The roots of the current crisis in South Africa

The ways in which state elites and the private sector have found ways to swindle the poor.

Over the last few weeks it has come to light that South Africa’s Social Security Agency (SASSA) has no idea how it will pay 17 million social (welfare) grants to around 11 million South Africans on April 1. This has understandably caused some concern, with the media, civil society organizations and trade unions accusing the department and the minister, Bathabile Dlamini, of deliberately endangering the welfare of the poorest South Africans. Social grants are direct cash transfers provided to South African citizens who meet specific criteria. The vast majority of grants are child grants, which in 2016 amounted to R350 per child per month (approximately US$26). Social grants are one of the few redistributive policies pursued by the state in the post-apartheid period, and they had a marked impact on chronic poverty rates and, research suggests, led to improvements in child health and school attendance.

The roots of the current crisis can be traced back to 2012 when the department shifted from a model in which provinces were charged with distributing funds to a single national model. The company that was chosen for this public-private-partnership was Cash Paymaster Services (CPS) which is a subsidiary of Net 1 UEPS Technologies Inc.In 2014 the country’s constitutional court declared the contract with Net 1 to be invalid due to extensive irregularities in the tender process—at the last minute SASSA included criteria for biometric technologies that could only be met by CPS. The court allowed CPS to continue paying out grants on the condition that SASSA regularly report back to them about developing an alternate system for grant payment.  They didn’t. What has unfolded in the first few months of 2017 is a testament not only to bureaucratic incompetence, but the ways in which state elite and the private sector have found ways to swindle the poor.

What has been forgotten in the grants crisis, however, is the extent to which those who received grants have long been in a state of crisis. Since CPS took over the payment of grants in 2012 recipients have been plagued by illegal deductions from their grants. In another article, I wrote about the ways in which CPS has colluded with banks to sell grant beneficiaries dubious cell phone and insurance deals that are next to impossible to cancel. While these deductions were declared illegal by SASSA in 2016, this has meant little as they have continued apace. Erin Torkelson’s recent article in the Cape Town news site GroundUp reveals the extent of this horror: A mother in tears after receiving only 26c of her child grant from a CPS paypoint. There has been no study on the extent of these deductions since May 2016, but by all accounts (including extensive documentation by Black Sash) they are occurring at an alarming rate. All of which seems to confirm the political scientist and newspaper columnist Steven Friedman’s point that CPS effectively took over SASSA in 2012 compromising its autonomy and control over the grants process. That’s the first crisis.

The second crisis is the fact that social grants are wholly insufficient to actually support poor households and that their value has been declining as the cost of food has sky-rocketed. This is particularly acute in rural areas where the rate of unemployment is even higher than in urban townships. This is not only about corruption in the payment of grants, but the fact that many of those people receiving grants are well below the poverty line. The average inflation rate (CPI) in 2015 was 4.51% and in 2016 it was 6.59%. Between the 2014/2015 and 2015/2016 budget year old age grants increased by 4.4%. Over the same period child support grants increased by 4.7% and disability grants increased by 3.6%. What this means is that the poor can buy less with their grants each year, and this is being made worse through illegal deductions. This is being forgotten in a crisis that is being cast as a spat between politicians, bureaucrats and businesspeople.

In 2016 Nandi Vanqa-Mgijima, of the International Labour Research and Information Group (ILRIG), and I conducted research on social grants, illegal deductions and the ways in which grants are used in poor and working class communities. We found numerous cases of social grants being used beyond the household, as an effective subsidy to inadequate public services. Community health care workers used their own grants to purchase medical supplies to treat people with HIV-AIDS living in their neighbourhoods. Waste pickers used their grants to purchase the equipment they need to clean up their communities and, as a result, make a living. Parents used social grants so their children could get to university when student loan funding was inadequate or late. Social grants are, in many senses, the glue holding families and communities together. Disruptions in payment would be catastrophic and would drive many into the arms of formal and informal moneylenders—although this is already happening as Net 1 provides microloans to grant recipients through Easy Pay and Moneyline.

The third feature currently being overlooked is the extent to which the chaos generated by this crisis presents an opportunity for the ruling party, the African National Congress (ANC). Politicians using social grants to further their own ends is nothing new. The ANC has essentially worked to position the party rather than government as the main benefactor in this system. During the recent local government elections, for example, the ANC’s Gwede Mantashe reminded unemployed fathers that it was the ANC who ‘raised’ their children through child grants. In a recent press conference, the minister of social development, Minister Dlamini was lavished with praise by community and religious leaders for ‘uplifting’ the poor. Dlamini is also president of the ANC’s women’s league and staunch supporter of president Jacob Zuma.

While the confusion created by the current scandal certainly casts Dlamini and other ANC bigwigs in a bad light, it also presents a rather terrifying opportunity in which the party could begin to use social grants to further their own interest—more so than at present. It is common knowledge that, in almost every township in the country, having political connections, which most often means through an ANC councillor, is a sure way to receive tenders and access to various forms of employment. In one township that I’ve conducted research getting a public works job usually involves going to local party meetings and donning a party t-shirt. Is it so unthinkable that access to social grants could similarly be used as a form of political patronage in the future?

Finally, there’s the already well-documented fact that the CPS contract has been enormously beneficial to a range of characters within or close-to the ruling party. The fact that SASSA had no real contingency plan for who would take over grant payments after the contract was declared invalid by the Constitutional Court in 2014, or claimed that the renewed tender bid was unsuccessful, speaks to the extent to which they are willing to go to preserve networks of graft and influence. The recent revelation that President Zuma’s lawyer Michael Hulley was involved in negotiations to keep the CPS contract only confirms the extent to which this contract is bound up in shady business and political deals.

The country’s constitutional court has repeatedly asked SASSA to explain why it had no contingency plan for the payment of social grants when the current contract expires at the end of March. It should be clear by now that Dlamini has no interest in seeing SASSA insource grant payments. She has effectively positioned CPS as the only body that is capable of distributing grants nationally. And this may very well be true, but this is only because officials at SASSA have ensured that this is the case. Whatever system of payment emerges in the future it will almost certainly involve CPS and Net 1, and because of this money will continue to flow to their bank accounts and their majority shareholders, Allan Gray, who recently described illegal deductions from social grants as part of a process of ‘financial inclusion’ for the poor. Who benefits from this will speak volumes about the nature of the current crisis and the extent to which a few politicians and business people are willing to risk the livelihoods of millions to line their pockets.

Further Reading

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A solidariedade socialista na Angola e Moçambique pós-coloniais tornou as pessoas queer invisíveis. Revisitar esse apagamento nos ajuda a reinventar a libertação de forma legítima.