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Time for serious investment in old-age pension grant

1 Mar 2019

Instead of citing fiscus constraints as a reason for not addressing the plight of pensioners, effort should be made to reprioritise how funds are used. This – coupled with an increase in Corporate Income Tax, which has steadily decreased over the years and the introduction of a wealth tax – alongside an urgent action plan to clamp down on corporates that are not tax compliant, are some ways in which revenue to enable this could be generated.

As members of Parliament descended onto the red carpet for the annual State of the Nation Address (SONA), pensioners from the Pietermaritzburg Pensioners Forum stood outside hoping to deliver their campaign to the President. They were calling for a pension to be increased to R2 500 a month for now, as a step towards equalising with an increased National Minimum Wage and towards a living wage. They also want pensioners to receive a 13th cheque every December.

It is clear that this is a necessary step to ensure the dignity and health of millions of people in our country.

This action came after pensioners penned the President and the Minister of Finance a heartfelt open letter detailing their requests, followed by a trip to Cape Town to make submissions to the finance committee in Parliament. Numerous letters to government officials and politicians went unanswered as pensioners pleaded their case.

As the glitz and the glamour of the SONA unfolded, the women who stood their ground were a powerful reminder of the conditions they – and 3.5-million other pensioners – are facing. These pensioners included 67-year old Dineo Makgema, who lives with her four grandchildren in a two-room shack, the oldest of whom is in Grade 10. The shack leaks badly in rainy weather, but they often have to choose between repairs or food. With the proposed increase of the pension to a living wage, Makgema would be able to afford to feed her family, which in January amounted to R3,234.25, and have enough money left over for other basic needs, including repairing the leaky roof.

In July of last year, Makgema suffered from a stroke which left her shoulder injury. She’s due for surgery later this month, but she is worried that she cannot undergo the procedure since her grandchildren don’t have someone to take care of them. The parents of the children, Makgema’s own kids, have disappeared while another has died. Apart from Makgema’s old age pension, which often doesn’t stretch far enough, households like hers also depend on the kindness of others – such as teachers who provide her grandchildren with school uniforms.

Makgema’s experience is sadly not unique. Data from Statistics South Africa (Stats SA) shows that “about a third (32.5%) of households headed by the elderly have five or more members,” and half of whom live in homes with no employed adult. This issue of families being led by the elderly is a reflection of the extent of economic and social responsibilities that elderly persons continue to provide to their families. This burden is particularly borne by women, who according to the same data, were found to be more likely than men to distribute their pension among the household.

According to Stats SA’s 2016 survey, the number of households headed by women increases from the age of 70 upwards and for these breadwinners, nearly 67% of their income is made up of social grants. 75-year old Tholani Ngubane, who is raising six grandchildren, is her household’s sole breadwinner. The old age pension is her most consistent form of income, but it is not nearly enough, and she often has to search for “piece jobs” doing domestic work.

Of course, some will argue that an increase in the old age pension is impossible, considering the state of South Africa’s finances. However, as pointed out by the Pietermaritzburg pensioners forum, “providing all 3,5-million pensioners with a bonus in December 2018 would have cost around R5.8-billion, which is relatively equivalent to the R5.57-billion re-prioritised to e-tolls”. They also note that, “it makes more sense for the money to go directly into South African pockets to help 3.5-million pensioners and their families and act as an economic stimulus by bringing money into the local economy than for billions to go into the e-tolls system where much of that money will go overseas, instead of coming back to government in various forms through Value-Added Tax (VAT), improved education and health outcomes, increased circulation of money in townships and lower debt levels for millions of South Africans”.

This position is affirmed by research showing that raising the income share of the poor is good for economic growth. Economic justice group, Pietermaritzburg Economic Justice and Dignity (PMBEJD), has argued that the understanding of social grants such as the old age pension needs to go beyond being seen as merely a way for the poor to survive. Because pensions serve the same function as a wage and bring income into homes, they should also be seen as a potential economic stimulus for local economic development which should be invested in.

But it’s not just about economic growth – the benefits of increasing the old age pension and introducing the 13th cheque for pensioners will transform millions of lives by enhancing the quality of life for millions. With South Africa’s recent budget speech, the Minister of Finance missed the opportunity to announce some bold steps to make it happen. The old age pension was increased by a pitiful R80 which is 4.7%, and less than the rand value of R100 in last year’s increase.

Instead of citing fiscus constraints as a reason for not addressing the plight of pensioners, an effort could be made to reprioritise how funds are used. This – coupled with an increase in Corporate Income Tax (CIT) which has steadily decreased over the years; the introduction of a wealth tax – alongside an urgent action plan to clamp down on corporates that are not tax compliant are some ways in which revenue to enable this could be generated.

The conditions of households like that of Dineo Makgema and Tholani Ngubane affirm the importance of urgently pursuing ways to enable economically sensible assistance to households struggling to make ends meet. DM

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