and occupied by those who have capital (whether economic or academic) and who are looking for new labour or markets.  While the new mediums include and conquer new spaces, it also excludes and “otherises” communities and segments of society (Prinsloo 2005).  Cyberspace provides institutions and corporations with a space to operate without the responsibilities and obligations of locality – as long as you can afford the privilege of operating in cyberspace.

Cyberspace is therefore not neutral.  Spaces are occupied, reoccupied, abandoned, claimed, fortified, secured – contested.  Those with mobility define and map spaces continuously according to their claims.  Those without capital and the mobility it brings, contest these claims, contest the spaces and hack into the space.  Reclaim it.  Recolonise it.

 

Re-Appropriating Cyberspace

A number of authors explores such a re-appropriation of cyberspace.  Instead of seeing the Internet and related functions like online teaching as just accessing and transferring information, cyberspace is explored as political, social, personal and economic space.  Institutions across the spectrum including higher education institutions venturing into cyberspace often think that it offers them a space without the usual socio-cultural complexities. Gunn, McSporran, Macleod and French (2003:14) however indicate that online “interactions that take place through electronic channels lose none of the socio-cultural complexity or gender imbalance that exists within society”.

Instead of cyberspace being a new space where the differences and disparities of non-virtual life on earth cease to exist, “cyberspace is an imagined network layer sitting on top of the physical infrastructure of cities. Cyberspace is an imagined, continuous, worldwide, networked city; the global city that never sleeps, always experienced in real time” (Irvine 1999, Online). Cyberspace therefore not only sits on top of the physical infrastructure, but is also a mirror image of the power structures and disparities of non-virtual life on earth.

Cyberspace is also much more than just a replication of non-virtual reality. New subcultures and new self-defined communities are coming into existence (Irvine 1999, Online).  These new communities in cyberspace resemble communities in non-virtual format, but they are also vastly different.  For example, Grierson (Online) explores the similarities between cemeteries and the communities in cyberspace.  She finds that, although both “communities” are constituted in space, it is a “placeless place” which “links and mirrors society, with all its alter-egos and hidden desires … a virtual site holding up a mirror to physical reality where subjective presence is delineated in imaginary absence”.

The Internet as “sites for power and knowledge” is further explored by a number of authors, amongst othersNewman and Johnson (1999), Usher (2002), Walmsley (2000) and Borer (Online). Jordan (1999, Online) investigates culture and politics in cyberspace.  He explores three “intertwined levels”, namely cyberspace as “playground of the individual”, as “social space, a place where communities exist” and as “being a society or even a digital nation”.  In each of these three levels, power is played out and claimed in a “sociological, cultural, economic and political battle between the individual and a technopower elite”.

The so-called impact of the Internet on society is discounted by Bennet (2001:197).  He suggests rather that the Internet “should be regarded as a “form of life – whose evolving structure becomes embedded in human consciousness and social practice, and whose architecture embodies an inherent valence that is gradually shifting away from the assumptions of anonymity upon which the Internet was originally designed” (2001:197).

We started by stating that it is no longer business as usual. We can no longer afford epistemologies of ignorance and politeness. Cyberspace and the opportunities it offers for business, society and education in particular need to be interrogated using a hermeneutics of suspicion, confronting certain myths, exploring opportunities and defining appropriate responses.

It is evident that the impact of the cyberspace stretches across the total spectrum of the human experience and condition.  Due to the complexity of discussing the total spectrum of options this discussion focuses on Higher Education as one entity to demonstrate the implications and level of reflection required.
To come to terms with some of theses realities it is necessary to address some of the typical myths. The following aspects provide an indication of some of the myths:

  • Myth 1 - Access. The Internet and online education is not the great equaliser. Access to the Internet on a sustainable and affordable basis is still for the rich and the privileged. There is good reason to celebrate the widening access citizens have to the Internet. In the last number of years the so-called “digital-divide” has indeed decreased. It is however still disputable that having access to the World Wide Web changes lives for the better. For the World Wide Web to deliver on its promise of changing society into more just and compassionate communities, the other divides in society have to be addressed as well.
  • Myth 2 - Quality of information available. Even when/if sustainable and affordable access to the Internet would be available to all; the overwhelming quantity of information on the Internet would require participants to have critical information literacies. Such literacies will be crucial in allowing the “having access to more information” to really allow participants to live differently. Bauman (1989) and others warn of the increasing commodification and consumerisation of knowledge; the immense amounts of information available on the Web, results in information and knowledge becoming “cheap”, and un-validated.  
  • Myth 3 – The role of race and gender. Current research indicates that the unequal socio-economic gender relations are perpetuated in cyberspace. Females have less access and often less frequent access due to prescribed and patriarchally perpetuated life-roles. Research also indicates that males frequently dominate online discussions, often relegating female participants to roles of quiet observer. In this “neutrality” of cyberspace the assumption often is that gender should not matter in a space where identity is often just a name and a short introduction. There is however enough research to validate the role identity and specifically race and gender play in online learning environments.
  • Myth 4 – Guaranteed success as learning platform. International research indicates that very few students opt for fully online learning. Even in countries where access to online environments are either state-sponsored or very cheap, learners do not prefer online learning to more face-to-face learning environments. Students seem to prefer a range of blended learning experiences, rather than fully online. This has impacted on several world-class universities forcing them to cancel fully online offerings. Fully online learning and interaction require specific literacies and personality traits of participants. Online learning is not a “one size fits all”.

