Put the money in their hands

In­creas­ing the old-age grant would in­ject money into the econ­omy and stim­u­late towns across the coun­try

The Witness - - OPINION - Julie Smith • Julie Smith is a re­searcher for the Pi­eter­mar­itzburg Eco­nomic Jus­tice and Dig­nity Group.

EV­ERY month, gov­ern­ment in­jects about R6,2 bil­lion directly into the econ­omy through the in­stru­ment of the old-age grant. About 3,5 mil­lion pen­sion­ers re­ceive this money directly into their pock­ets and spend ev­ery cent of this money, putting it back into the econ­omy.

At least once a month ev­ery eco­nomic hub in South Africa is boosted. Eco­nomic ac­tiv­ity flour­ishes. Across South Africa, ev­ery sin­gle town, from the small­est to the big­gest, comes alive.

Pen­sion­ers use the old-age grant to sup­port their fam­i­lies. Through the pen­sion­ers’ mass spend­ing, a large por­tion of the R6,2 bil­lion goes back to gov­ern­ment via VAT, fuel le­vies, elec­tric­ity and wa­ter pay­ments, cor­po­rate in­come tax and sav­ings in the health-care and ed­u­ca­tion sec­tors. This money boosts busi­nesses and keeps work­ers in jobs. This money sub­sidises high lev­els of un­em­ploy­ment, low base­line wages and the low child-sup­port grant, and keeps house­holds func­tion­ing.

The prob­lem is that the value of the old-age grant is too low (R1 780 per month) and this money does not cir­cu­late for long in the econ­omy. On pen­sion pay-out day, pen­sion­ers go to town, col­lect their money and within a few hours spend all of it on very ba­sic con­sump­tion ex­penses in the big­ger su­per­mar­kets. Pen­sion­ers leave town with empty pock­ets: no money goes home to where they live. The hege­monic view that wel­fare spend­ing is a drain on the fis­cus and that so­cial grants go into a deep, dark, bot­tom­less pit, with no re­turns, doesn’t hold true in South Africa. South Africa’s wel­fare sys­tem is unique. It is a trea­sure. It is one of the pri­mary eco­nomic in­stru­ments that pushes money directly into the econ­omy. And into ev­ery area across the coun­try.

The old-age grant has an eco­nomic value, even at its cur­rent low level. But, in­crease the grant be­yond its poverty level and it holds ex­po­nen­tial pos­si­bil­i­ties to re­duce the eco­nomic cri­sis that we face and lower our lev­els of in­equal­ity.

Imag­ine if the eco­nomic ac­tiv­ity gen­er­ated on pen­sion pay-out day could be ex­tended from one day a month to sev­eral days a month. Imag­ine how this would change our small towns and big cities. Imag­ine if this money could cir­cu­late for longer in lo­cal economies where the ma­jor­ity of peo­ple live. Imag­ine what our econ­omy would start look­ing like.

In­creas­ing the old-age grant be­yond ba­sic con­sump­tion spend­ing would al­low mil­lions of peo­ple to de­mand more and new types of goods and ser­vices, which would en­cour­age the start of new busi­nesses in both the cur­rent eco­nomic sys­tem and the mas­sive un­tapped town­ship econ­omy, and, where busi­nesses al­ready ex­ist, would en­cour­age an in­crease in sup­ply to meet the new de­mand and the need to em­ploy more peo­ple. Work would be cre­ated where peo­ple live.

The South African econ­omy is starved of money and we are strug­gling to deal with our deep­en­ing eco­nomic cri­sis. Our mas­sive job losses have re­moved the wages of mil­lions of work­ers from cir­cu­lat­ing in the econ­omy. The wel­fare sys­tem of­fers us an in­stru­ment to change the tra­jec­tory of our eco­nomic path by putting money back into the econ­omy. In­crease the old-age grant and it will be an as­set to the South African econ­omy.

It is hard to see a more avail­able and cheaper in­ter­ven­tion that could bring about such an im­me­di­ate and de­ci­sive shift in our eco­nomic tra­jec­tory, as well as re­sult in ex­po­nen­tial ben­e­fits to our de­vel­op­men­tal fu­ture.

We sup­port the call of the Pi­eter­mar­itzburg Pen­sion­ers Fo­rum to in­crease the old-age grant, as a start­ing point, to R2 500 a month. This would serve as an im­por­tant start to the re­cov­ery of our econ­omy, the cre­ation of work, trans­form lo­cal economies, build a strong ed­u­ca­tion and health sys­tem, healthy and pro­duc­tive work­ers, and, some­thing we must get right: jus­tice for black pen­sion­ers, par­tic­u­larly women, who are the strug­gle work­ers and he­roes of South Africa’s past. About 3,5 mil­lion of prob­a­bly our best peo­ple are be­ing ig­nored. Imag­ine how much poorer we are by mak­ing in­vis­i­ble so many gifted, con­nected, net­worked and re­source­ful peo­ple.

Pen­sion­ers sac­ri­ficed enor­mously for SA to get where it is to­day. No other age group holds the repos­i­tory of the past and the dreams and as­pi­ra­tions for a bet­ter and brighter and gen­tler South Africa as they do. Put money directly into the hands of these in­cred­i­bly re­source­ful, wise, pru­dent and car­ing women and men, who so want South Africa to suc­ceed, and see what hap­pens.

How much will this cost and where will we get the money?

It will cost about an ex­tra R2,5 bil­lion a month. If this is what it will cost to shift dras­ti­cally South Africa’s econ­omy onto a pos­i­tive tra­jec­tory, we can find the money.

For those of you out there with a healthy dose of scep­ti­cism, good. But what do we have to lose?

If it works it could fun­da­men­tally change our fu­ture. If it doesn’t work then R2,5 bil­lion will have been pumped into our econ­omy ev­ery month for 12 months. It is hard to see how this could be a bad thing. We have done so much worse with the pub­lic purse. Let’s do it. Try it. Take a risk.

An­nounce it in the Fe­bru­ary Bud­get Speech and start dis­burs­ing in April.

We need some­thing new. We need some­thing to raise our spir­its and en­ergy. We need to be­lieve again in the pos­si­bil­ity and dreams of a South Africa that we all love and so des­per­ately need to start mov­ing again.

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