Straining to support: South Africa's social grants are vital but can the state keep up?
Economic challenges and the future of social grants in South Africa
Image: Tracy Adams
Social relief of distress, or social grants, is a key part of South Africa's welfare system; however, recent data indicates that its role is increasingly strained, raising concerns about sustainability, economic growth, and social cohesion.
According to the latest General Household Survey released by Statistics South Africa (Stats SA), an unprecedented 40.1% of the population - approximately 25.4 million individuals-now rely on social grants.
This marks a significant increase from previous years and reflects a steady rise in dependence, particularly amid persistent unemployment and economic challenges.
Risenga Maluleke, Statistician-General of South Africa, noted that the country's official unemployment rate hit 32.9% in the first quarter of 2025.
Such figures highlight the stark depth of economic hardship many face, with social grants serving as a vital safety net without sufficient employment opportunities.
Paul Maritz, Director at Free SA, a foundation advocating for rights, equality, and systemic reform, highlighted the gravity of this dependence.
'The growing reliance on social grants - now affecting over 25 million people — highlights deep socio-economic challenges and the urgent need for structural change,' he explained.
'Our proposed Power to the People Amendment aims to address these issues by reducing waste, devolving policing, and breaking monopolies that hinder economic opportunity.'
Maritz warned that 'sustained dependence on grants without parallel investment in job creation risks entrenching a welfare economy that stifles individual potential and hampers long-term growth.'
He warned that if current trends persist, South Africa's economy could face stagnation, shrinking tax bases, and rising inequality-all threatening social stability.
The fiscal burden of social grants is significant. In 2011, the South African government allocated around 3.5% of GDP to social assistance, which has grown over the years.
The Centre for Global Development estimated that expenditure on social grants, particularly the Child Support Grant (CSG), reached nearly ZAR31 billion (approximately US$4.2 billion) in 2010-11.
Instead, they argued that they serve as a necessary-but insufficient-measure to support those unable to provide for themselves.
"While grants have helped improve food security, children's well-being, and school attendance,' Maritz warned that they are not a long-term solution to poverty.
'Overdependence can distort labor markets. When social assistance becomes a substitute for employment, it can disincentivize active job-seeking and skills development.
'Countries with more developed economies often implement prerequisites or conditions tied to grants, encouraging recipients to pursue upskilling or community participation.'
He added that the current approach risks creating a stagnating workforce and reducing overall productivity in South Africa, thereby hindering economic growth and perpetuating inequality.
'Ironically, the system designed to reduce inequality may inadvertently reinforce it if not paired with empowerment strategies.
'Without access to meaningful employment, quality education, and secure communities, social mobility remains elusive for many beneficiaries.'
Furthermore, dependence on grants without addressing the root causes-unemployment, corruption, and inefficient public services-could erode trust in institutions.
Maritz warned that 'a society where millions feel trapped and unheard is inherently unstable,' stressing the need for comprehensive reforms.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Citizen
an hour ago
- The Citizen
Two-pot retirement system: Almost 4 million withdrawals close to R57 billion
The two-pot retirement system saw thousands of people withdrawing for the second time, showing how much people are battling financially. Since the two-pot retirement system was implemented on 1 September last year, pension fund members made nearly 4 million withdrawals that amounted to almost R57 billion, with the South African Revenue Service (Sars) collecting around R15 billion in tax. Edward Kieswetter, commissioner of Sars, made these figures public when he was a member of a panel discussion at the 2025 Sanlam Benchmark event last week. Tax collected from withdrawals where pension fund members were in arrears with their tax, added almost R1 billion. While there were 4 million withdrawals, just under 500 000 of the withdrawals were repeat withdrawals under the two-pot retirement system. Under the two-pot retirement system, pension fund members can withdraw from the savings pot of their retirement savings once every tax year. The second round of withdrawals therefore started on 1 March, and Kieswetter said that is where about 478 000 pension fund members made second withdrawals. 'We expect the repeat withdrawals to continue, because the financial distress of people has not changed.' ALSO READ: Two-pot retirement system: financial lifeline or long-term liability? Two-pot retirement system shows people battling to save The two-pot retirement system was designed to stop people from resigning their jobs just to get their hands on their pension to pay for emergency expenses and other expenses, such as debt. The two-pot retirement system was designed to force people to preserve two-thirds of their retirement savings until they retire. However, Kieswetter said telling people they must save 15% to 20% of what they earn today, when they cannot even cover the cost of today, is a moral dilemma. 'Therefore, in that respect, the two-pot retirement system is the closest to a Goldilocks balance we can get to allow earlier access but also enforcing preservation.' He pointed out that there is a fundamental problem: the South African economy is not growing, illustrating it with the joke of a man who orders a pizza and, when the waiter asks if he wants it cut into four or eight slices, the man says he wants eight slices because he is so hungry. 