SOUTH Africa already has one of the highest ratios of taxpayers to welfare dependants in the world, so any move to increase the number of beneficiaries, or the size of the payments they receive from the state, should be treated with utmost caution.
This stance is motivated by the question of affordability and sustainability, rather than principled or ideological resistance to the welfare state. In a country such as South Africa, with its history of discrimination and huge disparities in wealth, education, skills and opportunity, as well as an appallingly high unemployment rate, a state-funded social safety net is morally obligatory.
However, a balance must be maintained between state largesse and efforts to help the poor and disadvantaged stand on their own two feet. It is for this reason that this newspaper is opposed to the job-seeker grant proposed at the recent African National Congress policy conference, especially if the intention is to implement it in lieu of the youth wage subsidy.
State support for job seekers is fine in principle, particularly if it takes the form of helping unemployed people get their CVs in order or matchmaking with potential employers, but a monetary grant is no different from a dole and would just add to the number of welfare recipients. What South Africa needs now is job-creating growth, and extracting ever more money from the productive parts of the economy to extend the social grant system can only impede such growth.
The Unemployment Insurance Fund's (UIF's) plan to extend the benefit period from the current eight months to a year, however, is quite different. First, the fund is independent of the fiscus, so increasing payments would have no effect on the budget deficit or deprive Peter to pay Paul. The funds are raised through a levy on employees' wages and salaries, so there is no reason more should not be returned to contributors who lose their jobs, as long as this is done in a sustainable manner.
Based on the fund's 2011-12 financial report, sustainability is not an issue - the UIF asset base grew to R65bn from R54bn during the year, with collections rising about 10% to R12,4bn, while spending grew 5,7% to R5,6bn. As UIF commissioner Boas Seruwe said: the UIF contribution is a levy, not a tax, so there is no purpose in allowing the funds to accumulate ad infinitum.
Increasing the period for which people who lose their jobs are eligible for UIF payments, and raising the ratio of income replacement to salary to 65% from 45% would have the added benefit of injecting more liquidity into the economy. The circumstances under which such payments are made mean the funds would be spent almost immediately, making this an effective intervention in terms of stimulating the economy, perhaps even more so than an interest rate cut.