Rather than creating wealth, South Africa has been stuck for the past decade in redistributing existing wealth.
This much is evident in the inexorable growth of social grants, with job opportunities remaining a luxury for the lucky few who went to university.
With the devastating effects of the nationwide lockdown having been made clear in Stats SA’s Labour Force Survey for the second quarter, some activists have been calling for the temporary Social Relief in Distress grant to become a permanent grant. But should this be the focus of South Africa’s reforms?
The year 2010 was the point when South Africa transitioned from a country that was relatively effective in steadily lowering its unemployment rate to one that was simply adding growing numbers of people to its welfare tab.
This followed the global financial crisis, and – tellingly – the elevation of Jacob Zuma to the presidency: the moment at which the government intensified the pursuit of policies hostile to business and investment.
As a result, South Africa exited a period of relatively high economic growth, and entered what some analysts would refer to as the country’s lost decade.
In fact, 2010 was the first time the number of social grants being paid out exceeded the number of people with jobs. In that year, there were 92 people with a job for every 100 social grants paid out. This was a big drop from 2008, when there were 112 people with a job for every 100 social grants paid out. Today, around 90 people have jobs for every 100 social grants.
Labour force absorption rate
South Africa’s labour force absorption rate (which measures the proportion of the working-age population that is employed) declined by 4% from a peak of 46% in 2008 to 42.4% in 2019. Over the same period, the number of social grants as a proportion of the total population increased by 4% from 26.8% to 30.7%.
The effects of one of the world’s harshest and longest nationwide Covid-19 lockdowns are reflected in data showing that more than two million South Africans have lost their jobs – essentially wiping out a decade in jobs growth within just a few months.
Introducing a temporary grant to help support people throughout these difficult times is both understandable and justifiable.
To mitigate the economic fallout from the lockdown, the government expanded the country’s system of social assistance by topping up the amounts of every grant as well as introducing a special Covid-19 Social Relief of Distress (SRD) grant of R350, both for six months.
Recently the humanitarian organisation, Black Sash, saw the Social Relief of Distress grant as the first step to a universal basic income grant. Black Sash strongly supports the introduction of such a grant. However, notable economists such as Dawie Roodt and Professor Bonke Dumisa have warned that South Africa does not have the fiscal space to afford such a grant on a permanent basis.
Making the special R350 grant more permanent would be an expensive and unaffordable endeavour while South Africa finds itself in political and economic turmoil. Already, more than 18 million grants are being paid out every month. The only way to reduce the number of people in need of a social grant is to significantly increase the number of people with a job.
Obstacles to job creation
However, the unions and the African National Congress itself are the major obstacles to job creation. The consequence of the national minimum wage is that businesses are reluctant to hire because the minimum wage makes labour in South Africa too expensive.
By contrast, a study done by Afrobarometer this year showed that the majority of South Africans would prefer a low-paying job to no job at all.
The study, comparing two hypothetical economic systems, showed that two thirds (66%) of South Africans would prefer an economy with low wages and low unemployment over one with high wages and high unemployment. The vast majority (79%) believe it is better to have a low-paying job than to have no job at all.
South Africans clearly attach a high value to having a job. Government therefore needs to implement labour reforms that will price people into work. With more people in jobs, South Africa’s high social grant dependency ratio will decline, providing fiscal relief. It is time for South Africa to focus on wealth-creation again.
Source: https://dailyfriend.co.za/2020/10/28/sa-needs-more-jobs-not-social-grant-beneficiaries
Comments:
David de Beer
Social grants, like all forms of welfare, seem justifiable on paper. In truth they are the most disempowering weapon in modern democracies. Call them what they are — voter bribes. Disempowered people are dependent on the largess of the politician. Politicians need captive votes. Dependent people are crippled for life. When govt will simply provide what possible incentive is there to strive and succeed?
David de Beer
He who does not work, shall not eat.
People believed that once. We should make it our mantra again and revive the engines of human determination that drive prosperity and success.
Hunger is the best damn motivator in the entire world for people to find a way. We just need govts to stop “helping” and go and sit on their arses and basically just get out of the way.
Greville
This is how government traps people into voting for them through social handouts at election time
Graham Richards
There is no such thing as the ‘Redistribution of Wealth’. It is unsustainable. The only “redistribution “ that will emerge is the ‘Redistribution of Poverty’.
Mac Steynberg
This is such obvious common sense, it hardly needs to be stated. I object because my tax money is used to buy wellfare and therefore votes for the ANC. South Africa cannot be expected to emulate rich, developed countries with a national work ethic like Europe.
Marcell
Why give a person a job if this employee might kill you later?
[A white person employing a black person in South Africa would now have to worry about the employee killing him.]
Time to look at the elephant in the room. Breeding beyond your means.
Audrey
We can’t just create jobs because we have so many people who need them. If you can’t afford to fund your own children don’t have them! It’s not my job to feed them via my tax contribution. If I could have afforded children of my own, I would have had them. But I don’t see why I have to fund those of other people. I have noticed over the years that no-one ever talks about this but to me, it’s the elephant in the room.
Peter
Marcell, why should they worry about breeding, when they don’t have to worry about the feeding? And they still hate the ones’ who do the feeding.
[They hate the white people that pay the taxes.}
Greville
If you want to see what the problem will be like around 2050 see graph
https://bit.ly/2PEZs2N
hjbacker
Reduce the number of sleeping government employees.
Garg
Reduce all the government employees, starting with the MPs Zuma hired to pack the benches.