 

Research in South Africa indicates that many learners use computers at work to access their learning environments. Not only does this impact on productivity, but learners therefore do not have access to their online learning environments over weekends and when they prepare for the examination. Employers also increasingly block mass-generated electronic correspondence from universities and limit learners’ access to the Internet. This results in learners experiencing growing frustrations with “fire-walls” that do not allow an effective learning environment.

Very few learners are sufficiently prepared to engage and sustain their own learning in a fully online environment. Institutions offering online learning are often inundated with requests for more support, often face-to-face.

  • Myth 5 - Quality in an online learning environment. At present there are no quality indicators specifically focused on online learning environments in higher education. The quality of the current offerings  range from “drop-off and go” experiences where students carry the cost of printing materials with very little continued support and interaction from the side of the institution, to very intensive online teaching which overestimates the time and resources that students have for such learning.
  • Myth 6 - Accountability.  Many overseas institutions offer online qualifications in other countries without any guarantee that the qualifications will be accredited by local institutions of learning or employers. Many students wrongfully belief that because it is offered by an international provider using online, that the learning experience will be of a high quality and that it will be accredited by local education institutions and employers.
  • Myth 7 - Global is better. Though there is a legitimate trend to ensure internationalisation in education, the need for contextual, local and authentic learning remains equally important. The challenges learners face are often context-specific and international tutors in online environments often have very little understanding for the cultural and socio-economic specificities of local contexts. Some metaphors and examples often used in online environments exclude participants from non –western cultures to fully comprehend and apply the learning to their own contexts.
  • Myth 8 - Online teaching and learning is ideologically neutral. All curricula arise from context specific ideological and socio-economic relations and epistemologies. Very few institutions foreground their specific beliefs and assumptions about knowledge and learning. This is even more so applicable in online learning environments where the “designers” of the learning are often even more hidden than in face-to-face contexts.

Opportunities

The Internet does however offer scores of opportunities for institutions of higher learning to seriously consider. The following is but a few of the opportunities that await careful and critical consideration.

  • Opportunity 1 - Reaching the un-reached. Yes, online teaching and learning bring opportunities to many learners who have been previously excluded from training, development and higher education. The reach of higher education does not only entail those who were previously excluded, but also brings into reach qualifications at internationally renowned institutions.
  • Opportunity 2 - Access to information. With the Internet, students have access to the most recent, cutting-edge information. Students will increasingly be able to compile their own curricula and have it validated by institutions of higher learning. Students now have access to the international discourses in the different disciplines at the click of a mouse. While there is a real danger that not all students have (yet) the critical literacies required by the Information age and secondly that they may be overwhelmed and become lost in cyberspace.
  • Opportunity 3 - Communication. With the Internet and other mobile communication technologies, learners can increasingly be in touch with institutions of learning and educators and peers. Learning experiences can be enriched by synchronous and asynchronous communication, between the institution and tutors, tutors among themselves, between tutors and learners and among learners themselves. Online learning really open up a Habermasian “public sphere” for “communicative action”.
  • Opportunity 4 - Mode 3 knowledge-production. Traditionally knowledge production in higher education focused on discipline specific transfer of knowledge, called mode 1 knowledge production. Paulo Freire called this “banking education” (1989). Recent years saw the development of Mode 2 knowledge production where knowledge was applied and arose from practical application to appropriate problem-spaces. Online learning environments make it increasingly possible to move to Mode 3 knowledge production where learners address problem-space from the foundations of a specific discipline but then continue to explore contributions from a range of other disciplines Knowledge production has moved form “knowing-how” to “knowing-in-the-world”. Barnett refers to this change as an “ontological turn” (2005).

The changing role of higher education

It will be naïve and irresponsible for higher education not to interrogate popular notions and epistemologies of online education and the role of the Internet. We have explored a number of myths and (hopefully) created sufficient suspicion to invite further discourse. We have also explored a number of opportunities an online environment offers to business, higher education and society in general.

