Grow the economy – so we can spend more on ‘social protection’, says Ramaphosa

President Cyril Ramaphosa says that focus must be directed at building the economy to strengthen social protection measures and support the poor.

Writing in his weekly letter to the public, Ramaphosa echoed Nelson Mandela’s belief that ‘while poverty persists, there is no true freedom’, citing the fact that government spends millions on the social wage.

He said that the funds spent on social protection are not wasted and should not be referred to as ‘handouts’. “They make a real difference in people’s lives, both now and in the future,” he said.

Currently, the government spends, excluding debt servicing costs, around 60% of the government’s budget on the social wage.

The social wage includes the likes of free housing, utilities, education and health and social grants such as the Social Relief Distress Grant that was instituted temporarily during Covid-19 but has reached its third year of implementation.

He referenced the following achievements, including the fact that over 13 million learners receive basic education, with many attending no-fee schools.

Health care is provided for 50 million people without private insurance. Additionally, subsidized housing has positively impacted the lives of numerous families, he added.

Ramaphosa said that the expansion of social protection can only occur at the pace and scale the fiscus can afford.

“We are focused on growing our economy and developing sustainable solutions to support pro-poor spending,” he said.

“A growing economy provides the funds we need to strengthen our social protection measures, while the support that poor people receive, especially in access to education and health, enables them to better contribute to the economy.”

Ramaphosa said that through the country’s social support system, it is meeting its collective responsibility to the most vulnerable in society as well as investing in the country’s future.

The wide social wage has come under backlash from both economists as well as the National Treasury itself.

Earlier this year, following the National Budget Address given by Enoch Godongwana, the minister of finance and economists raised concern over excess spending and the increased demand placed on the national budget, especially as it relates to grant increases.

Financial services Momentum Investments said that the SRD grant would likely form a ‘targetted basic income support’ grant at the time of its expiration at the end of March 2024.

The Insitute for Economic Justice has calculated that a universal basic income grant would amount to between R275 billion. Funding for the grant remains unclear however, analysts worry that there could be increases in taxes.

Godongwana said, however, that the government is trying to keep within budget without any increased taxes or hindrances to the social wage.

Handouts

Ramaphosa said that the country’s social wage is well-targeted and has been effective in providing benefits to the poorest households.

“While some people refer to the various forms of support to poor people as ‘handouts’ or as a wasteful drain on our fiscus, our social support programmes are an investment in South Africa’s people,” he said.

“It is not correct to say that these programmes breed dependency or discourage people from looking for jobs.”

“Indeed, a paper published in 2014 by the Brookings Institute noted that “social assistance may well be just what many in South Africa need, enabling them to actively pursue a job search, move out of a poverty trap, and take control of and direct their futures.”

Read: How much you need to earn to be middle class in South Africa