OPINION: The state claims that it doesn’t create jobs, it creates ‘conducive environments’ for jobs to be created. It seems as if the state has created an environment that enables people to create their own businesses and create jobs, unintentionally through social grants, writes Isobel Frye.
OPINION: The state claims that it doesn’t create jobs, it creates ‘conducive environments’ for jobs to be created. It seems as if the state has created an environment that enables people to create their own businesses and create jobs, unintentionally through social grants, writes Isobel Frye.
Calls to government to take seriously the increasingly violently made demands of the poor seem to have fallen on deaf ears in the Budget Speech of former unionist Minister Enoch Godongwana.
In the midst of our poverty crisis, the Minister used the Budget to redistribute the proceeds of windfall commodity gains to business and to the employed. The Minister claimed his budget created a balance between saving lives and livelihoods. If this is government’s line, then this is indeed not a country for poor people.
Recent World Bank Development Indicators demonstrate empirically the depth of South Africa’s poverty crisis. South Africa ‘s levels of extreme poverty are ‘many times’ that of countries with similar levels of per capita income. Most countries with similar per capita incomes have extreme poverty levels of 1- 4%. In South Africa, almost 19% of the population live in extreme poverty. South Africa is a living humanitarian crisis. Poverty is strangling our economy, and it stunts our children.
The evidence is in every statistical report tabled before government, and yet it took a global epidemic for our government, reluctantly, to provide cash grants to adults. The extreme or ‘food poverty line’ is R624 per month. The R350 grant is 56% of the extreme poverty line.
The Minister announced that tax collection in the last financial year was much higher than expected –an additional R182 billion was raised from higher commodity prices and higher than expected personal income tax and VAT.
Next year, South Africa is expected to have a primary fiscal surplus. The state will spend less than it raises through tax. In this time of poverty crisis, the state is pre -planning to spend less than it will raise. Why?
Over half of all South Africans live in poverty.
Company Tax (CIT) has been cut from 50% under Apartheid to just 27% - the last 1% cut was announced in this Budget. The Constitution obliges the state to use its (maximum) available resources to meet people’s rights. Social grants are a constitutional right for poor people.
51,1% of Black Africans are unemployed. More than one in two black adults have no access to waged income, but there is still no system of permanent income support for adults in South Africa. Almost 80% of the 12 million unemployed have been unemployed for over a year. A further 14 million adults are so delinked from the formal economy that they are defined as ‘Neither employed nor unemployed’. These are people who could be active citizens running micro businesses if they had money, or they can vent their anger at being poor and unemployed as we saw last year.
The President in his State of the Nation Address told amazing stories of people who used the R350 grant to start micro businesses, like Mr Thando Makhuba with his ice-cream store in Soweto that now employs four people. He also spoke of the ‘far-reaching’ interventions that would be taken to assist small and micro businesses and informal businesses.
Using grant money to start enterprises increases the multiplier of state spend through grants, it creates jobs and it grows the economy. This ticks all of the priorities of government.
It will take years to create jobs for the 12 million unemployed and the 14 million ‘Other’. With the downgraded annual economic growth forecast of 1,8% over the next two years, creating this number of jobs is not feasible. Research shows the multiple positive pathways from grants to jobs.
The ‘dependency theory’ is a myth of prejudice, not a fact of science.
The promised assistance for informal and micro businesses sadly also didn’t reach the budget. The ‘Bounce- back scheme’ is aimed at small and medium enterprises. One wonders why there appears to be such steadfast refusal to recognise the catalytic dynamite inherent in social grants. Spreading demand by putting buying power in people’s hands through decent grants is the first step towards stabilising our hungry and volatile country.
In a poverty crisis such as ours, with clear fiscal space, why would the Minister of Finance declare the R350 grant and call for a BIG (Basic Income Grant), a ‘significant risk’ to the fiscal framework ‘that exceed available resources?’ It instead suggests that it is time to sharpen the macro-economic framework to increase available resources without beyond just fiscal policy as many have argued for years.
The state claims that it doesn’t create jobs, it creates ‘conducive environments’ for jobs to be created. It seems as if the state has created an environment that enables people to create their own businesses and create jobs, unintentionally through social grants.
The Budget should have reversed the 1% VAT increase, it should have increased the value of grants over the next two years to the lower poverty lines and introduced in year three a R1335 universal basic income grant. These steps would stimulate the economy and grow jobs. That would have been a budget that ‘saved lives and livelihoods’.
But, it seems, this is no country for poor people.
* Isobel Frye is the Director of the Studies in Poverty and Inequality Institute.
** The views expressed here are not necessarily those of IOL and Independent Media.
Insider