Massive increase in social spending, grants

As government finds ways to grow an economy that may eventually produce much needed jobs, spending on social assistance will rise sharply in the next three years from R111.2 billion this year to a projected R129 billion in 2015.

The increase will cater for an expected rise in the number of social grant beneficiaries from 15.6 million this year to 16.8 million in three years. More than 10 million of these are children.

Tabling this year’s Budget in Parliament today, Finance Minister Pravin Gordhan said expenditure on social grants will grow from R105 billion in the current financial year to R122 billion in the next three years.

As from April, old age pensioners will get R1200 while foster care grants increase by R30 to R770 and child support grant to R280. Gordhan suggested that the increases may need to be reassessed if inflation continued to rise.

Earlier, Gordhan told reporters that social assistance still remained crucial in ensuring that the poor were cushioned from the effects of poverty which arise mainly from the high employment rate.

“Investment in our people is something that is very crucial to us in overcoming our legacy, without these measures and the support given to our people, the level of poverty and inequality would be much worse and South Africa would find its self in even a worse situation,” he said.

However, while government had expanded social assistance to households over the past decade, employment and economic growth have to be the main economic drivers of income growth and poverty reduction.

South Africa’s social assistance expenditure increased at an average annual rate of 11% between 2008 and this year. During the same period, there was an 11.4% reduction in the number of disability grant beneficiaries, with officials attributing this to an improved assessment process.

But Government says despite the rapid growth in the number of social grant beneficiaries in recent years, spending on grants may decline from 3.5% to 3.2% in 2015. This is because there are no major grant increases planned for the next three years and also economic growth is expected to outpace growth in the number of recipients.

A green paper, to be published this year, will propose major social security reforms for the country. These will include a recommendation that the present fragmented arrangements be replaced by an integrated contributory social security system that includes provision for a basic retirement pension and shared death, disability and unemployment insurance for all workers.

Meanwhile, Gordhan said a series of discussion papers will be released this year focusing on promoting household savings and reforming the retirement industry.

“Consultation with the industry, employers and trade unions will take place on these reforms”.

Included in the issues is improved governance over pension funds, including measures to eliminate corruption and fraud. The main proposal is to establish a mandatory statutory fund to provide pensions, life insurance and disability benefits. In the absence of such a fund, government says a large number of occupational and voluntary schemes had been established but these fail to protect a majority of workers.

“The proposed national social security fund will be based on the principle of solidarity, risk will be shared across the workforce and the state will stand behind the fund”. – BuaNews