There are warnings after warnings of a ‘ticking time bomb’. The ticking is heard
but inadequately heeded. Throwing money at the problem won’t resolve it.
The sustainability of Eskom is marked as the greatest risk to the SA economy. But there’s another risk, perhaps equally great. In circumstances of pitiful economic growth, it’s the perpetuation on its present trajectory of the social-grants system that shields swarths of the population from starvation.
Retirement funds are obliged by regulation to consider environmental, social and governance (ESG) criteria in making investment decisions. Of the three, the S gets the least attention. This isn’t as it should be because it can rock investments the most.
Latest figures from Stats SA put unemployment amongst black youths at 34,2% in the 25-34 age group and 55,2% in the 15-24 age group. To describe this situation as explosive is to state the obvious. When people have no incomes they must rely on those who do, however meagre, or take to the streets.
Riots and robberies, dangerously prevalent, won’t be thwarted by improved policing alone. Neither can they be mitigated by the maximum hand-outs that the state can afford. For the present, social grants are a kind of palliative that keeps the poorer in relative calm and the richer in relative comfort.
The latter daren’t gripe because, in a way, they’re paying an insurance. In the current fiscal year, government allocated R175bn in social grants for 17,6m people. Against this, there are 7,6m individual taxpayers from whom R553bn is extracted.
So a hefty chunk of individual taxpayers’ contributions are absorbed by social grants. In a national budget that’s highly redistributive, of the 7,6m individual taxpayers there are a mere 121 000 (1,6%) who pay R160bn (30%) of the total. The equivalent of their entire payments, and then some, go to social grants.
Despite redistribution, which in itself is unarguable, the social-grant system has failed to generate upliftment from destitution. The new mandate of the Social Development Department is “to provide social-protection services and lead government efforts to forge partnerships through which vulnerable individuals, groups and communities become capable and self-reliant participants in their own development”.
Were it to happen, it will be a reversal from what’s been happening. Bring on the “partnerships”, presumably with the private sector, and pray for success.
When the dispensation of cash lacks a multiplier, it is limited to serving consumption. The vital means of support for grant beneficiaries, it extends to support for dependents in the swollen ranks of the jobless. Poverty grinds on.
The point is made in the National Development Plan which aimed to eliminate poverty and unemployment by 2030: “Children, the aged and people with disabilities are the groups most likely to be unemployed and bear the brunt of poverty and inequality. Their dependence on family networks is precarious given the extent of unemployment and underemployment.
“High unemployment rates mean grant recipients have to use their grants to support other household members as grants are often the main source of income in poor households.”
Released in 2012, the NDP was produced by a panel on which Cyril Ramaphosa served as deputy chair. In his inaugural address as SA president, Ramaphosa emphasised his determination to reverse the trait of too much talk and too little action. The NDP will need to be dusted off, inclusive of its concerns with social protection.
Thin as the grants are – people older than 60 get R1 780 a month, for example — they hit disconnects. One is that the number of beneficiaries increases faster than tax revenues. Another is that joblessness proceeds in the wrong direction, compounding the number of dependents.
The inadequacy of social grants, relative to need, is accentuated if each of the 17,6m recipients is conservatively assumed each to have an average of two dependents. This implies that the greater proportion of SA’s population relies on the grants, capped at around 3,2% of gdp.
National Treasury projects that there’ll be 18,6m recipients within the next two years. As gdp declines – it slumped in the first quarter of this year, causing growth forecasts for 2019 to halve from the already-distressed 1,5% — there must either be less money available for social grants or the state will need to prune from other essential expenditures. The plight of Eskom, for one, gives it little leeway.
For a further perspective, go back at little. In a 2004 judgment, the Constitutional Court ruled that there were circumstances which entitled non-citizens to social-security benefits. This was despite the arguments of National Treasury that the extension to permanent residents was unaffordable.
Treasury had pointed out that, in the previous three years, expenditure on social grants (excluding administration costs) had increased from R16,1bn to R26,2bn. It was contemplated that over the next three years the amounts would increase from R26,2bn to R44,6bn.
That was long ago. The figures are miniscule when compared with the subsequent ballooning. Back then, the court had considered that the inclusion of permanent residents would have minimal impact because of an effective immigration policy which sought “to exclude persons who may become a burden on the state and thereby to encourage self-sufficiency among foreign nationals”.
Did it? There aren’t analyses to say. But it would be a red herring anyway. Joblessness in SA is joblessness in SA, a matter of scale irrespective of nationality.
The overarching evidence is that the numbers keep going up with few interventions to make much difference. This is despite the plethora of green papers, white papers, academic research and recommendations into what should be done. Thankfully, long-serving Social Development Minister Bathabile Dlamini has been relegated for uselessness.
She’s had no more severe critic than Sipho Shezi. Her fulltime special advisor from 2013, she fired him in 2017 for his objections to her defiance of a Constitutional Court decision over irregularities in the department’s contract with Cash Paymaster Services.
Shezi, a retired director-general of Public Works – he was the youngest DG when appointed by Nelson Mandela – is a steadfast critic of the system that’s evolved. Quite fundamentally, he warns, the system “is unsustainable in the manner being executed”.
When he headed Public Works under minister Jeff Radebe, he recalls, its programmes were meant to have money flowing into delivery of services while simultaneously to develop skills and jobs. These intents, formulated as policy in 1997, must be revived.
But in the years that have passed, under Social Development the system has garnered the sense of a right to receive something for nothing in exchange. Perhaps it’s a legacy from the 1980s’ mobilisation against the old regime carried into an anticipation for the new.
This culture, which accommodates zero return on government’s investment, has to be turned around. “As the social grants come in, most of it goes out for the purchase of perishables manufactured and distributed by large JSE-listed groups,” he points out.
Not that Shezi has anything against Tiger Brands and Shoprite, amongst others, but he’d far rather see the grant money circulating optimally in the communities themselves; for example, “where local people grow vegetables that they sell to local stores which in turn supply local customers and such public institutions as schools”.
At the policy level, there has to be a welfare net. But at the same time, he urges, it must provide for a transition: “When people are in the net this component of civil society has to be consciously mobilised with capacity to look after itself.”
He wants an exit strategy from social grants. The more that people are “capacitated” to produce their own incomes, the more they can become taxpayers who contribute to the revenue base. The welfare net is there for those don’t make it, or until they do.
It cannot be said that the present system is sustainable when active citizenry is virtually zero, Shezi suggests, and children are coming from collapsed family structures.
To be sure, there are myriad proposals for reform. The committee of inquiry into a comprehensive social-security system was established by the Social Security Department in 2001. It concluded: “The urgent need to address deepening social exclusion and alienation of those households living in destitution cannot be ignored.” Some urgency.
In 2016 there was the updated iteration, under UCT professor Viviene Taylor, for “transforming the present, protecting the future”. Like the NDP, it’s been gathering dust.
And proposals for a National Social Security Fund remain in the wings, almost is if its central feature of “social solidarity’’ is too contentious to confront. The term is a diplomatic way of phrasing the subsidisation of people not in retirement funds by those who are, with concomitant effects on fund benefits that otherwise contradict efforts to improve them.
But structural reform should be subordinated to the larger reform of diminishing dependence on hand-outs, not to be consumed as an end in itself but as a stimulant for economic activity. This will require a radical change in culture, which serves an aspiration for self-reliance, much more difficult to achieve.
Unless there’s a new leadership committed to achieving it. To be hoped is that the new mandate of Social Development, articulated in a bill being developed for parliamentary approval, will represent the start.
Dlamini . . . failure
Shezi . . . culture shift