Social security grants should fall under the provinces, argues Amanda Fitschen
The state of provincial government finances has received a lot of attention, especially in the past week as provinces tabled their individual budgets.
While the latest published provincial revenue and expenditure figures indicate that matters are certainly better than they were a year ago, one should not believe all causes of provincial overspending have been dealt with satisfactorily.
Financial practices may have improved but the disjuncture between policy formulation and planning, budgeting and service delivery for social welfare still exists.
Provinces are currently responsible for the payment of social security grants to beneficiaries. Such payments are provided for in provincial budgets, and financed out of provinces’ share of revenue.
The Welfare Laws Amendment Act (1997), however, provides the minister of welfare with the exclusive power to set the standards for such grants and carry the risk of unbudgeted claims. As a result, provinces are merely agents in the payment of social security grants; they have no real jurisdiction over the function.
This ambiguous situation (a disjuncture between policy-making and financial responsibility) leads to inefficiency in the system.
The question is quite simply: should social security grants be under the full jurisdiction of either the national or provincial government?
Currently, each province is responsible for deciding how to spend the share allocated to it from national revenues. If the welfare function were to become the sole responsibility of the provincial government, each provincial department of welfare would compile a budget that would have to be approved by the provincial legislature. The provincial welfare departments would be responsible for the financing and administration of their respective welfare budgets.
Savings on the social security budget would accrue to the province (and over-expenditure would have to be financed by the province). This creates a strong incentive for the province to take measures against fraud and corruption and to ensure management is effective.
The fact that the provinces are accountable for expenditure facilitates the decentralisation of managerial responsibility, which can have positive results for the efficiency of service delivery.
A disadvantage is that many of the problems regarding fraudulent claims currently being experienced may not be resolved by provincial decentralisation.
Beneficiaries may be tempted to migrate to where it is easiest to qualify for a grant and thereby affect accurate budgeting. Proper budgeting is dependent on accurate data, a factor that all provinces will have to address regardless of the funding option.
Funding by the provinces allows for all welfare functions to be budgeted together, supporting the integrated management of the two sides of welfare provision and facilitating the implementation of the developmental social welfare objectives. On the other hand, poor budgeting may result in social security putting pressure on other welfare services. Nothing prevents the budgets for the various aspects of social welfare from being separated.
A provincially based system is theoretically closer to the beneficiaries and may address their needs and address problems better. In fact, in the purest form of provincial model the MEC for welfare, in consultation with the MEC for finance in a province, will determine the amount of the grant or award per category and the eligibility criteria.
On the other hand, if social security were to be purely national function, it would mean the national Department of Welfare would compile a social security budget for the whole country and the National Assembly would have to approve it as part of the national Budget.
The lines of accountability would be clear, but whether this would necessarily translate into better financial management and more effective administration is an open question – uniformity may simplify the administration, but over-regulation in a centralised system may lead to increased bureaucracy.
Any saving from effective administration of the social security system would accrue to the national government, as would any over- expenditure.
This option would require a centralised administrative structure and entail shifting responsibilities for personnel and infrastructure from the provincial departments of welfare to the national department.
The directorates that are currently running the system in the provinces would become regional offices for the national department. These shifts have political and budgetary implications.
Locating the responsibility for the function in the national sphere may lose the potential incentive effect arising from competition among the provinces. Provincial problems and issues may also be overlooked in the focus on the interests of national government. Administrators and policy-makers at the centre may be out of touch with the needs of beneficiaries in far-away areas.
Shifting the financing of the social security function to the national level may undermine links between it and other welfare services that should continue to be the responsibility of the provinces. The developmental approach to social welfare may be hampered.
If the provinces are to be fiscally autonomous spheres of government and not merely administrations of the national government, they must be provided with the means to perform as fully-fledged decision- making governments.
In monetary terms, the provincial sphere of the government spends more than 95% of the total amount voted to the national welfare function. Of the provincial expenditure, more than 91% is used to provide the social security function. In order to provide an integrated welfare service, to which the Department of Welfare is committed, responsibility for the social security function cannot be located separately from the rest of the welfare function.
Whatever method of financing social security is chosen it must ensure responsibility is clearly assigned. Whether social security is funded as a provincial or a national responsibility will impact on the funds allocated to the two spheres of government.
It is most appropriate that all aspects of responsibility for the social security function be located with the provincial sphere of government. In assigning the concurrent function to the provinces, constitutional provisions will be upheld – provinces will be able to operate as credible governments.
The sphere of government which spends the majority of the welfare budget will be able to determine how the money is spent (within the parameters of national norms and standards). The ability to integrate welfare services and social assistance is highest under a dispensation that allocates the function to the provinces.
If the issues are all so clear, what is delaying the decision? The answer is simple – the politics of centralised government versus fiscal federalism.
Nobody is willing to show their hand, not least of all in an election year where, if the ruling party obtains a two-thirds majority, it can make constitutional adjustments that would obviate the decision.
Amanda Fitschen is a lecturer in economics at the University of Cape Town