30 Nov 2007: ISS Today: Targeted Social Protection Fuels Welfare Fraud in South Africa

30 Nov 2007: Targeted Social Protection Fuels Welfare Fraud in South Africa

 

To be or not to be a welfare state - that is the question South Africa is yet to resolve as impoverished millions clamor for access to free but limited state-provided services, be they housing, education or social grants. In the latter case, government has in the meantime opted for a selective protection system, which targets particular social groups, namely the disabled, children, the aged, and war veterans.

 

Though still much debated, the idea of a universal welfare system that covers everyone, including the unemployed millions who are excluded by the current system, was not the preferred option.  Known as the Basic Income Grant (BIG), the proposal is to provide each man, woman and child age 7 to 65 with a monthly welfare check of R100. Though promoted by a broad coalition of labour unions, churches, non-governmental organizations, opposition politicians and even the Minister of Social Development, Zola Skweyiya, the idea struck little ideological resonance with the free-market reform forces within President Thabo Mbeki’s administration.  Consequently, other vulnerable social groups whose material condition is in all respects similar to the targeted population were left out of the system.

 

Is it not then naïve for government to expect the excluded group not to seek other means of accessing social protection? More than half of South Africa’s 47-million people survive on less than $2 a day. While 12 million South Africans receive grants, more than 13 million have no access to any regular income, even from a grant-receiving relative. Up to 1 million of the 12 million grant recipients are believed to be illegal, costing the state a conservatively estimated R1,5bn a year. Yet there is strong evidence that the majority of these illegal cases are motivated by need rather than greed. The Special Investigating Unit (SIU), which is gaining an increasing reputation as the state’s fraud buster, would admit that most illegal beneficiaries of grants are not the criminally inclined.

 

The mounting cases of illegal beneficiaries are indicative of the inadequacy of the targeted approach to social protection, and viewing the problem as a token of moral decay in society misses the point. So does the use of law enforcement to recoup the billions of rand lost to the state through welfare fraud. While it is certainly impressive that the state has saved R7, 7bn in welfare scams since commissioning the SIU more than two years ago, it would seem that far greater gains would accrue if the social safety net were simply cast wider in order to reach all poverty-stricken households.

 

Rather than trigger spending of the state’s limited resources on catching fraudsters, social grant fraud should serve to remind government that it is not doing enough to mitigate widespread poverty. Doing more to help the poor should involve rethinking the current social protection system and consider doing what no other African country has yet done: creating a welfare state.

 

For nearly a century welfare states like the UK, the Netherlands and the United States, from where South Africa derives many aspects of its social security framework, have demonstrated that free-market reforms can be pursued while still cushioning the poor with cash and other benefits. It is not a matter of choosing one over the other. The examples from the West illustrate that part of transforming to a modern market-driven democracy involves taking responsibility for those whom the markets leave behind.

 

In a country with a population for which poverty is not the exception but the rule, some relief in the form of the dole may see a dramatic decrease in welfare related fraud. Slightly higher taxes to finance the scheme may present some discomfort to the middle class and the affluent, but the resultant reduction in the country’s extremely high Gini coefficient would most certainly benefit the collective. A measure of inequality of income or wealth distribution, South Africa’s Gini coefficient topped 57.8 in 2000, depicting the country as one of the most unequal societies in the world. Since then, there has been a steady increase in wealth and income disparity.

 

The long-term success of the welfare anti-fraud campaign hinges less on tough policing than on replacing the means-tested social protection framework with an all-inclusive fully-fledged welfare state. Abolishing the test for eligibility also means less welfare bureaucracy and ultimately less corruption and inefficiency.

 

Andile Sokomani, Researcher, Corruption and Governance Programme, ISS Cape Town