'Our problem is that we keep cutting the pie into smaller pieces instead of growing the size of the pie.' ALSO READ: Two-pot retirement system: People taken aback by amount of tax – survey Tax man takes slice of the pie in two-pot retirement system Since the first pension fund members received their withdrawals, they were not happy with how much tax they had to pay on the withdrawals, with some even receiving nothing because the whole amount was swallowed up by arrears tax. When the panel raised this issue, Kieswetter pointed out that the design of the retirement system defers taxation until withdrawal. 'Contributions are tax-deductible, now, and therefore the tax event is always going to happen when you draw on the funds. 'It was designed to work like that. For many people, the tax rate in retirement will be lower than during their working years. With the two-pot retirement system, the tax event takes place on withdrawal. 'The complexity is not the two-pot retirement system design, but the fact that the tax burden comes earlier. Until the policymakers decide differently, you will continue to be taxed on withdrawals.' ALSO READ: Two-pot retirement system: withdrawals not being used for emergencies What people used the withdrawals for Sanlam found in its Benchmark survey that 44% of the withdrawals from funds at Sanlam under the two-pot retirement system were used for debt relief. The survey also highlights growing awareness of the two-pot retirement system, with 92% of fund members now familiar with the changes. This is a significant increase from just 59% in last year's survey. Sanlam says among those who accessed their savings under the two-pot retirement system, the majority cited immediate and pressing needs, with 44% saying they will use the funds to pay off debt, while 33% said they will use it for school fees and 28% for family support. 'While it is encouraging to see members using these funds to stabilise their finances, we must be cautious not to let short-term access undermine long-term retirement outcomes. There is a fine balance between flexibility and preservation, and we cannot lose sight of that,' Nzwa Shoniwa, managing executive of Sanlam Umbrella Solutions, said. ALSO READ: Two-pot retirement system: survey shows what withdrawals will be used for Do people understand the implications of the two-pot retirement system? According to the survey, only 49% of members feel confident they understand the long-term impact of accessing their emergency savings pot early, despite 77% saying they are aware of the tax implications. Shoniwa said this signals a need for clearer, ongoing communication and support, particularly for lower-income members, who are more likely to withdraw and less likely to preserve their benefits until they retire. 'There is some indication that the two-pot retirement system may be prompting more members to engage with their retirement benefits. Our job as an industry is to ensure this increased awareness translates into better decisions in all areas.' In addition, the survey showed that 88% of pension funds and 83% of participating employers now provide counselling to members considering emergency savings withdrawals, and the infrastructure is improving, but Shoniwa warns that the industry must ensure this support is accessible and trusted. 'The risk remains that today's withdrawals, while understandable, may come at the expense of tomorrow's security.' The survey results include responses from 74 employer funds, 168 participating employers in umbrella funds and 506 employed consumers who are members of a pension fund.
IOL News
2 hours ago
- IOL News
Fuel prices set to rise in July due to Middle East conflict
South African motorists may have to dig deeper into their pockets in July, as another potential fuel price hike looms. Image: Motshwari Mofokeng/Independent Newspapers South African motorists may have to fork out more for petrol in July, as another potential fuel price hike looms. According to mid-June data from the Central Energy Fund (CEF), Petrol 95 is under-recovering by about 47 cents per litre, and Petrol 93 by around 43 cents. Diesel prices are showing larger under-recoveries of approximately 69 and 71 cents per litre for the two types respectively. Illuminating paraffin is also under-recovering by roughly 57 cents per litre. An under-recovery occurs when fuel levies do not fully cover the rising global oil prices and currency fluctuations, resulting in higher pump prices to compensate for the shortfall. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Next Stay Close ✕ These are only projections based on mid-month data and not final figures. The Department of Mineral Resources and Energy will confirm the official prices just before they take effect in July. The situation is a result of a sharp jump in Brent crude prices because of the ongoing conflict in the Middle East between Israel and Iran. The conflict began last week when Israel launched strikes against Iran, targeting its nuclear and military facilities. These strikes resulted in the deaths of the head of Iran's Revolutionary Guards and several top nuclear scientists. The situation was made worse when the US joined the war by launching an attack on Iranian nuclear sites with US President Donald Trump saying they had "totally obliterated" Iran's main nuclear sites. "Tonight, I can report to the world that the strikes were a spectacular military success," Trump said. According to Oxford Economics since the war began Brent crude oil prices spiked by over 10%. Oxford Economics is a "leading global economic advisory firm, providing data-driven insights and forecasts". "The Brent crude oil price spiked by over 10% as the conflict started and remains elevated in the $70-$78 per barrel range at the time of writing, well above pre-escalation levels. "The most severe scenario is a closure of the Strait of Hormuz. Around one-third of all seaborne oil passes through this chokepoint, and a shutdown would freeze oil exports from Kuwait and Qatar, and restrict exports from Iraq, the UAE, Oman, and Saudi Arabia". Cape Argus
