Social grants – a real, good story to tell

According to a University of Stellenbosch study, households on the social grant system spend more money on food and other necessities, and less on what are called “adult goods” like booze and cigarettes. It is this that is having the positive impact on our children - all for a measly R310 per month per child per household.

If China has done more to banish poverty in the last two decades than any other nation at any time in history, it’s probably safe to say that never in our own country has one intervention made such a difference. While there is often a huge focus on economic policy to get an economy going, along with our perennial fights around laws and inflation targeting, we often neglect health. Workers need to be able to work first. And if they are healthy, they are more able to work. While it’s probably easier to celebrate that extra centimetre [You and most men – Ed], it’s the school achievement that is so much more important. If your brain is healthy, and better trained at school, your life chances are obviously significantly improved.

If you’ll forgive the crass paternalism for a moment, this also shows that those on grants are using the cash for what you could call “productive goods” i.e. food and clothes, rather than alcohol or other unproductive outlets. Which could remove the argument from opponents of grants that the grant money is being wasted on a large scale.

It would be hard to say, now, that social grants in this country should be changed in any way, except that they should be increased.

This is actually quite a big change from the way this argument used to play out. Both here and in other countries, the big debate has been around whether these grants create dependency; there have been the usual anecdotes about the young woman who falls pregnant just for the grant. At the ANC’s 2012 Policy Conference, there were also predictions of a new “jobseekers’ grant” for those who are unemployed, which would essentially be a way to get young men into the grant system that they currently fall out of.

Even President Jacob Zuma at the time said that we needed to be aware of the danger; that we could not become a “nation of social grants”. Which feeds directly into the fears of many private sector economists that the tax base is staying roughly the same, even as the number of people dependent on the social net grows.

However, this new study, along with other data, is suggesting that really, social grants - and increasing of their value - is probably the best bet for any economy, including our own.

The argument goes like this: If someone has very little money to spend, they will spend it carefully. If they have the prospect of that same amount in the future, they will continue to spend it very carefully in the future. But if they have more money to spend, and know they will get that larger amount in the future, they will spend more of it. In other words, they will go from just buying bread and pap or beans, to buying bread, pap, beans and a Coke. That Coke is produced in South Africa. Suddenly there is a lot more Coke being produced, which means the factory that cans the stuff here needs more workers, and thus they get salaries and stimulate demand further.

This then feeds into what looks like a plan by the ANC to consider introducing a national minimum wage. First suggested by President Jacob Zuma during the unveiling of the party’s election manifesto, there has been very little clarity on the issue. He said they would “investigate the modalities” of a minimum wage. Which all sounds very Cronin-esque.

However, Labour Minister Mildred Oliphant suggested on Wednesday that government was actually looking at the merits of a national minimum wage versus a sectoral minimum wage system. She pointed to how mine drillers in the platinum, gold and coal sectors were paid different amounts, despite doing “essentially the same job”. It takes a brave person to talk about miners and salaries at the moment, but she might be on to something.

Then there’s that other aspect: It is easy to over-state the impact of a national minimum wage. Around 70% of our workers are currently covered by the sectorial minimum wage system. There are currently minimum wages for domestic workers, waiters, farm workers - all sorts of sectors. So to bring in a national minimum wage wouldn’t really affect most people; only around 30%.

Having said all of that, introducing such a scheme, while raising social grants at the same time, could have a big impact. Organisations like GroundUp have long advocated that we follow the Brazilian model. They have had good results (in social grants, not on the pitch) by increasing grants, while also making them conditional. So, if your children got vaccinated, were in school etc., you qualified for a higher grant. That then stimulated demand, and the economy started to grow strongly from there, everyone was richer, happier, and Brazil won the World Cup. Or didn’t.

Up until now, cynics have often pointed to any attempt to increase the number of people on social grants, or to raise the amounts paid out dramatically, as just another “ANC election ploy”. In a country like this one, that cynicism is to be expected. But actually, on the evidence, the data that we now have, it would seem almost inevitable that this is the path we should follow.

The rich may grumble a little, but they should look at it as a proper investment in the future. The middle classes pay redistributive taxes in this country, which is how it should be. A little bit more might well yield big results for the economy, and those rich people themselves. It might also buy them some more peace of mind. If people are getting richer, they stop thinking about getting out the pitchforks and climbing over your fence.

In the meantime, come on, Luthuli House. Where’s your statement celebrating what is truly a great achievement? DM

Photo: A South African boy stands with his mother and thousands of South Africans as they wait in line outside Guguletu Social Services office to register for a Social Relief of Distress Grant, Guguletu, Cape Town, South Africa 28 January 2009. EPA/NIC BOTHMA