South Africa has a runaway number of grant recipients and social wage spending, which is unsustainable amidst slow economic growth and high unemployment.
Finance Minister Enoch Godongwana highlighted the social grant problem in his 2021 medium-term budget policy statement.
“Today, 27.8 million South Africans are social grant recipients. This accounts for about 46% of our population,” said Godongwana.
“At the same time, the number of people working has declined, further underlining the critical flaws in our economy.”
South Africa’s total spending on the social wage is also very high and has grown from R860 billion in 2018/19 to R1.1 trillion in 2021/22.
“Around 60% of total non-interest spending annually goes towards housing development, free basic services, employment programmes, health, education and social grants, among other things,’ he said.
Godongwana said a permanent solution in responding to these challenges is to achieve high and sustained levels of economic growth.
The FF Plus highlighted that the number of South Africans dependent on social grants for survival increased by 10 million over the last two years.
“It is absolutely unsustainable without economic growth and job creation,” the FF Plus said.
“The single ray of hope — the slight economic growth experienced in 2021 — is primarily the result of rising commodity prices and not job creation.”
“It demonstrates that the government still has not created a favourable environment for the private sector to enable it to create more jobs.”
The DA also said Godongwana’s statement fell short of their key expectations to shore up the economy and reduce the country’s debt.
“He mentioned structural reform, but they do not address the key challenges identified by the rating agencies and the IMF and the World Bank,” said the DA’s shadow deputy minister of finance, Dion George.
The problem of rapidly increasing social grant recipients versus the number of people with a job was clearly illustrated in research by the Centre for Risk Analysis.
They highlighted that the number of people with a job in South Africa doubled from over 7 million in 1996 to over 14 million in 2008.
Job growth has since stagnated, with the number of people employed in 2020 being roughly the same as it was in 2008.
Since 2010, the number of social grant recipients has exceeded the number of employed people.
The chart below provides an overview of the number of grants versus the number of people with a job from 1996 to 2020.