Put the money in their hands
Increasing the old-age grant would inject money into the economy and stimulate towns across the country
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.