IN A NUTSHELL: By exploring the social grant systems of South Africa and the USA, we uncover each country’s unique approach. And get to celebrate South Africa’s notable achievements, says Advocate Makhubalo Ndaba, a fellow of Harvard University’s Advanced Leadership Initiative.
South Africa is a beacon of progressive social welfare in Africa. With over 26 million out of 62 million people receiving income support, the South African government demonstrates a strong commitment to combating poverty and ensuring a safety net for its residents.
There is general agreement though, that this is not sustainable in the long term, as the country faces significant economic challenges.
Central to South Africa’s social security framework are various grants that target specific needs, such as child support and disability.
In comparison, the USA offers a more diversified social security framework, focusing on broad-based benefits like Social Security Retirement and Supplemental Security Income. In the USA, with a total population of 333 million, almost 70 million Americans receive some type of welfare funding.
In South Africa, we have not yet reached what the World Bank distinguishes as the three separate pillars of a retirement system. The first pillar is a public benefit programme, funded from general government revenue, aimed at redistribution (from the more well-off to the poor) to prevent poverty in old age.
The second pillar is typically privately managed with mandatory participation. The third pillar comprises voluntary savings.
Our social grants fall under the first pillar. South Africa is stronger on the second pillar, which is occupational pensions, but does not have a strong voluntary savings culture. In contrast, the USA has a vibrant first pillar, and a strong second and third pillar.
Our discussion below is limited to the first pillar.
South Africa’s social system
South Africa’s social security system, managed by the South African Social Security Agency (SASSA), provides various monthly grants, including:
R2085 per month
Old Age Pension: Financial support to citizens over the age of 60, with recent increments reflecting the rising cost of living. There is an additional increment for those over 75 years.
R2085
Disability Grant: Available to individuals aged 18 to 59 who are medically certified as disabled.
R1125
Foster Child Grant: Support for foster parents per month per child.
R505
Child Support Grant: Provides financial assistance to primary caregivers of children under the age of 18.
Social Relief of Distress Grant: A temporary assistance grant for those in dire need, often provided in the form of food parcels or vouchers. This grant was notably expanded during the COVID-19 pandemic to reach approximately 7.8 million people.
The USA’s approach
The social security system operates very differently from South Africa. Social security is administered by the Social Security Administration. Its key components include:
USD1830
Social Security Retirement Benefits: Provides monthly payments to retired workers, starting at age 62, with benefits increasing if the start date is delayed up to age 70.
USD1280
Social Security Disability Insurance: Offers financial assistance to individuals who have a qualifying disability and have paid into the Social Security system through payroll taxes.
USD914
Supplemental Security Income: Provides cash assistance to elderly, blind, or disabled individuals with limited income and resources. Some states offer additional payments.
A fascinating inclusion is the national nutritional assistance to low-income families, called the Medicare and Supplemental Nutrition Assistance Program, formerly known as food stamps.
Social Security spending: SA vs USA
This article compares two vastly different social security systems, with different population sizes and national budgets. It provides a basis for South Africans to compare how important it is to save for our future because welfare grants are unsustainable in the long term. These social security interventions are only made possible by the availability of capital to fund them.
The projected significant increase in population in Africa could complicate matters further. South African labour, government and business should negotiate a social compact that anchors the developmental path of our economy. More economic opportunity must be created for the growing population of young people.
What is a social compact?
Social compacting is a way to engage diverse members of society in supporting a shared vision for the country and implementing necessary actions to attract investment, grow the economy inclusively, and address socioeconomic challenges. For example, during the Covid pandemic, South Africans from various sectors launched a successful social compact and pulled together resources and expertise to save lives.
While the USA provides a broader array of benefits for its citizens, the proactive measures of the South African government to explore universal basic income support are a testament to an inclusive government that aims to prioritize the most vulnerable – as illustrated by the annual spending within the national budget.
However, the slow economic growth and the shrinking tax base serve as an urgent reminder that South Africa cannot afford to postpone the negotiation of a social compact much longer if we want to continue providing a robust safety net for its people.
Advocate Makhubalo Ndaba is a pension funds professional and Atleha-Edu facilitator. Also, read the Q&A on his background and studies.
Sources
American Action Forum: The Future of America’s Entitlements
Centre on budget and policy priorities: Where do our federal tax dollars go?
Expatica: Social grants in South Africa and SASSA
SA News: Social grants to increase in 2024
Social security administration
South African Government: Highlights of the State of the Nation Address 2023 – Social security
Trialogue: South Africa’s social compact – progress stalled?
Treasury: 2024 Budget review consolidated spending plans
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