South Africa, which ranks among the world’s top ten spenders on social assistance, may consider a variety of modifications to its R156 billion annual welfare program to make it more cost-effective while boosting support for the unemployed, according to the World Bank.
While more than 18 million South Africans get welfare payments, with over two-thirds benefiting directly or indirectly, only child support, old-age pensions, and disability payments are distributed to those who have not paid into a separate unemployment insurance system. Despite the shortcomings, welfare payments amount to around 3.3% of GDP.
The country should adopt a job-seekers stipend, community service programs, or varying child support payments to help the poorest families, according to a World Bank research issued Thursday. According to the report, a job-seekers grant of R350 per month may cost R16.2 billion per year.
“The dilemma of the future of South Africa’s social assistance system rests in the opposing pull of these two forces: The limited political appetite for cost-saving reforms and the need to consolidate expenditures,” the World Bank said. “Feasible options for broader reform hence need to balance political will and the need to contain costs.”
South Africa’s welfare program has been lauded as the post-apartheid government’s single most significant achievement in lowering income and wealth inequality, which remains the world’s highest. Due to the Covid-19 pandemic, unemployment has reached an all-time high of more over 34%, with nearly four out of every five 18-24 year-olds out of work.
Unemployment insurance, on the other hand, is contributory, and hence only available to people who have previously worked.
While civil society organizations have urged for the implementation of a basic income grant, and President Cyril Ramaphosa has stated that one will be examined, business organizations and the World Bank have stated that it is unlikely to be feasible. Although public and community works initiatives should be explored, they are short-term in nature and do not solve South African unemployment, which is structural and linked to problems such as a deficient education system, according to the Washington-based lender.
“As the the private sector recovers from the pandemic it would be important to continue the public employment programs,” said Victoria Monchuk, a senior economist at the World Bank, in a presentation Thursday.