Johannesburg - Social grants have created a safety net for
poor South Africans at a small cost, an economist said on Thursday.
"You establish a safety net and it costs you 3.5 cents
in every one rand, what's the problem?" independent economist JP Landman
said in Johannesburg.
Social grants make up less than 3.5% of gross domestic
This has led to improvements on various poverty measures,
"We have rolled poverty back extensively... I think
social grants are helping to stabilise the country."
He gave as an example a farmer he knows in the Eastern Cape
who said crime in his area has declined since the introduction of the social
grant. Landman said social grants have increased 27% since the ANC leadership
change at Polokwane in 2007.
This year 15.6 million people – or almost 31% of the
population - will receive social grants. This was expected to rise to 16.7
million by 2015, Finance Minister Pravin Gordhan said when delivering his
2012/13 budget on Wednesday.
"The Treasury has managed this expense extremely
However, Chris Hart, economist at Investment Solutions, who
was debating the budget with Landman, disagreed. He said social grants alone
are sustainable. Spending on health or education alone is also sustainable.
"But when you start looking at the whole lot together
with national health insurance, you start to get to something unsustainable and
that's the concern," Hart said.
Government should not stop spending on these, but needs to
ensure this money is spent wisely.
"When you are throwing money at a situation where
you've already got a huge amount of inefficiencies, you enhance those
Hart said the pendulum has swung to the point where South
Africa is focusing too heavily on poverty alleviation rather than poverty
He defined poverty alleviation as giving poor people things
for free, such as housing. Poverty reduction involves creating jobs for people,
so they no longer need handouts.
Landman saw it differently, saying money has to be thrown at
"You live in a country with the worst human skills
profile in the world, probably the worst health profile in the world... you are
not going to solve these things by not throwing money at them."
He added, though, that other issues such as weak management
in the public sector also need to be dealt with.
Economic growth alone could not solve South Africa's
unemployment problem, Landman argued.
"It's virgin-in-a-whorehouse thinking to think in our
lifetimes we will ever solve the unemployment problem though growth," he
This was because of South Africa's demographics. There are
too many unskilled people entering the labour force who will not get jobs.
Spending on social grants will grow from R105bn in 2012/13
to R122bn in 2014/15, according to the Budget Review.
The document notes that "despite limited fiscal
resources, government provides a safety net for nearly one-third of the
population through the social grant programme... paying for largely free
services at public health facilities and no-fee schools for 60% of
By the end of last year, nearly 15.3 million people were
eligible for social grants, compared to 2.5 million in 1998.
According to the document, the average value of the
"social wage" for a family of four in 2012/13 will be about R3 940 a
Despite the rapid growth in the number of beneficiaries,
however, spending on social grants will decline as a percentage of GDP - from
3.5% in 2011/12 to 3.2% by 2014/15.
This is because there are no major grant increases planned
for the next three years, and economic growth is expected to outpace growth in
the number of recipients.
According to the document employment is the most effective
route out of poverty, and boosting long-term job creation remains an overriding
objective of economic policy.