We need to overhaul the pension system

Minister of Social Development Zola Skweyiya described the suspension of disability grants as “not only illegal, but sinful”. (”North West suspends pensions for disabled”, June 1). This admission demonstrates a commitment to transform the social-grant system.
To this end, administrative reforms, increased levels of coverage and locating grants in a wider poverty-eradication strategy are needed.

The current systems for grants are based on means tests. These require applicants to provide proof that they are of a certain age, or that their income is below a certain level. Applicants for disability grants have an additional hurdle they need a certificate from a district surgeon. Means testing also disempowers the poor applicants are forced to request assistance in completing the necessary forms, but very few would share personal information under different circumstances.

It is common for a person to return three or four times to a grants office before a decision on their application is made. Solutions to these crises of means testing often focus on transforming bureaucratic culture.

Redesigning the system requires two shifts. First, changing the systems to focus on service rather than control. Avoiding corruption is the rationale for many administrative systems. This is why recipients must reregister each year. A more practical system would include the running of selective audits of grant recipients and the establishment of an early warning system that would highlight corruption.

Consequently, an effective deterrent would be established and this would allow for the discontinuation of the reregistration process.
Second, more integrated systems are needed. The most practical would be to locate the police, district surgeon, grant officials and volunteers within one building. This would reduce the expensive trips that applicants make. A more mundane but vital intervention is redesigning the current obscure application forms.

Civil society structures would play a crucial role in this process from representing people in court to holding officials accountable. Recently the presidency reported that large numbers of children still do not have access to disability grants; and young adults and the unemployed have no access to grants from the state. Closing these gaps in the social security system requires accepting the need for a universal grant.

The Congress of South African Trade Unions (Cosatu), the South African Council of Churches, the South African NGO Coalition and other structures in civil society have called for the introduction of a Basic Income Grant (BIG). This grant would be between R100 and R200 provided to all individuals. Cosatu has noted the following advantages of such a system:

  • It minimises administrative burdens.

  • Payments to all individuals inherently favour larger households, which are poorer and have greater needs.

  • Payments to all individuals also benefit women and young people directly.

  • A universal grant will reach not only the unemployed but also the working poor.

  • Universal coverage reduces the risks associated with the dole that is, a disincentive to work and stigmatisation.

Financing such a system has given rise to two diametrically opposed proposals. On the one hand, some opposition parties have called for an increase in VAT to finance the BIG. VAT is a regressive form of taxation (the poor pay a higher percentage of their income on VAT compared to the rich).

Consequently, this amounts to taxing the poor to fund poverty eradication programmes. On the other hand, progressive organisations have called for a solidarity levy. The solidarity levy will be a surcharge on personal income tax, and thus taxes the well-off. In turn, this creates a cross-subsidy from the rich to the poor.

In Germany a solidarity tax is being used to fund the costs of reunification. The government relies on established banks to administer payments. This has little impact on poverty, as banks are virtually absent in most rural areas and retain about 10% of the grants as a service fee. These service charges wipe out the increases announced by the government.

Greater development potential exists in establishing a post bank. In sum, the proposal aims to extend services provided by the post office to include financial services and the administration of grants. More appropriate fiscal parameters need to underpin these initiatives.

The Cabinet-appointed commission into social security will hopefully continue on this path. Accelerated delivery, after all, means eradicating poverty within one generation.

Ebrahim-Khalil Hassen is a public sector researcher at the National Labour and Economic Development Institute

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