SA welfare recipients surpass number of taxpayers

Highlighting the challenge the government faces in trying to sustainably support the legions of unemployed and poor.
Image: Dwayne Senior/Bloomberg

South Africa’s extension of a monthly grant for the jobless means there’ll continue to be twice as many welfare beneficiaries as registered taxpayers, highlighting the challenge the government faces in trying to sustainably support the legions of unemployed and poor.

President Cyril Ramaphosa last week extended the temporary monthly stipend of R350 ($23), first introduced in response to the pandemic in 2020, through to March 2023. The measure has added about 10.3 million people to the welfare net and was fueled by record unemployment and deepening poverty in the world’s most unequal nation. Civil rights groups and academics have been calling for a permanent basic income grant.

The government can afford the latest measure because high commodity prices have put revenue on course to exceed budget estimates. Economists, including Old Mutual Investment Group’s Johann Els, expect further extensions, enabling the state to defer a decision on a basic income grant amid significant fiscal constraints.

“If a more permanent expansion of the grant system is decided upon, it is likely that a more permanent revenue stream may have to be considered to limit the drag on the fiscus,” Herman van Papendorp and Sanisha Packirisamy of Momentum Investments said in a note.

Debt funding is considered unpalatable, with loan-service costs already the fastest growing expenditure line item in the budget since 2011. And raising taxes could further erode the tax base in a country where fewer than 15 million individuals out of a working-age population of 40 million are registered taxpayers and those earning more than R1 million a year pay almost 40% of all personal income as levies.

South Africa’s extreme inequality, poverty and unemployment levels are a legacy of the apartheid system that disadvantaged the Black majority. While the ruling African National Congress has formally adopted five blueprints to boost economic growth and job creation since it came to power almost three decades ago, efforts to usher in policy changes have been stalled by powerful vested interests.

Before the Covid-19 stipend, more than 18 million people, or almost a third of the population, received state aid. South Africa spends 3.3% of gross domestic product on welfare, mostly in the form of child support and pensions. That’s more than most countries and will amount to R222 billion in the current fiscal year.

© 2022 Bloomberg

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You can only rob the rich to pay for the poor until you run out of rich people !!
Look North into Africa for myriads of examples none more poignant than Zimbabwe which we are tracking closely !!!
Absolute destruction under the ANC is GUARANTEED !!!

The social grant is actually part of a transaction in democratic nations.

Economic activity creates wealth. That wealth goes to either politically-connected individuals or to individuals who can access capital to invest and build wealth. This process creates good billionaires, that add value to society or bad billionaires that plunder society. Good billionaires like Mr. Johann Rupert employs people, pay taxes, deliver sought-after products, create wealth for pension funds, and supports charity organizations for the benefit of the broader society. These good billionaires create broad-based economic empowerment through the market system.

The bad billionaires like the current president, became wealthy thanks to their political connections. They do not add value to society. They extract value from society, create unemployment and inequality, cause a slowdown in economic growth, and deplete pension savings. Russia has the oligarchs and South Africa has the BEE billionaires.

When the levels of inequality, not poverty per se, threaten social stability, it is in the interest of wealthy people to pacify poor people. The wealthier individuals “buy” social stability from the poorer people by means of a tax to finance the social grant. This can only work for as long as wealthier people can afford it. The fact that we are living in security complexes, behind walls and burglar bars, with private security, proves that we have lost the war. We pay bribes but get nothing for it.

Why do we continue to finance this process of purchasing social stability when we get nothing in return? The bad billionaires have the political power to force us to finance their personal security and their social stability.

Judging from the photo used in this article it looks like the Gov. Grant is being used to pay off DSTV subscriptions ( and cell phone top ups!) Rather than money..perhaps food subsidies and feeding schemes in schools and crèches should be re introduced…or would this funding just be stolen by the administrators?

End of comments.

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