THE state should take a broader view of social protection.
A quarter of South Africans are destitute, earning less than R100 a month each. Approximately half the population lives in poverty stricken households where each person earns less than R400 a month. Almost a quarter of our children under the age of six are stunted from poor nutrition. And from 1990 to 2000 formal-sector employment declined by 20%, a net loss of one million jobs.
These are some of the issues confronting the Cabinet’s committee of inquiry into a comprehensive system of social security, which released its final report last week. Launched in 2000, it is known as the Taylor committee after its chairperson, Vivienne Taylor of the University of Cape Town.
The claws of poverty leave permanent marks, even on people who eventually manage to escape from it. Children suffer permanent, although sometimes subtle, damage to brain development. Poverty makes girls and women more susceptible to contractual sex, putting them at high risk of abuse and contracting HIV/Aids.
South Africa has a Constitution that guarantees socio-economic rights, but unlike many comparable middle-income countries such as Chile, Mexico and Brazil, we lack a basic social security infrastructure. Many vulnerable communities remain trapped in poverty, even though South Africa has the financial capability to lift them out of it.
Unemployment, inadequate education, poor access to health care and other barriers to accumulating assets actively create exclusion, which in turn manufactures poverty. Non-systemic measures, such as job-creation programmes, or even unemployment insurance, cannot cope with the size of the problem.
Social security typically refers to government-mandated systems of minimum protection that not only provide a safety net but also prevent people from slipping below a basic level of economic security in the first place. Such protection systems are wide-ranging, including health care, old age, education, housing and unemployment. International experience in a diverse range of countries from the European Union to Latin America has demonstrated conclusively that without state intervention social security coverage is costly and inefficient. Informal or private social security systems are uneven, excluding the most vulnerable and biased toward higher-income and lower-risk groups. They also tend to be more expensive, due to high private administration and commission related costs.
Underpinning social security provision in most countries is the simple rationale that a degree of ”social solidarity” is crucial for human development. Such social solidarity includes cross-subsidisation both in terms of risk and income. In such countries the debates rage about the extent of social solidarity, rather than whether or not it should exist.
In South Africa, however, we have not yet reached agreement that such minimum social security benefits should exist, let alone grapple with what form they should take or the most efficient ways of providing them.
Concerns about cost are often superficially the basis for national Treasury’s opposition to social security measures regarded as standard in many other middle-income countries. But ideological positions on the developmental priorities for South Africa are sometimes disguised as technical concerns: the level of motivation for an infrastructural programme is lower than that for a human orientated development programme.
The Taylor committee questions the Treasury’s opposition to instruments such as earmarked taxes, which are widely used internationally to finance specific social security benefits such as for retirement and health. South Africa already has some earmarked taxes, such as the petrol levy to fund the Road Accident Fund.
The Treasury’s strong bias towards fiscal federalism is also questioned by the committee, which regards this policy as fragmenting government spending in important areas of publicly provided social security such as health and social grants. This emphasis on fiscal federalism is unprecedented by international standards, and appears to be an indirect method of reducing the priority given to social spending in South Africa. Such an approach breaks up a cohesive national response on such issues, and allows each province to apply its own weighting to social needs. Thus a province may prefer to divert resources from health, education and welfare, which together consume the vast majority of provincial budgets, to pet projects.
In its final report the Taylor committee concluded that the priority should be to attack income poverty – defined as lack of income earning opportunities – through a systematic expansion of focused general social assistance grants. Initially this expansion should focus on the most vulnerable groups, such as women and children. Therefore the report recommends that the value of the Child Support Grant should be increased significantly from its current level, and that over time the age of eligibility should be raised from seven to 18 years of age. Further down the line, as it proves affordable, social assistance should be expanded to include all adults.
This approach is rooted in the understanding that one of the primary causes of social exclusion in South Africa is a lack of access to sources of income. This is largely due to structural reasons relating to shifts away from high labour-absorbing industries such as mining and agriculture, to manufacturing industries that require more educated and skilled personnel. The workers shed by mining and agriculture are too under-educated for employment in the newer industries. The result is long-term structural unemployment and destitution for the affected households whose breadwinners are locked out of the formal labour market. The alternative is to earn a survival income in the informal sector, which does not ensure financial stability for families.
In these circumstances, where there is an absence of savings or insurance, a calamity such as sickness, disability or death can tip a family from the fringes of poverty into outright destitution. Even high-income families can suffer precipitous falls in their standard of living in such circumstances if they are denied access to adequate insurance.
Support mechanisms that only kick in when destitution has struck are a false economy, the Taylor committee concluded. Acting only once financial disaster has occurred may appear to be more efficient and cost effective, but in reality the hidden costs of the long-term harm caused far outweigh any perceived short-term savings.
The aim should rather be to prevent poverty by ensuring that all South Africans have adequate minimum levels of social security to prevent uncontrolled downward spirals in standards of living. For those already mired in destitution, social assistance in the form of minimum-income support – sometimes referred to as a ”basic income” or ”solidarity” grant – could partially subsidise their efforts to dig themselves out of poverty.
For this reason the committee proposed the state adopt the broader concept of social protection, which incorporates preventative social strategies, rather than simply social security to help those already harmed.
The difference between the Taylor committee proposals and those made by the Congress of South African Trade Unions for a basic income grant relate to the method and speed of implementation. The union body has called for the basic income grant to be implemented immediately. The committee suggests that social assistance be expanded over time in a fiscally affordable manner, starting with the most vulnerable group – children. Such a staged implementation would sidestep the standard affordability problems raised by the Treasury, and allow debate to focus on the merits of the proposal.
The committee also recommends that as the fiscal capacity of the government expands through economic growth and the possibility of higher tax revenues, greater priority should be given to expanding the social assistance grant system. This would prove a better investment in the human development of South Africa than reduced taxes. Expanding the social assistance grant system, starting with children, rather than reducing taxes for the well-off, changes only who spends the money, not the amount spent. When done in a reasonable manner, neither the incentives of the rich or the poor are adversely affected.
Alex van den Heever is a member of the Taylor committee. He has written this article in his personal capacity