Social assistance still crucial: Gordhan

22 February 2012

While South Africa works to find ways of achieving job-creating economic growth, the country continues to spend on cushioning the poor and unemployed, with social assistance spending projected to rise from R111.2-billion in 2012/12 to 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 in Cape Town on Wednesday, Finance Minister Pravin Gordhan said expenditure on social grants would 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 R1 200, while foster care grants increase by R30 to R770 and child support grants to R280. Gordhan suggested that the increases might need to be reassessed if inflation continued to rise.

‘Crucial to overcoming our legacy’

Earlier in the day, Gordhan told reporters in Cape Town that social assistance remained crucial in ensuring that the poor were cushioned from the effects of poverty, arising mainly from the country’s high employment rate.

“Investment in our people is something that is very crucial to us in overcoming our legacy,” Gordhan said. “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.”

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

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.

Social spending as % of GDP to decline from 2015

But the government says that, 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% of gross domestic product (GDP) in 2015. This is because there are no major grant increases planned for the next three years, and also because 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.

Savings, retirement reforms up for discussion

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

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

Among the issues up for discussion 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, the government says, a large number of occupational and voluntary schemes have 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,” Gordhan said.

Source: BuaNews