Finance minister Enoch Godongwana said pay increases for government workers contributed to the finance crisis. The SACP said workers mustn't be blamed though. (Elsewhere, they accused Western "imperialism" for petrol price increases, absolving their sponsor, Russia, as an oil and gas producer that tried to blackmail Europe.) He was was worried how about paying for the emergency Social Relief Distress aka Covid-19 Grant of R350.
Government workers are the new elite. Under Zuma their numbers increased half a million to 2.7 million. They're a third of all employed people. For 30 years they've received above-inflation increases. They, including cabinet and executive, earn 20-30% more than private sector workers for similar posts.
The ANC doesn't care, though. They say people - their people, cadres - must eat. And they are ensured voter support from the extraordinarily large numbers of grant recipients.
The public sector is overpaid, overstaffed, underemployed and filled with many people of questionable competence. How many municipality workers does it take to change a traffic light bulb? In Cape Town, four! I witnessed this a couple of months ago: one to do the job, another to hold the ladder and two others to look on. They were joined by three other teams - a total of four vans - who observed the man on the ladder. They all returned the following day, probably because the one who actually worked didn't do the job properly the first time.
This redundancy, duplication, waste and inefficiency is typical in "well-run" Cape Town and around the country, at all levels of government.
And when government workers retire, they look forward to generous Government Pension Fund benefits, and as I learned, a SASSA pension. A SASSA pensioner told me a GPF member (herself?) with a R2.5 million payout (not mentioned but implied was other assets like property and savings) received the full R2,000 a month SASSA pension. This is over and above the GPF annuity and any earnings from investments. This is not an isolated case either.
Grants applicants are means tested. But SASSA is giving retired government workers a pension while rejecting the poor and needy - seniors and R350 subsistence - applicants.
And SACP say government workers, and by extension ANC Alliance, are blameless for the finance crunch.
And despite all this there's the continuous call for a basic income grant (BIG). Supporters say it will kick-start and grow the economy by the multiplier effect. But their proof does not bear scrutiny. BIG will cost, estimates vary, between R275 to R355bn a year. The current cost of social grants is about R250bn. The idea is that everyone from 18 to 59 years will be eligible. One assumes the over 60s will get the old age grant (pension), currently R2,000 a month. Supporters suggest BIG will be around R1,400 a month.
The Social Relief Distress Grant of R350 a month to qualifying applicants has been provisionally extended to 2025. It costs R34bn a year. Before the interim budget in October Godongwana struggled to find the money to pay for it. He wanted to cancel it. But less than a year before general elections, it was untenable for the ANC, and Ramaphosa/cabinet instructed him not to.
Government employee costs (42%) and social grants (17%) together account for 59% of the national budget. The 7.5% salary increase will cost R37.4bn which is not funded. Debt to GDP is 72%. Servicing this debt costs R1bn per day, or $1 per day per citizen. SA is nearly bankrupt (not including National Health Insurance which will cost an estimated R1 trillion when fully implemented) but BIG supporters insist it will create economic growth.
Social grants increased from 13 million to 18 million to presently 25 million (this includes the emergency grant since 2020). During this period the economy has worsened, particularly over the last decade. How BIG will improve it when 60 million people - the country's population - receive one grant or another is not explained.
Dependency of any kind is never useful. It They're mostly academic sociologists who don't understand economics and the real social world having never had a proper job. leads to independence. And in a country with 42% unemployment, a permanent grant is fatal for self-reliance. Those already financially independent will not really notice the claimed positive impact of BIG. In fact, they'd have paid for it out of the increased taxes they must pay to cover its cost to national expenditure.
Supporters are either silent, unsure or evasive about how it will be paid for. They claim the multiplier effect - spending leads to increased revenue and investment for business and tax revenues for government, and economic growth - means it will eventually pay for itself. A Wits sociologists and BIG project director suggested a loan from the government pension fund to get it started. This level of ignorance, and from one who should know better, is unacceptable. Pension funds - government or private - are not permitted to give non-investment loans. It's illegal to fund operational expenditure and consumption spending which is what BIG is. The problem is supporters are mostly academic sociologists who don't understand economics and the real social world having never had a proper job.
It will take more space than this article to explain why BIG will not lead to economic heaven but here's a synopsis.
High taxes - SA's taxpayers are very highly taxed for poor returns - are a disincentive to investment, saving and productivity (then there's BEE and the regulated labour regime).
It will not lead, in every economic sector, to increased spending, the so-called multiplier effect, because SA's economy has surplus capacity - increased grants since 1994 did not do it. For the macro-economy to sustainably grow, every sector must benefit not just certain retail and basic goods.
The poor, the target group for the grant, spend a proportionally large percentage of their income on basics - food, then clothing and transport. Nothing is left for anything else. Middle class recipients of BIG would welcome the money and many may spend it on luxuries but since it's a small part of their expenditure, it would make little difference on economic sectors that might benefit. It goes without saying BIG will be used on consumption spending by both affluent and poor that does not help long-term economic growth.
The last reason against BIG having an effect on the economy, and the most important one, is because it's not new money, not new investment. An economy grows by new investment, a capital injection by entrepreneurs. Government spending is really derived from taxes on the private sector and individuals, money already in the economy. So BIG is not new money.
While government spending can stimulate the economy, it must be on infrastructural and economic projects that help create the conditions for private investment. A qualification of the government spend argument is the R60bn on World Cup 2010 infrastructure did not generate expected economic growth. (The same for events like these around the world. Neither did billions on social housing since 1994.)
The reasons are complex, but in short, SA does not have the right conditions for growth. The ANC has seen to that. BIG will aggravate an already bad situation by placing a burden on taxpayers. Government will have to borrow the deficit to pay for BIG leading to even more debt, a never-ending spiral to insolvency. Nothing good will ever result.
Given the country's extraordinarily high unemployment - the highest in the world ahead of Djibouti and Gaza, both failed states and in war and conflict - something must be done about the poor ad those without hope of finding work. By now unemployment ought to have been in single digits and poverty halved at least. But the country is worse off every year, an amazing feat given its resources and status as a middle income country.
But giving up and resorting to permanent dependency, which creates entitlement and an idle and unproductive population, is not the solution. It's a quick fix though for the ANC and leftwing sociologists who shy from asking how SA got here (the ANC).
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