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Tough questions for political parties (Part Two) — Rise Mzansi, the SRD and basic income grants

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Neil Coleman is Co-Founder and Senior Policy Specialist Institute for Economic Justice. @NeilColemanSA

Rise Mzansi’s proposal to terminate the Social Relief of Distress (SRD) grant would have an extremely negative impact on poverty and hunger and runs counter to its claim to be a pro-poor party.

Read Part One here

Rise Mzansi has run an impressive election campaign, creating an image of a party that is breaking the mould of South African politics and empowering youth voices, while harnessing the experience of activists who have a good sense of realities on the ground. 

It has appealed in particular to young people from the middle strata and professionals, although its reach among the working class and rural communities is more limited. I for one welcome the emergence of fresh voices such as Rise Mzansi’s on the South African political scene. Our politics needs to be shaken up.

However, the claim by Rise Mzansi that it is a pro-poor party must be questioned. Despite its innovative political presence, it has adopted conservative positions on economic and social policies in significant respects, tending to entrench the status quo rather than fundamentally challenging it. It is not only our political scene that urgently requires a shake-up — so too do our economic and social policies if we are to navigate a way out of our current economic and social malaise. 

Rise Mzansi’s policies on social protection betray its conservative bent. Its opposition to the introduction of a basic income grant is worrying enough. More serious, however, is its proposal to terminate the Social Relief of Distress (SRD) grant, and replace it with a three-month jobseekers’ grant. This will be nothing less than a social catastrophe if implemented. The proposal is taken straight from the playbook of the World Bank and a discredited 2022 proposal of the National Treasury.

According to the latest available figures, as of March, more than 8.7 million people in South Africa were receiving the SRD Grant. This grant is the only income millions of South Africans have, standing between them and starvation, although set at the unacceptably low level of R370 per month. According to a study by UNU-Wider, more than half the population benefited from the SRD grant at its peak, either directly or indirectly (there were 10.9 million beneficiaries in March 2022 plus around two dependents on average per beneficiary).

Incomprehensible

It is therefore incomprehensible that a pro-poor party would propose to terminate the SRD grant at a time when one in five South African households regularly sends a family member out to beg for food.

Particularly worrying is the fact that the party, given the opportunity to reconsider its position in response to a GroundUp survey and the Universal Basic Income Coalition’s basic income scorecard exercise, doubled down on its position, unlike other parties that were open to engage on alternatives. It is still to be hoped that the party will shift its approach.

The DA has also proposed to terminate the SRD grant and replace it with a jobseekers’ grant. But Rise Mzansi has arguably placed itself to the right of the DA on this matter, given that the DA conditionally supports a basic income grant being introduced at some point (“depending on economic growth”) and doesn’t appear to propose a time limit for receipt of a jobseeker’s grant.

So what does Rise Mzansi propose in place of the SRD grant? Unfortunately, a mix of paternalism and narrow targeting, both of which are unlikely to reach more than a tiny fraction of the current SRD beneficiaries.

It proposes food vouchers for households experiencing hunger, although food vouchers are more costly and difficult to administer than direct cash transfers, are vulnerable to corruption, and take away agency from grant beneficiaries to decide what are their most urgent requirements. 

Further, research shows that 93.3% of SRD grant recipients use their grants to purchase food. As such, the logic of providing food vouchers in place of cash transfers is unclear.

As problematically, Rise Mzansi proposes to limit cash transfers for adults needing support to a limited three-month conditional jobseeker’s grant, which would require the completion of a training programme. This assumes that unemployment is a cyclical phenomenon; jobseekers only need support for three months; that jobs would be available after this period; and that the state would be able to offer access to training programmes for up to 12 million unemployed people. 

It further assumes that only active jobseekers need income support and that it would be acceptable to exclude caregivers, precariously employed workers and the long-term unemployed from such support. The proposal is fundamentally flawed in all the above respects.

Data published by Stats SA earlier this month reveal that the number of unemployed people (in the broad definition) has risen to 12.1 million. Three million people have given up looking for work (“discouraged work-seekers”) and 6.2 million (of the narrowly defined unemployed) are long-term unemployed, ie, have been looking for work for more than a year. 

rise mzansi basic income rise mzansi basic income

Jobs simply aren’t available in the short term, so other immediate, high-impact interventions, including the introduction of a basic income grant, are critical if we are to address the extreme poverty and hunger arising from this reality. 

