Covid-19: Ramaphosa’s plan is good, but the budget is insufficient
An in-depth analysis of the social grants component of the relief package
President Cyril Ramaphosa has announced a package of reforms to support poor people over the next six months through supplements to social grants, a new emergency grant and improved distribution of food parcels. Together, these promise for the first time a seamless social safety net covering not only the very poor but a majority of the South African population. In opting for a broad package of reforms, the president has avoided relying on a single programme. But the state faces an enormous challenge in effecting its bolder reforms. The budget is clearly insufficient and the state lacks administrative capacity to effect the promised reforms.
In his 21 April broadcast the president announced a R500 billion ( approximately US$25 billion or close to 10% of Gross Domestic Product) of emergency expenditure to counter the costs of the lockdown. The package included increased expenditure of R50 billion on social grants.
The Child Support Grant – paid to about 7 million parents or other caregivers, for about 12.5 million children – will increase by R300 in May and R500 per month from June to October;
Other social grants – including the Old Age Grant (or pension) and the Disability Grant – will be increased by R250 per month from May to October;
A new “Covid-19 Social Relief of Distress grant”, of R350 per month, will be introduced for people who are unemployed but not yet receiving any social grant or support from the Unemployment Insurance Fund. This will also be paid for six months. The president declared that the Department of Social Development would “issue the requirements needed to access and apply for this funding”; and
The distribution of food parcels will be reorganised: 250,000 food parcels will be distributed within two weeks, and a new system of vouchers or cash payments introduced.
The president also announced additional funding as well as tax deferrals for companies, small businesses and workers, and for municipalities. It is also unclear how the package will be funded.
The design is good, in principle
The package appears to be well-designed, institutionalising a patchwork of programmes to provide what amounts to a basic income grant for a majority of the population for the next six months.
Emergency social grants are required above all because of the collapse of informal livelihoods. The president’s package will reach directly individuals and households who are not eligible for benefits through the Unemployment Insurance Fund (UIF), even with some relaxation of eligibility requirements, because they were working informally.
The wide reach of the package goes beyond some of the narrower proposals that have circulated in recent weeks.
Recent proposals fell into two broad groups. On one hand were proposals to focus spending on the Child Support Grant. The call for the CSG to be increased was made initially by University of Cape Town (UCT) economists. They argued that this was the most practical way of reaching households affected by the collapse of informal livelihoods during a lockdown. They cited survey data from before the pandemic that showed that most poor households with someone in informal employment also include someone who receives a CSG. Therefore, they argued, if you want to help households whose household income has collapsed due to the loss of informal livelihoods, then supplementing the CSG is a sensible and administratively feasible way forward. A R500 per month temporary top-up would also be affordable (at a cost of about 0.1 percent of GDP per month).
Another group of academics and activists based at UCT’s Children’s Institute called for an “urgent increase” in the CSG of R500 per month, for six months. By mid-April, 600,000 people had reportedly signed the online petition in support of this proposal.
A second set of proposals entailed a broader set of reforms to grants. More than one hundred economists and other academics called on the government to introduce a set of measures including a “special Covid-19 grant, a top-up to existing grants, and/or a universal basic income grant”.
The Institute for Economic Justice (IEJ) in Johannesburg expanded on this, proposing an emergency rescue package that included almost universal new payments. The IEJ recommended an immediate payment of R500 plus top-up payments of R500 per month for three months to all grant recipients – including old-age pensioners and disability grant recipients as well as CSG recipients – together with the extension of CSGs to pregnant women and a once-off universal basic income payment (UBI) of R4,500 to all adults. These measures would cost close to R200 billion or about 3% of GDP.
Members of the Concerned Africans Forum (CAF) called for a special Covid-19 or universal basic income grant. If this proved unfeasible, then the CSG should be supplemented, they said. The Black Sash has reiterated a call for a universal, basic income grant. The ANC and COSATU have reportedly called for something similar.
The president’s plan incorporates the increases in the CSG within a broader set of grant reforms. The plan is thus closer to the second set of proposals than the first, although the reforms stop short of a universal basic income grant and many of the benefits are more parsimonious than the IEJ proposed.
A broader set of benefits is preferable to a narrow focus on the CSG because burdening the CSG with the support of entire poor households would undermine the core purpose of the CSG – to support children in particular – and is likely to exacerbate conflict within households and communities.
For years, the state and civil society have promoted the message that the CSG is to support children, not the caregivers (who receive the grant on behalf of the children) and certainly not other members of the household. Researchers show that the CSG results in a range of demonstrable albeit modest improvements in the well-being of children.
No one expects that the caregivers who receive the grant spend the entire amount on the children without regard to the caregiver’s own basic needs. In practice, grants are shared. But the message has clearly been: The CSG is primarily for children.
