Graphic: Timothy Alexander / African News Agency (ANA)
By Isobel Frye
While the “sturm und drang” about the extension of the R350 social security grants rage furiously between hungry grant beneficiaries and human rights activists on one hand and the National Treasury and voices of organised business federations on the other, it seems the biggest beneficiary of social grants this Christmas will be large shopping retailers headed by Shoprite and their shareholders.
As we approach this year’s festive season, we are mindful that the social assistance grants will indeed provide some joy to the millions of poor children and older people and now working-age adults who receive small grant incomes, but it is critical to remember the bigger picture: follow the money to see who is in fact getting the biggest present of all, and it seems that large retailers are the ultimate beneficiaries.
How can the value of these payments to profitable retailers be used for second-round developmental benefits?
Using social policy principles, it is most efficient when government transfers are optimised in the localised area that they are received. In other words, where grant beneficiaries live, we would like to see the money value from the grant supporting and growing local businesses to grow employment and general well-being in that area. This ultimately leads to a lower overall level of poverty and better quality of life as more employed people can pay more local government rates, leading to better roads, refuse removal and better street lights leading to safer neighbourhoods for all – this is the positive cycle of development or the multiplier effect in action.
The annual social assistance budget for this year was R248,294,592,000, which is a lot of spends. R44 billion of that was for the R350 grant.
In March 2022, Shoprite announced that the R350 grant beneficiaries would be able to redeem their grants at the tills of Shoprite and Shoprite U-Save. Also in March 2022, retailer Shoprite posted a 25 percent half-yearly leap in sales and profits. In the previous month, the Minister of Finance announced a 1 percent cut in Corporate Income Tax from 28 percent to 27 percent.
A forthcoming study on spending patterns of R350 recipients conducted in a small catchment area of the Western Cape shows that the R350 grant recipients in the study overwhelmingly spent their money at large supermarkets, with less than 10 percent of participants shopping regularly at a local or Spaza shop.
So effectively what we see is money in, money out, with a less-than-optimal circulation of monies to generate a second-tier developmental multiplier in the area.
SACCAWU, the South African Commercial Catering and Allied Workers Union, has documented the extractive nature of large retail giants. This includes the use of casual employment relationships rather than permanent contracts for workers which provides for no job certainty, seldom any benefits like medical aid or pensions, almost no training and career path opportunities, and very little compliance with the conditions of the International Labour Organisation’s Decent Work standards.
In addition, the exploitative behaviour of retailers toward suppliers has been raised regularly in the past.
This includes delayed payment practices such as only paying suppliers three months after the stock is delivered. Such practices effectively eliminate small and micro-producers from the retail supply chain. Small producers depend on immediate payment to fund the next planting and growing cycle.
Large retailers are not developing the local communities through good jobs or supporting local producers.
Mall expansion to poor and working-class communities is contentious. For consumers who enjoy the discounts that retail chains can provide it is a blessing. Consumers save on transport fares they would otherwise spend on travelling to outlying malls, and strip malls usually attract fast food franchises into the area that provide a chance for an affordable luxury outing.
However, whenever malls move in, struggling spaza and other micro retailers face extinction.
The Pietermaritzburg Economic Justice and Dignity Group is a non-profit organisation that tracks expenditure items of food and basics on a monthly basis in a variety of locations, and so compares these prices with incomes in poor households. According to their October 2022 report, the price of food across their data points on average increased by 10.4 percent between October 2021 and September 2022, while the prices of domestic and personal hygiene items increased by 22 percent.
As an outlier, the price of green bar soap (500g x 8) used as a basis for personal washing as well as clothes washing increased by 58 percent over this year.
The R350 grant has not been increased in line with inflation since its introduction in 2020: it has lost 14 percent of its purchasing power since then.
Are there other ways in which the financial value of grant payments can be better harnessed to leverage an improvement in the lives of the beneficiaries?
The value of cash grants that are paid to poor communities across the country is significant.
Disposable income amongst the majority of South Africans is extremely low. Between 50 percent and 60 percent of income in very poor households is spent on food, and then transport. Retailers that market to poor consumers, particularly retailers that have beneficial access to the social grant distribution chain in effect have a captured market. Because of the benefits of scale and market dominance, large retail chains can provide cheaper goods to consumers, and as the above-cited study has shown, consumers buy at cheaper shops.
Retail and services are the two most widely advocated entry sectors for SMMEs, however, where the price is being undercut by large formal retail chains this is clearly not a viable market for SMME entrepreneurs to grow enterprises and create jobs.
We need to see the state engage with large retailers, especially ones that distribute grant cash, and use their muscle to negotiate better working conditions for employees, greater use of local producers on beneficial and affordable terms, and better discounts that translate into real savings for poor customers.
The distribution of tax-funded social grants paid to provide essential income to poor households increases the wealth of large retailers and their shareholders. The value of the R350 grant has fallen by 14 percent since its inception, while Shoprite posted a 25 percent increase in its profits.
To reduce poverty and inequality in South Africa we have to think with innovation and passion. We want to see the Christmas cheer spread better each year.
Isobel Frye is Director of the Social Policy Initiative.