Irrational and counterproductive

In this context, the idea of job-seeking conditionalities attached to qualifying for government programmes, including social grants, is irrational and counterproductive. 

What is the international and local evidence on cash transfers and job seeking?

The jobseeker’s grant further relies on the faulty premise that we should prefer a grant underpinned by jobseeking behaviour because other grant modalities discourage people from entering the labour market and create “dependence”. There is no evidence that giving people a grant discourages them from entering the labour market. If anything, the South African and international evidence shows the opposite.

According to a study undertaken for the Presidency in 2022, “There is no strong evidence that small grants would discourage job search and considerable evidence that they encourage job search. Government should focus on programmes for the population who are already actively looking for work, rather than spending funds on creating additional incentives to encourage the group of people who are not already searching to become active in the labour market… 

“In labour markets where most people who want to work are employed, encouraging more people to search for work can result in increased employment because there are many firms looking to fill vacancies. By contrast, in South Africa there are many people who are actively looking for work and cannot find jobs… Flooding the market with people who are searching for work but are not able to take up work may discourage firms from hiring, and in the longer term, discourage jobseekers from searching.”

These conclusions are broadly supported by a recently released IMF report on South Africa. The report concedes that attaching work conditionalities to grants in the South African context is likely to have unintended and adverse consequences, including discouraging workers further, forcing them to take low-quality jobs with reduced earnings, and increasing social discontent.

“In the context of South Africa with structural unemployment and high inequality, job search requirements should be designed to avoid the pitfalls of a heavy-handed monitoring programme … stricter monitoring and enforcement might not result in an increase in job finding or reduce unemployment in the economy as a whole,” the report stated.

Extensive research shows that most people including grant recipients are highly motivated to work and do not need to be incentivised through punitive welfare conditionalities. The biggest barrier to work in South Africa is a lack of available jobs, alongside the high cost of searching for a job. In other words, people are unemployed because of the structure of the economy, not because they are simply not searching hard enough for a job.

When people receive unconditional grants such as the SRD grant, they use the funds to supplement their job search costs or invest in their businesses. The SRD grant increased the likelihood of employment by three percentage points, without imposing work conditionalities. 

Finally, not everyone in need of social assistance in South Africa can participate equitably in the job market. For instance, those with full-time caregiving responsibilities (predominantly women) should not be required to demonstrate jobseeking to access direct cash social assistance.

Most importantly these proposals by Rise Mzansi, the Treasury, the DA and the World Bank — advanced in opposition to the overwhelming majority of civil society, unions and political movements — ignore the critically important role the SRD plays in combating hunger and poverty. The SRD grant needs to be improved and expanded into a system of basic income, to end hunger and poverty, not undermined or terminated. This is both a constitutional and social imperative.

I acknowledge the work done on these questions by the Universal Basic Income Coalition for the basic income elections scorecard. It’s available here.

Part 3 will deal with the problems arising from austerity policies pursued by the government and the need for the ANC to abandon neoliberal economic dogmas and adopt more developmental macroeconomic policies if our economic challenges are to be addressed. DM

This series of articles is written in Coleman’s personal capacity and does not necessarily reflect the views of the Institute for Economic Justice.

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Comments - Please in order to comment.

  • Ismail Lagardien says:

    this is good

    • Peter Utting says:

      Perhaps we should visit negative taxation, where everyone is a taxpayer from birth and receives tax until their income reaches a certain level, and pays tax thereafter.

  • Ismail Lagardien says:

    this is good

  • Kim Webster says:

    Too few taxpayers and too many on social security. The nub of the problem. Tie in with substance abuse which takes precedence when cash is available makes food vouchers at least a little less tradeable

    • David Le Page says:

      Too few tax payers … yes, because our current arrangements systematically impoverish people, making it impossible for them ever to become tax payers. It’s an absolute myth that poor people spend more money on substance abuse.

  • Henry Weyers says:

    A bit long winded but, I like the analysis and various arguments given It does make me think. I think grants are our new reality in South Africa. How we solve the availability of suitable jobs is a bit more problematic. Maybe instead of increasing grants we should subsidize employment opportunities especially those like basic service delivery which the Government appears to battle with.

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