The South African Medium Term Budget Policy Statement (MTBPS) is scheduled for delivery by the Minister of Finance on October 26. From a political economy perspective, the MTBPS will indicate whether or not the ANC will be seeking to win the 2024 national and provincial elections on a pro-poor ticket.
Historical allies and voters, Cosatu, gave an unambiguous message to the ANC leadership last week at the federation’s national congress that its support in the ballot box is not guaranteed. The stubborn hubris of the ANC does not appear to be waning.
They appear to be out of touch with the miserable realities of life lived by the majority of their electorate. Their recent policy conference resolution affirms their commitment to a Basic Income Grant (BIG) and universal social security, and yet Treasury seems aggressively determined to eradicate the meagre R350 grant.
This dissonance in the ANC suggests no coherence on key principles and policies. Next year will be one of fierce contestation before the 2024 elections. The Young Turks – the new independents – bring with them a freshness untainted by corruption and the arrogance that has settled around the leadership of the ruling party.
If the ANC wanted to secure victory, the one policy that would win the votes and restore the faith of its largely working-class and the unemployed electorate would be the BIG. Its determination to reject the grant is one of its own goals that has come to characterise a ruling party that seems more concerned with preserving the wealth of the elite than ending the intergenerational poverty of the majority.
South Africa’s poverty levels have grown steeply since 2011 and the unemployment trajectory is also growing, even without the disaster that’s load shedding. Economist Duma Gqubule’s recent paper on unemployment, South Africa’s unemployment crisis: a national disgrace, was published by Social Policy Institute in August.
A plan to achieve full employment by 2035, projects an unemployment rate of 50.9% or 17 million people by 2030 unless the state takes significant steps to change the fundamentals of its development path. Gqubule’s plan to achieve full employment in South Africa by 2035 is bold but clear and he sets out in unequivocal detail the interventions needed to reverse the current dystopia.
Gqubule argues South Africa’s current macroeconomic policy framework will ultimately be the downfall of the country. The macroeconomic policy targets debt and inflation, and these targets are out of kilter with the country’s needs.
According to the report, in choosing these targets, the state continues to starve state and household expenditure respectively and growth will never be possible. Following these targets leads directly to a drop in national demand, and so the economy stagnates.
Rather, he argues, the macroeconomic framework should target growth of 6% per annum and employment. Rather than continuing to cut state expenditure under Treasury’s austerity budgeting, he argues for three fundamental policy changes: the introduction of a universal decent BIG indexed to the Upper Bound Poverty Line (approximately R1500 a month), the consolidation and expansion of the many different public employment programmes with a living wage threshold, and the adoption of “aggressive industrial policies” that “steer production towards sectors that have high (employment) multipliers”.
His modelling based on these reforms predicts an unemployment rate of 4.4% by 2035 or 1.6 million people. And Gqubule does not, as conservative think tanks have scaremongered, model these reforms on tax increases.
Taking money out of the economy is not what he prescribes, but rather using other available funds that are sitting unutilised on the “SA INC balance sheet” and increasing debt until these policies start virtuously paying for themselves.
Gqubule is not the only intellectual who has been developing alternatives to help South Africa out of its current state of implosion. But Treasury appears deaf to these analyses. What will we see in the MTBPS? Up until then, recipients seldom knew with certainty whether the grants would continue from month to month or whether they would just dry up, as happened just before the July 2021 riots. And beneficiaries had very concrete grounds for their optimism.
First, social security grants are guaranteed in the Constitution to people unable to provide for themselves, so the state is obliged to continue with the grant unless it can prove the need is not there.
Second, all the impact evaluations of the grants showed an overwhelmingly positive impact on food intake, on the mental health of the beneficiaries and the local economies as people incredibly used the small grant amount to grow their economic activities and support local business initiatives, and third, Treasury said it would do so.
In the February Budget, the Minister of Finance promised the grants would be extended, in his words: “R44 billion is allocated for a 12-month extension of the R350 social relief of distress (SRD) grant”.
What happened has been a national disgrace and not the work of a party committed to alleviating the poverty of the majority. The critical words were not the 12-month extension of the relief, but the R44bn allocation. The budget for the promised extension was ring-fenced and the line department, the Department of Social Development, had to create a maze of obstacles to slash eligibility for the 10 million beneficiaries who were receiving the grant at the beginning of the year.
In March, 10.3 million people received the R350 grant. In April, not a single person received any payment. In July, under the new regulations introduced to comply with Treasury’s budget allocation, 3.7million people were now deemed eligible for the mean R350 grants. How does the government justify such actions? It seems that clandestine conditions issued by the World Bank that insist on poverty targeting rather than universal benefits are more compelling than the Constitution, or the weight of the empirical evidence of the beneficial returns that the grants were generating.
Ironically, under the new Treasury regulations, the means test adjustment meant anyone who used the grant to make further money lost the grant if their initiative was successful. In a recent report Can a Leopard change its Spots published by Development Pathways and Act Church of Sweden, the authors tracked the dissonance between the commitment by the World Bank leadership to support universal social protection in signing the USP2030 partnership and the conditions imposed by their country offices across the world of “poverty targeting”.
Some of this evidence is in World Bank publications. And yet, Treasury’s discussions about the R350 SRD in preparation for the MTBPS made mention of the advice of the Bank to move people off the R350 and into (non-existing) jobs.
Poverty is dynamic, you need a safety net that does not disappear the first month you make some money. Rather you need a safety net that provides support as you grow your business and start employing others and start to contribute to the fiscus.
If the support is taken away the first time you show a slight income, you will always remain at a survivalist level, and after a while, you will decide that it is not worthwhile trying. The MTBPS will tell where the ANC sees its election priorities for 2024. And all aspiring opposition parties will be watching.
* This article was published first in The African.
* Frye is the Director of the Social Policy Initiative.