Matthew Lester: Today’s World Bank report proves critical role of SA social grants

There are some amazing findings in the recently released World Bank Study of South Africa entitled ‘Fiscal Policy and Redistribution in an Unequal Society.’

It should be prescribed Christmas reading for any South African in management.

Were it not for the social grant system I sincerely believe that RSA would have gone up in smoke years ago. But many believe the social grant system is all a complete waste of taxpayers’ money.

World Bank SA economic update

The social welfare budget for 2014/15 is R188 billion out of total state expenditure of close on R1,2 trillion, about 16%. The budget gets paid out in child, old age and disability grants to close on 16 million of the 54 million South Africans.

But they drink and smoke it all. Or blow it airtime’ is the stuff I hear at social occasions.

Up to today my response has always been,’ if they do drink and smoke the lot then half goes back in sintax anyway. Unless they smoke contraband from Zimbabwe, that is.’

But now there is new ammunition in support of my views.

World Bank SA economic update1

The World Bank study shows that the poorest decile of RSA only spends 1 percent of their limited income on booze and smokes. And another 2% on communication.

More than 50% of the spend goes on food, roof, energy and water. And a further 8% goes on the cost of getting to work or school. You can’t fault that.

By contrast the richest decile have a very different life.

World Bank SA economic update2

Eventhough the rich enjoy better food and accommodation they only spend 20% of their budget on the absolute basics. That leaves the discretionary spend at 39%.

It is quite remarkable that both rich and poor spend about the same proportion on transport, booze, smokes and communication.

But just look what the rich are spending on household maintenance (6%) and insurance (15%). This bugs me.

Perhaps the reward for the wealthy in RSA is to pay the maximum marginal tax rate, then pay VAT and other indirect taxes on everything spent, then pay a fortune to insure your possessions, and then finally, spend your weekends and holidays in a hardware store endlessly pursuing the ‘honey do list’ that is household maintenance.

One wonders who is really free in the new RSA.

Download the full WorldBank report here

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