This accords with the views of most South Africans as to how the CSG should be spent. People condemn expenditures by CSG recipients – the caregivers – on non-essential goods for themselves, specifically on alcohol, cigarettes and airtime, rather than on the children. Surveys shows that most South Africans are strong supporters of existing grant programmes. But most South Africans when surveyed also agree with the statement that young women spend too much of their CSGs on beer or alcoholic drinks. Ethnographic research in both Gauteng and the Western Cape also reveals how receipt of a CSG exposes individual women to moral scrutiny and judgment by family members and neighbours.
The government’s plan both increases substantially the CSG, benefitting children and their caregivers, and provides for other household members by increasing other grants (albeit by less than the CSG) and by introducing a new emergency grant. The government is thus signalling that the CSG should continue to be primarily for the benefit of children and the immediate caregivers. Other adults should not rely on the CSG. This is sensible and appears to accord with public opinion.
Implementation will be an enormous challenge
Parts of the government’s reform package are easily implemented but others will pose a massive challenge. Increasing the benefits under existing programmes to recipients who are already registered should be straightforward. Improving the distribution of food parcels will not be easy, given evidence on corruption and incompetence. The biggest challenge will be implementing the boldest proposal in the package: the introduction of a special “Covid-19 Social Relief of Distress grant”.
The name of the new grant suggests that it is seen as an extension of the existing Social Relief of Distress programme. This existing programme is aimed at people in such dire material need that they are unable to meet their families’ most basic needs. Almost all awards take the form of food parcels or food vouchers, for a short period of time. The existing awards are reportedly used primarily to support destitute people while their applications for other grants are being processed (or to relieve distress if social grants were incorrectly withdrawn).
SASSA reports that in 2018-19, 444,000 awards were made at a total cost of R417 million, or 0.25% of the total social grant budget. Of these awards, 284,000 were in the form of food parcels, 103,000 in the form of vouchers (that could be redeemed at selected shops), 55,000 in the form of school uniforms, and only 2,138 in the form of cash (p56).
The president says that the new award will be in the form of cash (R350 per month). He also envisages it broadening from less than half a million awards a year to many millions of awards. These are fundamental changes to the programme. Effectively, the president is launching a new programme. For the first time, South Africa will be directly supporting unemployed working-age adults without a history of formal employment. ANC governments since 1994 have consistently resisted such provision, emphasising instead the “dignity of work” and promising to expand workfare through public works programmes.
No details have been provided on precisely who would be eligible for the new grant. The potential demand is enormous. The most recent available data on the labour market come from the Quarterly Labour Force Survey conducted by Statistics South Africa in the 4th quarter of 2019. Analysis of the survey data suggests that, of the approximately 33 million men and women aged between 18 and 60 (and hence not eligible for either the CSG or the Old Age Grant), 30% (10 million people) were unemployed, using the expanded definition of unemployment that includes “discouraged work-seekers”. Fewer than 1% of these reported receiving benefits from the UIF. One in five (21%) reported receiving a CSG. These data suggest that 8 million people were unemployed and uncovered directly by other programmes.
These figures do not include anyone who has lost their jobs or livelihoods over the past four months. UCT economists have estimated that, of South Africa’s 16 million working people, 45% (or close to 8 million people) are not eligible for relief from the UIF. This seems to be a high estimate. Using this figure, however, and assuming that three-quarters of this population will have lost their livelihoods, then the number of currently unemployed people will have risen to about 16 million and the number of unemployed people who are not covered by existing grants will have risen to about 14 million.
Another 8 million people aged 18-59 were “not economically active” in late 2019. These were working-age adults who were not working but said that they did not want work or were not available for work, perhaps because they were disabled or studying or fully-occupied in unpaid care work. The Quarterly Labour Force Survey data suggest that about one in four (26%) receive either a CSG or a Disability Grant. This leaves 6 million people without any social grant. A very small number might have other sources of income and be ineligible for a means-tested social grant.
This means that as many as 20 million people might apply for the new grant on the grounds that they have no other income. Registering these claimants and setting up payment mechanisms is unlikely to be within the capacity of SASSA and the Department of Social Development.
The administration of the existing Social Relief of Distress programme is not specified in the 2004 Social Assistance Act. The Department of Social Development’s website sets out the application procedure: Applicants must go to any SASSA office with various documents, including a supporting statement from a social worker, councillor or chief, or minister of religion. One study reports that, in practice, it is social workers who identify deserving individuals, then SASSA approves the recommendation. Extensions beyond three months are also dependent on a letter of motivation written by a social worker. In 2018-19, as we saw above, about 440,000 awards were made. Scaling this up tenfold or more is far beyond the capacity of South Africa’s social workers, especially given the paucity of social workers in the poorest parts of the country and the restrictions on movement under the lockdown.