The Citizen
2 hours ago
- The Citizen
‘We are not xenophobic': No justification to favour foreign academics over South Africans, says ANC MP
The Department of Higher Education's claim that it can't act against institutions has been criticised. Chairperson of the Portfolio Committee on Higher Education and Training, Tebogo Letsie, at the Good Hope Chamber in Cape Town on 23 June 2025. Picture: X / @ParliamentofRSA ANC MP Tebogo Letsie, chairperson of parliament's portfolio committee on Higher Education, says there is no justification for universities to favour hiring foreign academics over equally qualified South Africans. His remarks followed a recent controversy involving the Central University of Technology (CUT) in the Free State. The university faced backlash after appointing a foreign internal employee as dean over a black South African woman who reportedly holds a doctorate. A video of Patriotic Alliance (PA) MP Ashley Sauls questioning CUT vice-chancellor Pamela Zibuyile Dube in parliament about the matter circulated widely on social media in April. Watch the video below: Parliament on recruitment of foreign academics Speaking during a media briefing on Monday, Letsie highlighted that the Employment Services Act required employers to ensure no suitable South African candidates are available before hiring foreign nationals. 'We place it on record that we are not xenophobic because there are others who are going to say we are xenophobic for saying our laws must be adhered to,' he said. He further emphasised that hiring foreign nationals should not undermine job opportunities for equally qualified South African citizens, as outlined in the Policy Framework for the Internationalisation of Higher Education in South Africa. 'So the excuse by the Department of Higher Education that there is nothing they can do when institutions hire beyond the 10% foreign, international talent [threshold] … is just a fallacy.' ALSO READ: Almost 90% of foreign government employees in health and education sectors, says DPSA Letsie also highlighted that the framework affirms it is in South Africa's best interest to appoint the most suitable candidates to academic positions at tertiary institutions, including qualified foreign nationals. 'We do need our international brothers and sisters, but it must not be a detriment to South Africans.' He further stated that, according to the policy, tertiary institutions in the country have no valid grounds to favour foreign nationals. 'There can be no justification for any South African institution prioritising and preferring foreign nationals to South Africans who qualify equally for the same post.' Referring to CUT, Letsie said: 'There was an equally—if not more—qualified South African lady… was not given the job, and the excuse that we got from the leadership of the institution was that they prioritised an internal person.' He argued that such reasoning should not be seen as a legitimate advantage. Watch the media briefing below: Higher Education department criticised Letsie further said the committee was concerned about the attitude of departmental officials and their failure to take accountability regarding the 'illegal' employment of foreign nationals. 'We can't have a department that is soft and fails to hold the universities accountable.' He added that if officials were unsure how to address the matter, perhaps it was time to 'gracefully resign'. READ MORE: Mashaba slams tertiary institutions for hiring foreign academics The Department of Higher Education, according to Letsie, informed the committee during a meeting on 18 June that it would be engaging with university councils on the issue. 'While the committee fully supports attracting and retaining international talent, it does not support those done outside of the national legislation and policies.' Seta board appointments Letsie also revealed that the committee plans to recall Higher Education Minister Nobuhle Nkabane to answer questions regarding the appointment of Sector Education and Training Authority (Seta) boards. Nkabane had faced criticism for refusing to disclose the identities of the independent panel members who recommended chairpersons for the Seta boards. The controversy emerged after it was revealed that several appointees had ties to the ANC, including Minerals Minister Gwede Mantashe's son Buyambo Mantashe, former KwaZulu-Natal (KZN) Premier Nomusa Dube-Ncube, and former ANC KZN deputy chairperson Mike Mabuyakhulu. Though the appointments were subsequently withdrawn, Nkabane came under fire in parliament for withholding the panel members' names. Under increasing pressure from MPs and President Cyril Ramaphosa, she finally released the list on 17 June, which included her advisors and departmental officials. READ MORE: 'Gum-chewing' minister goes viral, prompting conduct warning for South African MPs However, Advocate Terry Motau, cited as the panel's chairperson, denied involvement in the process. Letsie remarked that Motau's denial 'raised more questions' about the integrity of the appointment process. He said the committee has requested documentation from all panel members, including their correspondence with the minister, letters of acceptance, remuneration details, meeting minutes, and the final report that recommended the appointments. Letsie confirmed that Nkabane and the panel members have been invited to appear before the committee. 'We don't have a date yet because parliament is seized with a process of adopting the budget,' he said. 'We had identified a date which was this Friday, but because of the work of parliament, we could not get that particular date approved.'