Greville Wood
What everyone misses in SA’s job creation equation is that the only people who can create sustainable jobs are engineers.
Surrounding the President is “experts” who have no engineering capacity to create industry and engineers who know how to create production are excluded. As a result, the dti, Nedlac, the President’s economic advisory council, the National Planning Commission, BLSA, BUSA and B4SA cannot provide economically sustainable jobs. As they are not engineers their solutions results in non-sustainable jobs that usually cost the state. Whereas the jobs engineers create through production in manufacturing, farming and mining, (an agronomist is just a biological name for an engineer) are all sustainable and do not burden the state but add to the coffers.
The B4SA R3.4 trillion is a classic example millions of costly non sustainable jobs and no production.
Here is an engineering plan capable of creating jobs countrywide in squatter camps which government rejects but two proof factories shows that it works. Government and the City of Jo’burg have rejected it for 26 years and they cannot give a reason why they have rejected the plan, leaving one to conclude that they never intended to create jobs.
See for yourself how government has deliberately forced poverty upon the very people it claims to champion. City of Jo’burg plan on how to lift 7 squatter camps out of poverty as a roll out model for all squatter camps. https://bit.ly/3a9nTNG Just to show that this plan has been with government since the mid 90’s, it was registered in 1996 at the National Research foundation, then the Foundation for Research Development, SA’s premier science council. https://bit.ly/3dOM1aY .
In order to maintain high levels of poverty and joblessness since 1995 government has rejected the findings of 2 multi-million rand proof factories, and 30 odd technical recommendations. These were inter alia from, 4 recommendations from the CSIR with one to the Science and Technology Port Folio Committee. Four confirmations came from the Ford Motor Company and one each from General Motors, Goodyear and Siemens. Recommendations also came from the Manufacturing Circle of SA, NAAMSA, NAACAM, Wits School of Mechanical Engineering, the SA Academy of Engineering and, 3 consulting engineers reports. Government and the dti rejected all.
It is clear from the above that government never intended to address unemployment but maintain high levels of poverty and buy votes at election time with social handouts.
I asked DG October to explain how for 26 years government was able to conclude all the above technical expertise was incompetent in this reply he could not provide the facts instead wanted to demonstrate his tap dancing skills. Letter to October https://bit.ly/3anXWvL ; October demonstrating his tap dancing skills https://bit.ly/2GDRzJJ
South Africans need to bring this to the public’s attention that government never intended to create jobs and are deliberately creating an economic decline.
Panagiotis
When people are financial independent they are difficult to control. Thus create a Slave community that must rely on the state for it to exist. It starts with education that prepares the youth not for self sustaining entity but a job seeking creature. Not one to use its brains to be creative thus independent. So we have to loot from the creators of wealth to support the non creators. When you keep ‘giving’ there is no need for the individual to make any effort to improve himself. You just making him weaker and more reliable to others. Totally the wrong and anti-human philosophy.
Peter
But this is the basis of communism/Marxist ideology: keep the masses ignorant and anything the State does (for them) no matter how small & inconsequential, makes them forget how totally dependent they are.
Brian Little
It is not South Africa, but the ANC – who think they ARE South Africa – that need more social grant beneficiaries, in fact lifelong dependencies the more appropriate description. It is their scaremongering vote ensuring strategy. This itself likely contributory to the reasoning behind our overly extended lockdown as well as talks about further lengthening as well as upgrading the status back to more stringent levels – in a time where their voters fodder have been slowly dissipating from them due to their lack of care, concern or practical policy.
Dependency on the state is all they have ever had on offer, and all they ever wanted to have on offer. It is practical enslavement and slavery. And by all indications, so it will be. Big man politics.
W Mulder
We have been destroying wealth on an industrial scale never mind redistributing.
Greg O
South Africans need to stop breeding themselves into poverty.
Amo
In a country where most or all of the citizens are dependent upon some form of social grant received from the government, the governing ideology is called: Socialism, this is usually the forerunner of a conversion to full Communism – where the community exist and work to keep an elite of Party officials in extreme luxury while the rest of the population lives below the bread line.
Greville Wood
The problem South Africa has is the lack of entrepreneurial sprit among South African business leaders to take advantage of good engineers labour and raw materials and expand South Africa’s manufacturing base.
Allan Preddy
The social grants was in fact introduced not to assist the poor, but rather keep them poor by having to rely on a pittance.
Dewald
Ìt is a human rights abuse that you have millions of people in a country who are so destitute that they are prepared to queue for hours to receive R350 per month, while at the same time you have semi-literate parliamentarians and cadres in the civil service drawing salaries in excess of R100,000 (plus massive benefits) per month.
Chris Faber
The current government mis-managed by the ANC never seems to disappoint with their blind ignorance of what the realities are. They have decided to ‘bank’ on the Chinese but then they only take the worst instructions from them which plays into their hands and moneybags. IF ONLY they would take the good that they can learn from them such as: “Give a man a fish and he has food for a day BUT TEACH a man to fish and he has food for a lifetime.”
But the lack of IQ and EQ abounds in their midst. Common sense is a term they do not understand. Latest interim budget points to the R/$ exchange rate going from R16,5/$ to about R32/$ within three years whilst it should currently be about R8/$. The halving of this figure is due to the bad track record of the government. I estimate that they will be printing (actually have it printed overseas at high costs since they do not know how to print money any more) new notes with Winnie Mandela’s face for the R500 notes which will be required to buy a loaf of bread.