The rollout of the new grant would entail a massive increase in SASSA’s capacity generally. In 2018-19, SASSA reports, it processed a total of 1.6 million applications for grants (p54), almost all within ten days (p59). Even this is a small fraction of the new applications that would need to be processed under the new Covid-19 Social Relief of Distress programme.
The state’s track record in registering eligible claimants is not good. Unpublished research by the UCT Children’s Institute suggests that there are as many as 2 million children who are eligible for CSGs but are not registered because of the difficulties in navigating through the procedures required by SASSA and the Department of Home Affairs. The courts have repeatedly ordered the Department of Social Development to roll over foster care grants when SASSA lacked the capacity to process renewals - including, most recently, at the end of last year.
The budget is insufficient
The president said that R50 billion (approximately US$2.5 billion or close to 1% of GDP) would be set aside for the social grant component of the relief package. This does not appear to be enough.
The increase in the CSG alone will cost about R35 billion: an additional R2,800 over six months for about 12.5 million children.
The modest increase in other grants will cost more than R8 billion: an additional R1,500 over six months for 5.5 million grant recipients.
The food parcel programme is not expensive: If each parcel costs about R1,000, then 250,000 would cost only R250 million per month, or R1.5 billion over six months.
Leaving aside additional administrative costs, this leaves between R5.5 billion and R7 billion for the new grant. If it pays R350 per month for six months, or R2,100 per claimant, then this will only cover about 3 million claimants. Above we have seen that as many as 20 million non-working adults might apply for the new grant. Paying the grant to them for six months would cost about R42 billion.
The government has surely done these calculations. Does it assume that the new grant will roll out very slowly? If it imagines that it will limit the programme to 5 million or fewer individuals, then how will these be selected? On what criteria will other applicants be excluded?
These costs above do not make any allowance for additional administrative costs. SASSA currently spends about R4 billion a year on administering benefits – and pays the Post Office and banks to administer grant payments. It is reasonable to assume that the cost of administering the new programme could easily raise SASSA’s (and the Post Office’s) administrative costs by 50%. If so, that would mean a minimum of R2 billion.
A final warning …
If the government does not provide even a modest grant to everyone who needs one, and supports only selected individuals, then it risks exacerbating tensions and conflicts within households and communities.
Many, perhaps most, households in South Africa do not operate as the caring and sharing units assumed by some economists. When the UCT economists wrote that “in the poorest half of the population, the child support grant reaches 80% of individuals who are in informal worker households”, they made a common error, imagining that a grant paid to one household member reaches every member of the household. What they meant was that 80% of people living in informal worker households live in households where someone (and rarely more than one individual) receives a CSG.
Grants are paid to individuals, not to households. The upside of this is that receipt of a CSG boosts the dignity of the recipient caregivers. The downside is that, all too often, recipients will not agree with other household members or other members of the community as to how additional funds are to be used. There is abundant sociological evidence on the conflicts that occur within households (and within local communities) over the use of CSGs in particular. Payments to young women are often resented, by older women as well as men, on patriarchal grounds. Payments may be resented also by other household members who bear much or all of the burden of childcare. Households whose members do not receive even a single grant are likely to resent their exclusion from emergency packages.
These kinds of tensions and conflicts are likely to be mitigated if everyone in a household or neighbourhood without an income receives a grant (or an appropriate increase in an existing grant). This is one reason why it is so important that coverage is as universal as possible. Smaller awards spread widely are preferable to large awards to selected individuals.
The way forward
ANC governments have repeatedly insisted that they are moving towards a comprehensive system of social protection, including a seamless social safety net for the poor. The current crisis has pushed the ANC to expand coverage to unemployed, working-age adults, albeit temporarily. Yet the budget allocation seems woefully inadequate.
The president must be congratulated on his bold vision. Now we need detail on how his vision will be realised.
Postscript (added after publication)
On 23 April SASSA clarified that President Ramaphosa was supplementing the CSG by less than it appeared. SASSA has tweeted that:
“In May only, care-givers (the card holder) will receive a R300 increase for each child (recipient) to the R440 Child Support grant amount, which amounts to R740. From June until October, the care-giver will get the normal R440 amount for each child and a single R500 added to that.”
In other words, from June the CSG supplement is R500 per caregiver not R500 per child. Whilst CSGs are paid for more than 12 million children, they are paid to only seven million caregivers, because some caregivers receive grants for more than one child. I calculate that this will reduce the cost of supplementing the CSG by close to R14 billion over six months. This means that the R50 billion budgeted should allow for the new Covid-19 grant to be paid to about 9 million unemployed adults. This is almost three times as many as we initially estimated, but remains far fewer than the number of adults with no other income.
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