On 10 February 2022, President Cyril Ramaphosa is expected to announce in the State of the Nation Address (Sona) whether or not the Social Relief of Distress (SRD) grant, which over 10 million South Africans rely on, for their monthly income will be extended and possibly made permanent.
In a leaked briefing note, the Presidential Economic Advisory Council (Peac) advised Ramaphosa against extending the SRD or implementing any sort of basic income: “Although there is some uncertainty as to what precisely is being considered with regard to the possible expansion of social grants — whether a universal grant; a means-tested grant; a grant for all unemployed working-age people, or for a younger or older cohort; or a grant for individuals or households — there is no doubt that the expansion of social grants in the present context would divert resources away from the building and maintenance of public infrastructure and away from the delivery of public services.”
The note went on to say, “inclusive economic growth must be built on employment creation. Our vision must be to promote employment rather than ever-increasing state-funded income support.”
This could have been copy and pasted from former president Nelson Mandela’s oft-cited 1994 State of the Nation Address where he stressed that South Africa would “confront the scourge of unemployment not by way of handouts but by the creation of work opportunities”.
Over 27 years later, the unemployment rate is the highest it has ever been in South African history. Despite the ANC’s ideological devoutness to job creation and its aversion to “dependency”, the scourge of unemployment has only gotten worse.
The response to unemployment must involve a dual approach — the very approach that the Peac advisors dismiss.
However, we mustn’t be fooled by the Peac brief. South Africa does indeed have a dual approach (albeit a limited one) to employment security, and it has for a long time.
An unemployment insurance fund was established in 1937 and was expanded throughout the 20th century.
Today, the Unemployment Insurance Fund (UIF) includes individuals engaged in formal employment. This includes most, if not all, of the advisors who have warned the ANC government against the extension of the SRD grant and the introduction of a basic income — Tania Ajam, Haroon Bhorat, Kenneth Creamer, Alan Hirsch, Thabi Leoka, Renosi Mokate, Mamello Matikinca-Ngwenya, Liberty Mncube, Wandile Sihlobo, Grové Steyn and Imraan Valodia.
The fund excludes informal workers and the long-term unemployed. The long-term unemployed account for 75% of the unemployed in South Africa. The current system of unemployment security is therefore grossly inadequate.
When UIF was first introduced, Black South Africans in rural areas were excluded from contributing to the fund. These exclusions reduced the cost of labour for the employer and the state by removing the burden of contributing to the UIF. The argument was that black South Africans would rely on familial support networks to fulfil the social reproduction function of unemployment insurance, whether or not this was actually possible in practice. It wasn’t until after 1994 that all the racialised exclusions were removed.
When economists today say that we must end grants for the unemployed in the name of economic growth, we must ask who this is benefiting and at what cost?
When unemployed adults are excluded from the social grant system, downward pressure is put on wages as those in the continuously expanding reserve army fight for decent work.
It is not a coincidence that the Quarterly Labour Force Survey fails to publish data on take-up of unemployment insurance by population group and occupation. If they did, we would undoubtedly see that the main recipients are those in high-skilled, highly paid positions. We would also see that it is still strongly racialised.
When the Unemployment Benefits Bill was under debate in the National Assembly in 1937, one of the MPs put the following question to the House: “are you going to pick out those that you may call aristocrats among the workers?”
Nearly 100 years later we could ask the exact same question.
An official in the Office of the Presidency has reportedly stated that the document was leaked by those against the proposed basic income and that the ANC government has no intention of cancelling the SRD any time soon. The same source stressed that the SRD will be extended for one more year, which will give the government time to formalise a plan for the basic income.
However, the government has already cancelled the SRD grant once without any warning. There is no guarantee that it won’t happen again when Ramaphosa delivers the 2022 address on Thursday.
If Ramaphosa fails to extend the SRD grant and make a viable plan for the introduction of the basic income, not only will he need to answer to the millions of unemployed, so too will the individuals who make up the Peac. DM