Over the past few days President Cyril Ramaphosa and his PR team have been on a charm offensive providing insights into the progress report on the president’s commitments from the 2022 state of the nation address.
That list mirrored the fragile state of the nation. Promises made — including a social compact that would be published within 100 days — reflected the president’s hope that his administration could find a way of steering the country’s fortunes in a better direction in the aftermath of the Covid-19 pandemic and the looting of 2021. Even then it was clear that state resources and capacity would not be enough on their own to deliver on the president’s wish list.
Persistently high unemployment and the overhang of the pandemic on the economy required bold and decisive actions on the political front. Unfortunately for the country, the conditions only deteriorated from the moment the president delivered his speech. Russia’s invasion of Ukraine ignited a cost-of-living crisis that spurred inflation across the board.
The spike in oil prices affected citizens and led to a temporary moratorium on fuel levy increases. Such an emergency intervention reflected a rare moment of proactive agility from the state, but it was not sufficient to contain the inflation spike and led the SA Reserve Bank to respond by increasing interest rates, which are now back in the pre-pandemic range.
These multiple hits on consumer pockets were especially acute for the poor and unemployed. Recipients of social grants — whose spending patterns require a delicate juggling of limited resources against ever-escalating costs — were hardest hit, as social grants do not increase at the rate of inflation. This has resulted in the gradual erosion of the currency of the grants in the hands of recipients.
Inevitably, the calls for a deeper level of assistance or the adoption of a basic income grant have been renewed by various stakeholders. In the 2022 address the question of the permanence of the social relief grant of R350, which was introduced during Covid-19, was deferred, as the ANC was still trying to figure out whether it was possible to withdraw the grant in light of existing poverty levels.
As we get closer to a general election the issue is rapidly moving out of the party’s control, as it simply cannot take the risk of withdrawing the financial support and still expect to perform well in the election. The problem for the ANC, and the country at large, is that while that aspect of the question can be perpetually deferred, the question of its financial sustainability cannot be deferred.
If the grant is to be made permanent and also be increased to reflect the cost of basic necessities, it requires new resources to be marshalled. Trade union movements have lobbied for a wealth tax or new forms of taxes that have rhetorical appeal but are simply impractical to implement in SA given its tax base.
The ultimate solution — reducing the number of citizens who need the grants by improving employment levels — has thus far proved elusive to the government. In the absence of a road map towards expanding the capacity of the economy and finding new jobs for millions of unemployed citizens, the country will remain in this dilemma.
As Ramaphosa girds his loins to deliver another address, difficult decisions are no longer avoidable and citizens have warmed to the idea that the state in its current form is simply not able to turn the tide. The litmus test of his address will be whether he introduces anything markedly different from the status quo, and whether he has the courage to put together a team that can execute on his wish list during his forthcoming cabinet reshuffle.
• Sithole (@coruscakhaya) is an accountant, academic and activist.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.