South Africa's Social Grants System

2015-02-25 12:59

In October 2014 I posted an article on my personal blog in which I was examining the SA social grants system. I have reposted the article below (with edits) including comments based on the ongoing Budget Speech by the Minister of Finance Nhlanhla Nene.

Safety net/fishing net

Social grants play an important role in the South African economy to help vulnerable groups live a relatively good standard of life whereby they can access basics such as food, clothing and shelter.

Despite this being the case, there are some who take advantage of the benevolence of the national treasury by becoming dependent on the state through grants such as Child support grants. The monies allocated end up not being utilised for the intended recipients, people end up abusing the safety net and make it a fishing net.

Population and Employment statistics

StatsSA mid-year population estimates for July 2014 stood at 54 million. [1] Approximately 30% of the population is aged younger than 15 years (16.2 million) and approximately 8.4% (4.54 million) is 60 years or older. This puts the 15-59 age group at 61.6% (33.264 million).

The 2014 Quarter 1 (Jan to March) Labour Force Survey shows the Population aged 15–64 years as 35.177 million. The Labour force being 20.122 million, these are the people of a productive age who can be employed. The people actually employed was 15.055 million with the employment in the formal sector in the formal sector (non-agricultural) being 10.78 million [2]

Government Revenues

Government gets money and spends money in the same way an individual does. Taxes such as income tax, corporate tax, value added tax (VAT), fuel levies, customs & excise duties form the revenue inflows for government. In the 2013/14 budget, tax revenue from personal income tax was budgeted to contribute 34% to the national coffers, VAT 27% and corporate income tax 19%. These three tax categories constitute 80% of the government revenue inflows. [3]

Grants

According to the Social Development Minister Bathabile Dlamini just under 16 million South Africans were receiving some form of social security grant from government last year [4]. This cost government more than R109bn during 2013/14. The SA Social Security Agency provides grants including old age, war veterans, disability, grant-in-aid, care dependency, foster care, and child support.

Of the 15 932 473 grant beneficiaries last year, 70% (11 125 946) received child support grants. The total spent on these grants was R39.6bn. Over the same period, R44.1bn was spent on old age grants - referred to as older person's grants - to 2 969 933 beneficiaries. The total spent on all grants last year was R109 053 880 000 [R109 billion].

Figures for the first quarter of this year (2014/15) show the number of beneficiaries is on the rise. There were 16 242 196 grant recipients at the end of June, and the cost of providing their benefits up to that date was R29.3bn. In 1998 (16 years ago) there were 2.5m social grant beneficiaries and there were 7.9m in 2003/2004 (~10 years ago).

Unsustainable scenario

The current scenario of about 11 million people contributing 34% directly to the national coffers through personal income tax and indirectly through other taxes such as VAT on goods and services- is not sustainable.

Recent pronouncements by the Minister of Finance of potential tax changes coming up in 2015 is set to increase the tax burden. All this is happening within a context of increasing grant recipients. Looming introduction of other drains on the fiscus such as the National Health Insurance is set to result in further strain on the taxpayer.

Recent pronouncements

In the 2015 Budget Speech the Minister of Finance stated that the Old Age grant will increase to R1,410, Child grants R330 and Foster care grants R860 per month. There might be a review of the grants in October dependent on the direction CPI will take.

Concluding remarks

Some amongst us might not take notice when there is frivolous expenditure by different government departments/ministries yet all this has a bearing on our pockets. We need to become a more active and engaged citizenry at all levels…local, provincial and national. Corruption, nepotism, kickbacks etc all have repercussions on the direction our country is headed.

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