More people on benefits than in employment in South Africa
Taxpayers may soon become overstretched as research shows there are more individuals living on social grants than earning in South Africa.
South Africa’s tax base is under a lot of pressure, according to research by the South African Institute of Race Relations (SAIRR) revealing that there are more people on social welfare than in employment – and the number of social grant beneficiaries keeps growing.
SAIRR’s study revealed that the situation has significantly worsened in the last decade. In 2001 there were 330 people with jobs for every 100 people on social welfare but in 2012 the ratio was 90 people in employment for every 100 social welfare beneficiaries.
This extensive social welfare system, in a society where unemployment has doubled since 1994, despite lifting many households out of poverty, puts a strain on the country’s tax base, the SAIRR warned.
“If this trend continues, South Africa’s tax base will not grow fast enough to keep supporting the millions of vulnerable individuals who rely on monthly cash transfers from the state,” said SAIRR acting head of research, Lerato Moloi.
With over 16 million social grant beneficiaries in 2013/14, social expenditure is expected to rise to about R113bn in this financial year.
The highest proportion of the social grant budget this year will be spent on pensions (39%) and child support (37%).
The National Development Plan estimates that about two million children who are eligible for the child support benefit are not receiving it. If all eligible children received this grant, it would push social grant expenditure up by more than R500 million.
Between 1994/95 and 2010/11, the nominal value of tax revenue grew by 491%, from R114bn to R674bn. In the same period, the nominal value of social grant expenditure grew by 700%, from R11bn to R88bn.
