Covid-19 Social Relief Stimulus Package could be SA's window of opportunity

Last night President Cyril Ramaphosa announced a social relief and economic support package of R500 billion, which amounts to 10% of GDP. Picture: GCIS

Last night President Cyril Ramaphosa announced a social relief and economic support package of R500 billion, which amounts to 10% of GDP. Picture: GCIS

Published Apr 22, 2020

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Cape Town - Last night South African President Cyril Ramaphosa announced a social relief and economic support package of R500 billion, which amounts to 10% of GDP. R50bn of this will be directed towards relieving the plight of the unemployed and current grant beneficiaries, through a multi-pronged approach.

Those on a child support grant will receive an extra R300 in May, and from June to October they will receive an additional R500 each month. Other grant beneficiaries will receive an extra R250 per month for the next six months. Furthermore, a special Covid-19 Social Relief Grant for the unemployed of R350 a month for the next 6 months will be paid to individuals who do not receive any other form of social grant or UIF payment, and 250,000 food parcels will be distributed across the country over the next two weeks. What does this social relief really mean and what is its significance?

The advent of the democratic transformation in South Africa during 1994 brought with it the high hope that income poverty and inequity would soon be significantly reduced from the very high levels that existed during apartheid. The reality has been sobering. Despite many progressive policies and laws, progress in poverty reduction has been slow and uneven.

The World Bank 2019 report findings show that South Africa still remains the most unequal society in the world. Its report focused on the theme of jobs and inequality, and it noted that, at 0.63, South Africa’s 2017 Gini coefficient was the highest internationally and that inequality had worsened since 1994. The Gini coefficient is the measure of income inequality, ranging from 0 to 1, with 0 representing a perfectly equal society and 1 representing a perfectly unequal society.

The most immediate causes for continuing poverty and inequality are clear. Persistent unemployment, low demand for unskilled labour, an unequal education system and holes in the social security safety net are some of the continued factors in the widening of poverty and inequality in South Africa.

South Africa is still challenged in terms of addressing aspects that create income and provide other opportunities for the poor. Indian economist Amartya Sen (1999) refers to this as “human capabilities”. Sen proposes two types of welfare priorities viz. those that are essential for economic development – such as education, micro-credit and healthcare – and those for economic justice and equity – such as providing unemployment support.

Why then should addressing inequality be the most pressing need in alleviating poverty and unemployment in South Africa? Well, every country has a distinct political economy that shapes the extent and effects of inequalities. South Africa, in this case, is no different, besides being the most unequal society in the world.

Studies demonstrate that inequality is not just determined by economic forces, but is also shaped by politics and policies. Extreme inequalities tend to hamper economic growth and undermine both political equality and social stability, resulting in cumulative economic, social, and political effects.

But perhaps the worst dimension of inequality is inequality of opportunity, which is both the cause and consequence of inequality of outcomes, and causes economic inefficiency and reduced development as large numbers of individuals are not able to live up to their potential. This is particularly true for women and the youth.

President Ramaphosa’s social relief stimulus package, though it’s only for six months, is aimed at assisting with day to day needs for those who are excluded from the formal economy and are on the periphery. Though some have indicated that the stimulus package for the unemployed is below living standards, this is the first time in the history of this country that a universal social relief package has been piloted, and it could be the start and a window of opportunity in addressing poverty and inequality head-on. What other case studies can we draw from that have been similar to the social relief announced by President Ramaphosa? Brazil could be a case in point.

Brazil, for example, as an emerging economy, has similar social strata like South Africa. Over the past few years it has been able to reduce inequality through increased social support spending. Its best known social support initiative is the Bolsa Família (Family Scholarships), started under President Lula da Silva: This programme provides financial aid to poor Brazilian families living below the poverty line.

The Bolsa Família launched in 2003 to consolidate existing cash transfer programmes. Its beneficiaries increased to 13.8 million households in 2014, thus reaching almost 50 million people (26 % of Brazil’s population). The Bolsa Família is the largest conditional cash transfer programme in the world. The programme has mitigated short-term problems that result from poverty and has helped to invest in health and education over the long-term, thereby interrupting the intergenerational reproduction of poverty. Studies show that it has significantly reduced extreme poverty and hunger. One estimate indicates that this programme has reduced poverty by 12-18 % between 2003 and 2009.

If the South African social relief package could be implemented flawlessly, ensuring that there is no political patronage and corruption in the system, this socially engineered relief package would go a long way in addressing poverty and inequality in South Africa.

* Dr Thabile Sokupa is the Director: Strategic Projects, Office of the DVC: Research and Innovation, University of the Western Cape (UWC).

** The views expressed here are not necessarily those of IOL.

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