The creation of a welfare state by the ANC

The path towards the establishment of a socialist state appears to have been cleared of all impediments. If the draft ANC election manifesto is anything to go by, the influence the SA Communist Party (SACP) on ANC policy is no longer a matter of ambiguity. The ANC under Jacob Zuma has modelled itself as the messiah of the poor and promised a government that would be involved in the lives of our people at every level of society. None of us would contest the need to address social needs of society and improving the standards of living. However, where there is divergence of opinion is on the approach elected for the realisation of these aims. The ANC has elected a populist and costly route that is harmful to our economic prosperity in the long run. The promise of a creation of a welfare state may garner desperate votes, but it is not a lasting solution to the problems of unemployment and poverty that the country has to contend with.

According to the draft ANC manifesto as reported by the Sunday Times, the proposed welfare net will include:

(1) Extension of the R240 monthly child support grant for an additional four years until a child’s 18th birthday. This could add R10-billion a year to the existing R100-billion social welfare budget;

(2) An unspecified additional “care-giver’s benefit” for mothers. At just R100 a month and assuming two million mothers, that will cost the government R2.4-billion;

(3) An undefined grant for young people between 18 and 25 to help them get into the labour market. This could be a version of the job subsidy now being considered by the Treasury at a likely cost of R20-billion to R30-billion a year; and

(4) Income support for all adult South Africans, which, if it is based on the basic income grant proposal, would be reversed for working people through taxes. In 2001, the cost of a universal R100 monthly basic grant was calculated at R48-billion, of which between R15-billion and R20-billion would be a cross-subsidy from taxpayers.

There are the most vulnerable, children and the elderly, who require such interventions by the state, but we cannot promote dependence by able bodied and capable citizens on the state through unnecessary social grants. Under the ANC welfare state people who are capable of caring for themselves would have no motivation to improve their lives when they can depend on the government to provide for them. The ANC is providing fish to the people instead of fishing rods. What people need are the means to sustain themselves.

The continuing redistribution of wealth would not do much in improving the lives of our people and ensuring that they are able to create their own wealth. The culture of entitlement is being entrenched and dampens the motivation to make things happen. We have noted how BEE has in fact slowly strangled the spirit of entrepreneurship and discouraged the emergence of new industries led by the previously marginalised. Recycling limited wealth is unsustainable and detrimental to economic growth and to the general welfare of all citizens in the long run.

The concern about growing inequalities is a concern shared by all of us; and what we know is that such inequalities have been aggravated by the inability of the ANC government to address the problem of illiteracy and shortage of skills. The promotion of labour intensive projects in order to artificially address the problem of unemployment has been successful in the short-term, but the consequences of such narrow measures would continue to be felt by communities whose social circumstances lag behind those embraced by the mainstream economy. We cannot afford to encourage the establishment of unskilled workforce without ensuring there are measures in place to transform the nature of our economy that is capital-intensive and knowledge-based if we are to become efficient and prosper.

To pursue policies that place social provision ahead of economic development is suicidal. There have been indications that the ANC would favour Keynesian policies where the ruling party would intervene in the economy to achieve its short-term populist aims. The call by influential communists and trade unions within the ruling party for loose monetary policy is in line with the proposal for the creation of a welfare state; where narrow interests are elevated above those of all citizens of the country. The poor will remain poor if no concerted effort is made to ensure a sustainable economic growth; that all people share in the wealth generated by the economy.

It is fascinating that the ANC has proposed these grants when the Minister of Finance, Trevor Manuel, is reported to have warned that the days of budget surpluses are over and forecasts that the government would slip into deficit by about R41-billion in 2009. How is the ANC going to fund these programmes? Government has only three sources of funding: taxation, borrowing and printing money. Without inflation targeting as the Cosatu and SACP wishes, inflation is bound to spiral out of control as leftists assert their control and populist agenda pursued without shame.