The World Bank said South Africa, which ranks among the world’s top 10 spenders on social assistance, could consider a range of reforms to its R156 billion ($15 billion) annual welfare program to make it more cost-effective while expanding support for the unemployed.
While more than 18 million South Africans receive welfare payments, and almost two thirds benefit directly or indirectly from the grants, only child support, old age pensions and disability payments are handed out to people who haven’t paid into a separate unemployment insurance system. Despite the short-comings, those welfare payments equate to some 3.3% of gross domestic product.
The country could consider a job-seekers grant, community works progams or differentiating child support payments so that the poorest families get additional help, the World Bank said in a report released Thursday. A job-seekers grant, set at R350 a month, could cost R16.2 billion a year, it said.
“The dilemma of the future of South Africa’s social assistance system rests in the opposing pull of these two forces: The limited political appetite for cost-saving reforms and the need to consolidate expenditures,” the World Bank said. “Feasible options for broader reform hence need to balance political will and the need to contain costs.”
South Africa’s welfare program has been hailed as the single biggest achievement of the post-apartheid government in reducing income and wealth inequality, which nevertheless remains the world’s highest. Unemployment is at a record of more than 34% due to the Covid-19 pandemic, with almost four out of five 18-24 year-olds without work.
Unemployment insurance is contributory, however, and therefore only available to those have previously worked.
While civil society organisations have called for a basic income grant to be implemented and President Cyril Ramaphosa has said one will be investigated, business organisations and the World Bank have said it’s unlikely to be affordable. Public and community works programs should be considered though they are short-term in nature and don’t address South African unemployment, which is structural and tied to factors such as a weak education system, the Washington-based lender said.
“As the the private sector recovers from the pandemic it would be important to continue the public employment programs,” said Victoria Monchuk, a senior economist at the World Bank, in a presentation Thursday.