When it comes to social welfare, finance minister Trevor Manuel's budget flirts with radical change but stops short of taking the plunge.
A common observation is that SA has crept towards becoming a thriving welfare state in the past 10 years. Though the 14% rise to R105bn in spending on social security and welfare next year will reinforce that perception, there is no sign of the radical interventions some suggested would be the order of the day to please a new ANC leader in Luthuli House with debts to repay to the labour movement.
There was loud applause in parliament when Manuel revealed he would be pouring more money into social welfare grants. Certainly, the numbers look big.
Manuel says a chunky R12bn will be spent over the next three years in extra "social assistance" through grants. By April, more than 12,4m people will receive some form of social grant - more than four times the 3m who qualified in 1997. That's a quarter of SA's population.
WHAT IT MEANS
 An extra R12bn for social assistance
Increases barely keep pace with inflation
|
Manuel's budget increases the size of individual payouts. Monthly child support grants - now paid on behalf of 7,8m children - will climb by R20 to R220 by October.
The 2,2m South Africans who rely on old-age grants and the 1,4m getting disability grants will have their monthly income increased by R70 to R940.
Sector strategist in the presidency Neva Makgetla wrote in Business Day this week that millions of SA households depended primarily on social grants. "But most get only the child grant, which at R200/month is not enough to lift a household out of poverty."
With food inflation having soared to 10,3% last year, compared with 2,2% as recently as 2005, some observers suggest the grant increases will do little to alleviate the situation.
According to Nedbank chief economist Dennis Dykes, "the actual numbers might not back up the rhetoric much, but there was lots of emphasis [in the budget] on social issues".
At least the increases were above inflation, as demanded by the People's Budget Coalition - comprising Cosatu, the National Labour & Economic Development Institute (Naledi), the SA NGO Coalition and the SA Council of Churches.
However, Naledi head Oupa Bodibe describes the increases as "paltry". He says: "They don't tie up with the rate of increases in food prices."
Before the budget, some pundits expected Manuel to immediately raise the maximum age for children qualifying for grants from 14 to 18. Social development minister Zola Skweyiya had said government wanted to raise the age to 18 but hinted it could take two or three years. That indeed appears to be the plan, and Manuel has initially raised the limit by one year to 15.
Nevertheless, Bodibe says the coalition is "thoroughly disappointed" it did not go straight to 18.
Open Democracy Advice Centre CEO Alison Tilley agrees, saying the decision not to extend the age to 18 leaves at least 1,5m children out in the cold. "It's disappointing because there were encouraging signals from [government] that the grant would be extended to all children to the age of 18," she says.
Given that there is little doubt the limit will eventually be 18, others are quite happy that it will happen gradually. Econometrix chief economist Azar Jammine says: "The reason these grants have been so successful is that they've been gradually phased in. This is a continuation of that trend, and enables them to manage that process."
Old Mutual's David O'Brien says it is Manuel's style to "phase things in, rather than take big steps all at once". He notes: "It's ANC policy to move this grant to the age of 18, but these things come at a cost. It may sound like one year isn't much, but this represents real money."
However, critics welcome the fact that Manuel lowered the age at which men may access the old-age grant from 65 to 63. This will fall further to 60 by 2011.
This defies the trend in a number of developed countries, where the pension age is rising. In the UK and Germany, for example, the aim is to raise the age to 67. Manuel's decision is partly to close the gender gap (SA women get the pension at 60), and partly to draw more unemployed into the welfare net.
O'Brien says: "A lot of countries are generally increasing the age for women for old-age grants, rather than decreasing the age for men, as this reduces the cost to the fiscus. But in a developing economy, [what Manuel is doing] is probably appropriate."
There is another problem with all these grants, though it is one recognised by Manuel: the means test.
He says: "The qualifying household income threshold for the child-support grant will be raised, and the means test formula that applies to the old-age grant and disability grant will be revised, contributing both to easier administration... and to broader access of the poor to income support."
At present the means test for the old-age and disability grants means a household must earn less than R1 800/month to qualify. Murmurings within government suggest this ought to be raised to R2 000.
For child grants, rural households earning less than R1 100 qualify, and the cut-off for urban households is R800.
A recent study on behalf of the department of social development found that, in practice, means tests were difficult to administer and had unintended consequences such as penalising those who saved for their retirement.
The Budget review concludes: "The difficulties of applying the means test fairly, the administrative costs associated with the test, and the disincentives to saving of the current system, are compelling arguments for reform."
Though the approach is apparently not to sweep away the means test entirely, it seems government is considering a "tiered" test to make the system fairer.
A notably absent feature of this budget is any word on a basic income grant - despite loud calls from the People's Budget Coalition this week for its inclusion.
Last year's budget raised the notion of a wage subsidy but, one year later, this remains a woolly concept without flesh. In theory, this would require employers to provide a subsidy for staff earning less than, say, R50 000/year, which could later be claimed back from government.
According to the Budget review, such a subsidy would contribute to "employment creation through reducing labour costs to participating employers".
But this would be expensive. Initial projections suggest such a subsidy would cost about R25bn, even though it would increase employment by 350 000 in the first five years. The national treasury estimates that when you add this subsidy to social insurance, it would cut the number of people living in poverty by 20% over the period.
However, no clear plans have been made, and treasury officials say only that "the exact mechanisms are still being investigated".
