Social grants are ‘unsustainable’

Experts say South Africa may soon not be able to afford to carry the growing number of people dependent on social grants.

A report released yesterday by the South African Institute of Race Relations (SAIRR) says there are more people receiving social grants than there are people employed.

The report further indicates that, as the economy slows, the government will find it harder to expand the rollout of grants or to increase their value. Last year there were 15 545 000 people with jobs in SA, while 17 094 331 people were receiving social grants.

SAIRR analyst Gerbrandt van Heerden said the numbers were a recipe for political chaos.

“With South Africa formally in recession, the government will find it difficult to afford the cost of its social grants programme. As the economy stagnates and tax revenue slows, demand for more grants will increase. The government will then have to cut other areas of expenditure in order to meet popular demand for more and higher grants. We predict that this will lead to much higher levels of violent protest action.”

But economist Dawie Roodt said the problem was bigger than just social grants, as government’s social expenditure was estimated at 60% of the total budget.

“We have the two groups, the productive and the nonproductive part of society. The question is how much more can we lean on the productive side to support the nonproductive part of society? We can increase spending but then you’re going to see more of what we are experiencing in the private sector, which is shrivelling. This will happen as a result of the overburdening on the private sector.”

Van Heerden said the shrinking tax base, as well as economic recession, meant the government needed to reprioritise spending.

“I think they should have made these changes a few years ago already, but we are now coming to a crossroad. What we are arguing is that on average it takes a country five to 10 years to recover from a recession or junk status. If we look back at the policies that were implemented during Thabo Mbeki’s era since he came into power in 1999, his policies contributed to better economic growth.

“Between 2004 and 2007, employment began to decrease and it’s going to take five to 10 years for the country to recover where we see less of a demand for social grants.” – simnikiweh@citizen.co.za