WELFARE: Helping to break the poverty cycle
Whether because of the election or the commitment to better the lives of the poor, all grants were again nudged up
A pre-budget week of extensive load-shedding and wall-to-wall media coverage of failing, cash-guzzling state-owned entities may have helped to temper expectations on the social grants front.
Some pensioners the FM spoke to even feared that with all the talk about state capture and a collapsing Eskom, the ANC government might do what it has never done before — cut the nominal value of social grants received by 17.9-million citizens.
There have of course been years when the nominal increase was not sufficient to cover inflation — such as 2017, when the increase in the old-age pension amounted to a slight decline in real terms.
But to date the government has stuck commendably to its decades-old commitment, referred to by finance minister Tito Mboweni in his budget speech: "Improve the conditions of life for all South Africans, especially the poor."
And as the National Treasury says in its 894-page Estimates of National Expenditure (ENE): "Social assistance protects against inequality and poverty, and promotes the social and financial inclusion of the economically inactive population."
The prospect of an election just two months down the track could have helped to ensure all the grants were again nudged up, though some increases may not cover inflation.
The old-age pension — including grants to war veterans, which is paid out to 3.7-million citizens — will increase by R80 to R1,780 a month. This is the largest single chunk of social grant payments and will cost the government R77bn in the 2019/2020 budget year.
Child-support grants, which will reach an estimated 12.7-million children in the coming year, will increase to R420 in April and to R430 in October and will cost the government R65bn.
The increases help to ensure social development, at R278.4bn, remains the second-largest category of government spending after learning and culture, at R386.4bn.
The largest portion of that R278.4bn, about R175bn, will go to social grants in the coming fiscal year.
This means social grant payments, as a percentage of GDP, will remain unchanged at 3.2%.
At this level it continues to be one of the largest noncontributory social assistance programmes in the world. According to World Bank data, SA has the second-largest share of households receiving state transfers in the world — after Iran.
Ingrid Woolard, dean of economic and management sciences at Stellenbosch University, says the grants are remarkably well-targeted by international standards. "With 17.9-million people receiving some type of grant, the system is an important part of government’s anti-poverty strategy; grants are the main source of income for about one-fifth of the country’s households."
Woolard says that while the grants are essential sources of income, they are not sufficient to lift households out of poverty.
"The old-age pension and disability grants equal 2.7 times Stats SA’s food poverty line, which means they would buy sufficient food and not much else for 2.7 people, while the child-support grant provides around two-thirds of the food poverty line."
Despite the tightness of the situation Woolard says the SA system of social assistance is highly effective in achieving other outcomes beyond just putting money into poor households.
"It not only leads to better nutritional outcomes but also educational ones. The child-support grant is an investment in children’s futures; it shouldn’t just be seen as current expenditure," said Woolard, adding that the grants help to break the cycle of poverty.
The good news for grant recipients who’ve been forced to rely on bank ATMs since the cutback in cash pay points is that the Treasury has allocated R500m a year from 2021/2022 to fund one monthly ATM withdrawal for each social-grant beneficiary. Government is investigating whether to make the additional payment to the grant recipient or to the National Payment System. Apparently, there had been hopes to roll this out during the 2020/2021 year but the government was forced to postpone it because of the funds needed to bail out Eskom.
The National Treasury is expecting to get a large chunk of the R500m from the savings on the controversial payment contract between Net1 and the SA Social Security Agency.
According to the ENE door-stopper, until Sassa’s contract with Net1 subsidiary CPS came to an end in September 2018 it spent an estimated average R2.1bn a year contracting the full payment function. After the termination of the CPS contract and the establishment of a new arrangement with the SA Post Office (Sapo), spending on contractors is expected to decrease to R1.8bn by 2021, says the Treasury.
Though the incidence of grant payment disputes has died out since the CPS contract ended, there are signs that Sapo and Sassa have not yet settled into an effective working arrangement. The agency is reviewing the grant payment value chain and the capacity of its personnel in the hope of addressing administrative bottlenecks.