[Letter] Tiny state handouts no cause for celebration

In delivering the keynote address at a commemoration of Human Rights Day, President Cyril Ramaphosa highlighted that in 1999 just over 2.5-million people were receiving social grants. As of 2023 that number has increased to over 18-million. The president concluded: “[this] means that we are respecting the rights of South Africans.”

Given the demands of the national democratic revolution, it is highly likely that many in the ANC view an increased number of grant recipients as a success story. The larger the number of people forced into dependence on the state, the more the party has succeeded in extending its control over the economy and society.

However, from the point of view of individual dignity and agency, forced dependence upon meagre handouts cannot be seen as anything but a tragedy. Wealth creation cannot take place without the necessary ingredients. The default state of humanity has been poverty; only where the right ideas have been implemented have people experienced a higher quality of life.

In SA, the potential for wealth creation on a macro level has been greatly undermined by both the rhetoric around, and push for, the legislative implementation of expropriation without compensation (EWC). Secure property rights are a necessary component for business formation, long-term capital investment and meaningful job creation.

With the sustained focus on EWC as a key deliverable the government aims to deliver, SA’s risk premium has increased over time. This results in an environment that discourages both local and foreign investment, fuels uncertainty and is a disincentive for private sector activity as a whole.

A social welfare programme can be an important component of a robust society if the economy is growing and people are not forced into dependence as a first resort. But absent real economic growth and job- and wealth creation, a record number of citizens dependent on tiny handouts is nothing to celebrate.

Letter originally appeared here.

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