Siyabonga Hadebe
Pretoria - Many people disingenuously complain that social grants are an unnecessary burden to the taxpayer.
To date, 44% of South Africa’s 60.6 million people rely on their social grants as compared to fewer than 7 million registered personal income taxpayers. Of course, the situation does not look good, and the sustainability of social grants is questionable.
According to the SA Revenue Service, tax revenue from personal income tax is still concentrated at the top. It is estimated that a mere 17.9% of South African taxpayers earn over R500 000 a year, but they account for 52% of all taxable income.
This does not come as a surprise since the apartheid economic design is almost intact, with whites often still holding senior positions and the black majority employed as cashiers, security guards and, in most cases, without jobs.
Apartheid institutionalised racial segregation in South Africa by giving white people political, economic and social advantages over people of colour, particularly black people. One of the primary ways apartheid and colonialism were able to maintain an inhumane system was through the exploitation of cheap black labour to subsidise white life.
The white minority optimised the system to their advantage by exploiting the black majority for cheap labour.
To achieve this, the state enacted laws that limited black people’s access to education, health care and jobs, thus forcing them to work in industries, such as mining, agriculture, and manufacturing, that paid low wages.
This arrangement ensured that the white minority had access to cheap labour that they used to build and sustain their wealth. Thus, blacks were paid significantly lower wages than white people for doing the same work, and also had little to no job security.
These wages were obviously not enough for black workers to support themselves and their families, forcing them to live in substandard conditions. Besides low wages, black workers were also subjected to poor working conditions, especially in mining.
In The Political Economy of Apartheid, Arden Finn also details how the apartheid government used the tax system to perpetuate racial inequality and discrimination.
It forced black people to pay higher taxes than white people. That is how the previous government managed to build and maintain infrastructure, such as roads, schools, hospitals and other public amenities. As a result, South Africa was able to build a strong economy on the back of cheap black labour.
With all its faults and ructions, the end of apartheid has been about creating a more equitable society, with many obvious challenges, of course. Among others, the social grants programme (financial transfers) is paid to those in need, particularly the poor black population.
Currently, the country’s expansive social grants programme includes child support grants, disability grants, old-age pensions, and grants for war veterans.
The social grants have had a significant impact on poverty reduction in South Africa. According to the government, social grants have lifted more than 3.5 million people out of poverty. The grants have also played a critical role in reducing income inequality in the country.
Notwithstanding the challenges such as corruption and mismanagement, social grants have become an essential part of South Africa’s social protection system.
They have helped to reduce poverty and inequality, providing a lifeline to millions of people who would otherwise be living in extreme poverty. The grants have also had a positive impact on education and health outcomes, helping to improve the lives of poor black families and their children.
The social grants are funded directly from the fiscus (taxpayers) and keep on rising due to the socio-economic difficulties faced by the population.
These challenges include unemployment, poverty-unfriendly monetary policy decisions and the perpetually rising cost of living, which affects the affordability of basic items like food, housing and health care.
Last year, for example, Bloomberg’s Shisanyama index showed that the cost of living was rising faster for the poor. Social grants, therefore, close this gap in families, as low as they may seem.
Nonetheless, there has been some controversy surrounding the programme’s cost. Experts argue that the cost of social grants is too high and that it puts a significant burden on taxpayers.
In 2015, the ANC’s contemplation of a wealth tax provoked a reaction from some affluent individuals. At the 2022 national policy conference, it was also reported that some members still favoured “some form of wealth tax to fund a basic income grant”. This proposal has been vehemently opposed but is as necessary for augmenting other taxes, including PAYE, company income tax, capital gains tax, VAT, customs duties, etc.
In Capital in the Twenty-First Century, French economist Thomas Piketty highlighted the high levels of inequality in South Africa, where the top 10% of the population earns 60% to 65% of the country’s income.
Implementing a wealth tax and a minimum wage could be a means to address this disparity and promote greater economic equity.
However, the Free Market Foundation’s Robert Vivian is of the view that imposing the extra tax was unconstitutional. And financial analyst Stuart Theobald argued that South Africa already had a wealth tax in place: the capital gains tax.
Globally, the 2023 Oxfam report suggested that the richest 1% of the global population has “grabbed” nearly two-thirds of all new wealth, worth $42 trillion (about R772 trillion), generated since 2020.
This is nearly twice as much as the total wealth accumulated by the bottom 99% of the world’s population.
Piketty recommends a wealth tax as a remedy to inequality. Clearly, this debate is not only taking place in South Africa. Wealth disparities are found in many countries.
Social grants may not be a long-term solution to poverty reduction. They may also not necessarily address the root causes of poverty, such as lack of access to education and employment opportunities. They nevertheless serve as a form of redistribution and support for communities that were systematically oppressed during apartheid. If apartheid enjoyed a limitless pool of cheap black labour to exploit, today’s taxpayers must support the offspring of those who were previously exploited and marginalised.
Overall, the grants provide a safety net for people who are unable to support themselves and their families, reducing their vulnerability to poverty and hunger.
This includes poor whites.
There is a need to compare the exploitation of black labour during apartheid and social grants to deal with some of the complaints from the previously advantaged whites and the black middle class. First and foremost, the exploitation of black labour during apartheid and the social grants programme share similarities and differences. Both were designed to redistribute wealth, but the former did so by exploiting the labour of the black majority, while the latter does so through taxation and financial transfers.
While the social grant system is not explicitly intended to serve as reparations, it does contribute to the broader efforts to address the systemic inequalities and injustices of the apartheid era. A growing economy and jobs are still necessary to shore up the country’s eminent social grant system. Citizens are better than a taxpayer because they have a more comprehensive role in society, unlike taxpayers, whose role is limited to paying taxes to fund government programmes and services.
* Hadebe is an independent commentator on socio-economics, politics and global matters.
* * The views expressed do not necessarily reflect the views of IOL or Independent Media.
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