The decision to provide a grant of R1 634, the upper bound poverty line, rests in the hands of the elite
On 1 October, phase 2 of the Government Business Partnership was launched. More than 140 company chief executives, with a combined market capitalisation in excess of R11 trillion, met the president and the government of national unity to celebrate their optimism for South Africa’s future.
In the same week, Deputy President Paul Mashatile led a large team of government and business delegates in search of new foreign investment from the United Kingdom and Ireland.
In a recent geopolitical risk assessment commissioned by the Social Policy Initiative (SPI) of the effect of South Africa’s extreme levels of poverty, unemployment and inequality, one of the risks identified was the increased cost of foreign investments caused by the costs associated with the related social and political unrest, crime and the rise of right- and left-wing populism. Given the high cost of continuing to do nothing to resolve poverty, why is government and business leadership so impervious?
The presentation of the Government Business Partnership was typical of this attitude. The upbeat presentation introduced the possibility of a GDP growth rate of 3% or more next year. This is a significant increase from the current rate forecast of 1.9%. This would indeed be an attractive hook to potential investors. Much was also made of the success story of the government overcoming past failings and finally being able to supply electricity to citizens.
But when it came to plans of how to share the fruits of the anticipated 3% growth in a way that brought direct benefit to the millions of people who fall outside of the inner circle, the plan was short of inspiration. In fact, all that was promised was a million jobs and 400 000 temporary youth job placements by 2030.
This signifies the failure by the government and business elites to comprehend the magnitude and destructive potential of the real constraints of poverty and unemployment amid the significant inequality in South Africa.
To contextualise the Government Business Partnership solution to unemployment: the one million jobs would have to be shared between the current 12.3 million unemployed adults, and the 400 000 short-terms youth jobs would have to be distributed among 7.2 million unemployed youth aged 15 to 34, and 18.6 million people are classified as not in employment, education or training..
Unemployment is a key driver of poverty, because salaries are the mainstay source of income for most people. In most industrial democracies, income is underwritten by a national social security system that provides income when a worker can’t earn. Maternity leave, disability, unemployment and retirement are the key contingencies that affect earning capacity. But South Africa has a huge hole in the social security net: there is no permanent social assistance plan for unemployed people. What we have instead is a minimalist policy-by- stealth that is extended year on year with seemingly great reluctance by the ministry of finance — the R370 social relief of distress (SRD) grant.
The launch of the Government Business Partnership Phase 2 coincided with a week of national concern occasioned by this grant. October is the month in which the finance minister delivers his medium-term budget policy statement (MTBPS), which is seen as a pointer to the budget policies that will be tabled in the national budget of the following February. There is no extension to the SRD grant in next year’s budget, although the election promises made by the ANC contained a commitment to an extension until the state has enough money to roll out universal social protection.
The story the media carried was a concern that, last month, more than 17 million people applied for the SRD grant. The backstory of the R370 grant is that it is a targeted temporary cash payment programme introduced during the Covid-19 pandemic. It is paid by the South African Social Security Agency (Sassa) subject to strict eligibility criteria to poor adults aged 18 to 59. The R370 is less than half of the national food poverty line of R796 a month, the amount the World Health Organisation deems necessary to buy enough food for basic survival in South Africa.
Seventeen million people making SRD applications every month is a demonstration of the levels of poverty in South Africa. A country where the right to a life of dignity is an inalienable constitutional right, and the right of access to social security is enshrined as a justiciable constitutional right. An upper middle-income country where more than a quarter of people fall below the food poverty line and more than half of all South Africans live below the upper bound poverty line of R1634 a person a month. South Africa is a country where one third of all boy children under the age of five are permanently physically and cognitively stunted because of malnutrition. A country where wealth is not the problem, but unequal distribution of the wealth is.
The number of SRD applications has been growing steadily since its introduction in 2020. The 17 million applications mark was passed three months ago, but the real story is that the number of grants approved has not grown in a long time. The number of approved applications in August 2024 was 8.1 million out of 17.1 million applications. In fact, the August 2024 approvals were lower than in any month since April 2023.
This means that more than nine million people are unsuccessfully applying for a R370 grant each month. Why? Why are they applying when they are rejected each month? What level of desperation does this speak to, and how long will their patience last?
Is there any programme that could meet peoples’ needs more effectively and be as affordable as a decent universal basic income (UBI)? What else does the government have, apart from its promise of one million jobs in five years’ time?
According to SPI research published earlier this year, a UBI of R1 634 (the upper bound poverty line) would wipe out poverty with the stroke of a pen. Taxed back from people above a certain income threshold, the size of the monthly transfer would provide a huge stimulus to the economy, and the social security grant spend itself would have a significant economic multiplier — perhaps five times as much as the initial spend. The multiplier return could create annual GDP growth in excess of 5.6% plus two million decent jobs in three years. In these same three years, the UBI programme could be 96% self-financing.
Last month, during a presentation by the government at the launch of an International Labour Organisation report on social protection at the United Nations General Assembly, Deputy Minister Dion George, who was standing in for the president, said: “Social protection is not merely a safety net, it is a critical enabler of social justice.” The MTBPS announcement later this month will be a signifier of which way the first budget of the unity government will go on income transfers for working-age people. It seems likely that the decision will be to extend the minimalist R370 grants for another year, with the government deferring any real discussion on the only real solution to the crisis — the numerous UBI policy proposals that have been researched by many different experts.
What is behind the refusal to discuss tangible policy options to solve the multiple crises that prescribe and describe the lives of so many million South Africans? Is it avarice — the refusal to share in the wealth? Is it cowardice — the extent of the problem so overwhelms the leadership that they ignore it?
Whether the repeated deferment of this decision is based on avarice or cowardice or anything else no longer seems to matter much. What does matter is that the costs of perpetual deferment continue to grow. From the cost of malnutrition to human development, and the lack of economic growth as a result of dampened demand caused by the fact that more people live in poverty than don’t to the inevitable costs of destructive violence or the effect of the heightened risk assessment in any foreign investment deal structured with South Africa, these costs must and will be laid at the doors of those who continue to ignore the empirical evidence on the table.
Isobel Frye is the founder and executive director of the Social Policy Initiative, a feminist social security think tank based in Johannesburg.