In theory, the allocation of both social grants and a national minimum wage amount to a good thing, reducing inequality, alleviating poverty and increasing spending power among the country’s poorest, whether they are employed or not.

Economist and researcher Gilad Isaacs argued in a report on the likely impact of a national minimum wage, “In 2014, the average income of the top 10% of full-time employees was 82 times the average income of the bottom 10%. Inequality in South Africa is driven by wage differentials. There is a growing international consensus, led by the IMF, World Bank, and OECD, that inequality retards economic growth. Inequality also undermines social cohesion.”

Similar arguments apply to the allocation of social grants. A rise in household income, argues Isaacs, spurs greater consumer spending and hence increased output and raised levels of growth, together with rising productivity.

That’s if policies aimed at poverty alleviation – both for the employed and the unemployed – work together to achieve their desired end.

Minister Pravin Gordhan, presenting his Budget Speech in Parliament on Wednesday afternoon, announced that the grant for pensioners over the age of 60 would increase by R90 to R1,600, and to R1,620 for those aged 75 and above. Disability and care dependency grants would also increase by R90 to R1,600 monthly, foster care grants by R30 to R920, and the child support grant by R20 to R380 monthly.

“Social assistance grants provide income support to the most vulnerable in our society,” Gordhan said. “These [grants] will be increased in April to compensate for consumer price inflation.”

The silence on where an extra R1.3-billion to extend the welfare distribution contract of Cash Paymaster Services (CPS) might come from spoke louder than words.

It’s worth asking, though, whether the impact of an increase in the social grant budget will be felt if the 17-million South Africans who rely on them can’t receive them.

A further question has been raised by KPMG Senior Economist Christie Viljoen, who pointed out following the SONA that there was a relationship between the qualifying criteria for child support grants and the proposed national minimum wage.

President Jacob Zuma managed, in the lead-up to SONA, to enable the reaching of an agreement between government and trade unions on minimum wages, Viljoen argued. 

But, he added, “It is interesting to note that the R3,500/month minimum wage translates into annual income of R42,000. That figure is the current maximum income ceiling for parents to qualify for child support grants. This seemingly suggests that, if the minimum wage was implemented today, many employed workers subject to the R3,500/month minimum wage would no longer qualify to receive child support grants.”

Viljoen would not be drawn on why this might be. “I would not say that there is a conspiracy of some sort,” he told Daily Maverick. “But if one only looks at the numbers, that is what jumps out, and it is worth considering that there might be a loss of income for households depending on child support grants and who will be earning the national minimum wage.”

Viljoen queried the matter and received no response. “There is currently no clarity from the government’s side on this issue,” he said.

It is unclear whether – if Viljoen’s concern is valid – a loss of grants to beneficiaries who are employed but currently earning below the threshold will result in a loss of income, a smaller increase in income, or income simply staying the same; this will vary on a case by case basis, depending on the number of children in the family as well as the household income.

There is little doubt that the impact of grants is felt far and wide. According to Africa Check’s fact sheet on social grants, 12,039,444 child support grants are issued to the main caregiver of a child aged 18 or younger. Unicef’s impact assessment on the South African Child Support grant revealed significant positive outcomes for children who had been beneficiaries of the grant since birth, especially girls. Scores on maths and reading tests were higher, health was better, and there was less child labour. The loss of a large amount of child support grant income, if the shortfall were not adequately met by the wage increase, could be devastating.

Daily Maverick approached both SASSA and the Department of Social Development to enquire as to whether there would be any amendment to the qualifying criteria for child support grants, given the overlap with the proposed national minimum wage. SASSA spokesperson Kgomoco Diseko was unable to assist, explaining that it was a policy matter, and referred Daily Maverick to the Ministry of Social Development via Minister Bathabile Dlamini’s spokesperson, Lumka Oliphant. After several days, no response was received from Oliphant.

Nonetheless, Viljoen appears alone in his concern. Cosatu spokesperson Sizwe Pamla said the organisation was not concerned about the impact of a national minimum wage on grant allocations. The message, to paraphrase bluntly, was that Cosatu had bigger fish to fry in the form of unscrupulous employers who might try to exploit loopholes in the system.

“The National Minimum Wage has not been linked to the child grant or any other grant,” Pamla said. “We are not expecting that such a matter would arise. The comprehensive social security discussion is yet to be engaged on, and there are many issues needing clarity. It is a complicated and complex discussion, but it is a necessary discussion, as it would improve the lives of the poor and the working class.”

Head of the School of Economics at UCT, Ingrid Woolard, was of the opinion that the interaction between social grant and minimum wage would be negligible. “We know from the data that most CSG recipients aren’t working, and those that are, are well below the means test threshold. The National Minimum Wage will push some over the threshold, but I doubt it’s very large numbers of people,” she said. 

Moreover, job creation should be the ultimate goal, she argued. The overriding goal of economic and  social  policy has to be the assimilation of many more of the unemployed into the labour market, she said. “National Minimum Wage and cash transfer policies are important, but a positive employment environment is the key issue for sustainable  social  transformation going forward.”

Cosatu’s Pamla agreed, telling Daily Maverick that the organisation’s primary concern was the creation of more jobs and better working environments.

University of KwaZulu-Natal Economics professor Darma Mahadea seemed similarly unconcerned about the relationship between grants and minimum wage, arguing that it was not feasible to provide grants to employed persons in any case. “We already have 17-million grant recipients and that is already prohibitively expensive to the taxpayers. If more social grants are to be given to low income earners or those who lost their jobs or to the poor, then the issue of financing becomes critical,” Mahadea added. “Where would finance come from to foot a rising public sector expenditure? The UIF cannot sustain a person for too long. We are already a highly taxed country, and the benefits that taxpayers receive in return are very thin. Every time there is a tax increase, direct (income) or indirect (spending), our disposable income is reduced, and this adversely affects our consumption.”

The bottom line, it appears, is that the long-term goal has to be a combination of job creation and dealing with exploitative employment conditions at policy level. But in the meantime, the unemployment rate remains high, and many South Africans are powerless to improve their circumstances without the support of grants. And there is still little clarity on how, come April 1, they will receive them.

“Today’s Budget showed us once again that Minister Dlamini is uncaring about the security of the most vulnerable of South Africa’s social grant recipients. She continues to delay and obviate the matter, as if we are not in the midst of a full-blown crisis,” DA Shadow Minister of Social Development, Bridget Masango, said.

The ANC Women’s League, for their part, vehemently opposed “any proposal that the payment of Southern African Social Security Agency (SASSA) grants to be outsourced to one of the major commercial banks”, citing greed and unethical behaviour.

Meanwhile, as the saying goes, when elephants fight, it is the grass that suffers. DM

Photo by Isabel Sommerfeld via Flickr