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SONA 2023: Seeds of a new state emerge as President stands firm on social grants

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Picture: Mxolisi Madela – Long lines of people queueing for their social grants from Sassa, are a common sight on the first of the month in many poor communities in South Africa. Welfare states are built to guarantee equality of outcomes, rather than a US-type equality of opportunity, the writer says.

By Isobel Frye

The recent State of the Nation Address (SONA) heralded the last full year of this current administration. We mere mortals cannot predict the outcomes of the 2024 elections, but going by the actions of two opposition parties in the house on SONA night, there will be strong contestation for votes. Unless this is expressed in violence and destruction, this should put voters in the pound seats.

As the countdown to the election begins, there are some critical questions to be answered by the public first and foremost, and for the public to put to parties competing for votes. The following three, to kick off the season, go the heart of nation building and perhaps President Cyril Ramaphosa’s elusive social compact.

The first is: what is the appropriate division of national income to total government social spending.

The global rule of thumb is the more advanced a country the greater the percentage of government spend. In other words, more advanced nations tax more and higher, and because they can collect more revenue from the population, government spends more. In less developed and lower income countries the national income is captured and retained by individuals and governments have less to spend on the general welfare of the country, the people and the economy.

And this is a crude and cruel determinant of the futures of these countries. Elite extraction of income is self-perpetuating, as without national development and investment in people and infrastructure and democratic institutions, elite privileging will continue.

So, for South Africa, the question is whether there should be a greater or lesser allocation of the national income to the state through taxes or to private individuals as post – tax income and wealth. In answering this question, it is important to bear in mind that countries with the greatest redistribution through taxes and transfers (allocations back to people through spend in education, healthcare, housing, social grants etc) have the lowest inequality.

There is global consensus that South Africa has the highest income and wealth inequalities in the world, and that these unsustainable levels of inequality carry the seeds of South Africa’s destruction. So the setting of this balance between public and private share of national income quite fundamentally will determine the future trajectory of the post-1994 democratic project, namely South Africa.

Should we be taxing more and redistributing more to correct the historic inequalities that haunt us today? And what will the emerging political party manifestos each say in answer to this question?

After the question of how much to tax is the second question of what taxed revenue should be spent on. Immediately after the President announced in the SONA that government spend on the social wage will amount to just under 60 percent of total government spend, some said that more should be spent on growing the economy and industrialisation than the social wage.

The hoary chestnut of the much-maligned welfare state was raised, almost as if government spending on the social wage is the causation of the almost 50 percent real unemployment rates for working adults in South Africa.

The allocation to the social wage was set at between 58 percent and just over 60 percent of non-interest government spending at the beginning of this administration’s Medium Term Strategic Framework (MTSF) in 2018/2019. This was developed well before the tragedy of Covid-19 and the full horrors of loadshedding, so this allocation is not a disaster response. It is an allocation determined by line departments’ budgeted needs.

In debating allocations, it is important to know the details. It is not true, as many people fear, that all of government spend goes to social grants. The largest government allocation was made to education and culture (24 percent of spend) in the last Budget, followed by social development at 18 percent. In further descending order, 14 percent goes to healthcare, 13 percent to economic development and 12 percent to ensuring peace and stability.

And it is important to know what happens in other democracies across the world. These allocations are not out of kilter with other countries. Our spending on education is aligned with Brazil, many SADC countries and central Europe according to a comparative World Bank 2021 study.

While the UK spent relatively less, Namibia allocated about a fifth more of their government budget to education. So in terms of current allocations, South Africa sits easily with her peers.

And that brings us to the third crucial debate. Popular opinion places in antagonism the triple goals of reducing poverty and inequality, promoting employment and increasing the pace of economic growth. Aggressive policy hawks demand that there be tough choices made about these three, suggesting that options are contained in a pre-determined, fixed system, finish and klaar.

But it is high time to redefine the gaze.

Should growth be a target, or is it an outcome of a successful policy? Just transition policies linked to smart re-industrialisation and infrastructure development would be a suitable target. With the correct design, this can promote employment and increase the rate of economic growth too.

And what about spending on poverty? Does the welfare state create dependency and eat into monies that should be spent on big infrastructure projects?

In social policy theory, welfare states are built to guarantee equality of outcomes, rather than a US-type equality of opportunity. Roman Emperor Augustus is said to have secured the Roman Empire’s ascendancy through the introduction of welfare measures. Elizabethan Poor Laws in England were seen as a way to give poor people a new beginning through relief packages and were certainly not seen as a handout. This came to an end in the 1830’s, however, when the relief schemes were withdrawn and Debtor’s Prisons were established where whole families and people unable to navigate the economic mainstream were condemned to live in misery and destitution.

Some argue that Apartheid spatial planning remains an approximation of the ghetto of Debtor’s Prisons. Before the democratic dispensation, debtors could be arrested for up to 3 months if they failed to pay a judgement debt. But the human rights-based foundation of our democracy unequivocally demands equality of outcomes. Race, and where you live should not determine your life’s course.

And so, it was good to hear the President unflinchingly proclaim in SONA that “it is the job of the state to provide a minimum level of protection below which no South African will fall”. Poverty and inequality rather than energy supply remain the most critical existential threats to our nation.

Determining what that minimum level of protection is should be done with knowledge and data that models the variable outcomes of different allocations, including taking into consideration the volumes of evidence of the equalising effect of a universal basic income grant.

Let’s debate these points and let us ask those who will be seeking our votes for their answers to these questions.

And final congratulations to the President for championing the social grants to poor working age adults. The reach of this grant is not enough, and the amount must certainly be indexed to an acceptable living level, so that we can call them the ‘grants formally known as the R350 grants’. From the depths of crisis, we can see the seeds of a new state order emerging, one appropriate to our needs.

Isobel Frye is Executive Director of the Social Policy Initiative

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