Higher education has to indeed decrease the “digital divide” not only in the form of broadening access, but also by seriously interrogating the accompanying epistemologies. From the above it would seem as if a responsible and robust response would entail the following:

  • Response 1 - Empower learners with critical literacies for the information age. having access to the information the Internet offers will challenge higher education institutions and learners alike to be able to critically evaluate information and its sources. While addressing access may in fact decrease the digital divide but it is worthless if the decrease in the digital divide does not and cannot result in students’ critical engagement with information and with one-another.
  • Response 2 - Increase access to the Internet through collaborative agreements. Higher education institutions have much more bargaining power than individual learners. It is almost unbelievable that with the “captive audiences” higher education institutions have, that they have not been successful to negotiate more affordable and sustainable access to online environments.
  • Response 3 – Develop quality online learning. Higher education should be very clear about the minimum standards for learning platforms, opportunities for peer and tutor interaction and the sustaining of a teacher presence in Virtual Learning Environments (VLEs).
  • Response 4 – Maintain scholarly online teaching. Higher education should encourage research, individual and collaborative projects to determine the indicators of success of online learning in specific contexts for specific audiences.
  • Response 5 – Higher education as critical praxis.  Higher education traditionally has validated all claims to knowledge and expertise. As Barnett (2000, 2005) has indicated, higher education is no longer the only “producers of knowledge”. However, higher education still has the mandate to validate knowledge, whether claimed or made available in cyberspace. Higher education has the unique opportunity to rise to the occasion and to interrogate knowledge claims. The opportunities should be considered in the context of the realities of cyberspace as discussed.  Fundamental to this is the fact that it requires higher education to increase the capacity of students for critical and compassionate action to assist in the formation and utilisation of the challenges and new opportunities.  Essentially the challenge is to create opportunities and empower students and the broader society to utilise the potential cyberspace towards a more just and equitable society.

In Conclusion

There are a number of myths surrounding online education and the impact of the Internet on business, education and development. Only once cyber space has been demythologised, it is then that our eyes open to the opportunities that it offers. Higher education is therefore called upon to reflexively exploit the opportunities online learning and the Internet offer to engaging one another in learning experiences. Higher education will do well to take both the myths and the opportunities seriously and courageously.

Cyberspace is a new frontier. As previously done with colonial frontiers, this frontier can be exploited ruthlessly. There is however also an opportunity for business and higher education to engage with cyberspace – and use cyberspace to create hospitable, nourishing environments for active learning and a more just and equitable society for all.

References

  • Barnett, R. 2000. University knowledge in an age of supercomplexity. Higher Education 40:409-422.
  • Barnett, R. 2005. Recapturing the universal in the university. Educational Philosophy and Theory, 37(6):785-797.
  • Bauman, Z.1998. Globalization. The human consequences. Cambridge: Polity Press.
  • Bennet, CJ. 2001. Cookies, web bugs, webcams and cue cats: patterns of surveillance on the World Wide Web. Ethics and Information Technology 3:197-210.
  • Borer, MI. The Cyborgian self: toward a critical social theory of cyberspace. Available URL:
  • http://reconstruction.eserver.org/023/borer.htm (accessed on 10/04/2007).
  • Freire, P. 1989. Learning to question: a pedagogy of liberation. Geneva: World Council of Churches.
  • Gunn, C, McSporran, M, Macleod, H & French, S. 2003. Dominant or different? Gender issues in computer support learning. JALN 7(1):14-30.
  • Grierson, EM. From cemeteries to cyberspace: identity and a globally technologised age. Available URL: Click here!
  • (accessed on 10/04/2007).
  • Irvine, M. 1999. Global cyber culture reconsidered: cyberspace, identity and the global informational city. Available URL: http://www.georgetown.edu/faculty/irvinem/articles/globalculture.html
  • (accessed on 10/04/2007).
  • Jordan, T. 1999. Cyberpower: the culture and politics of cyberspace. Available URL:
  • http://www.isoc.org/inet99/proceedings/3i/3i_1.htm (accessed on 10/04/2007).
  • Newman, R & Johnson, F. 1999. Sites of power and knowledge? Towards a critique of the virtual university. British Journal of Sociology of Education 20(1):79-88.
  • Prinsloo, P. 2005. Don Quixote in cyberspace – charging at the invisible. Open and Distance learning in Africa Number 1, 2006: 78-94.
  • Usher, R. 2002. Putting space back on the map: globalisation, place and identity. Educational Philosophy and Theory 43(1):2002.
  • Walmsley, DJ. 2000. Community, place and cyberspace. Australian Geographer 31(1):5-19.

 

 

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