The risks of institutional incapacity

One of the South African government’s more critical achievements over the past three decades has been the focus on the entrenchment of the social wage within the country’s spending framework.

The social wage – whose purpose is to cushion the poor from the effects of poverty and lack of income – has its genesis from a realisation that far too many citizens lacked skills and resources to get onto the economic bandwagon.

Read: Social Relief of Distress Grant extended, gets R34bn

Prior to the democratic transition, the social security system, which had been skewed in favour of white citizens on the lower end of the income scale, was made more accessible and equitable.

As a result, black citizens could fully participate in the national social grants system, and as it got entrenched over time, it formed a foundational basis for the country’s social security system. In addition to the direct transfers received by qualifying citizens and the rollout of the grants system to children of a certain age, indirect forms of assistance like school nutrition programmes and access to basic education and healthcare services all formed part of the comprehensive social assistance package.

Noble intention

The creation of the South African Social Security Agency (Sassa) was meant to deliver an institution that had the capacity to ensure the right grants were paid to the right recipients.

To enable this mission, the institution needed to be adequately capacitated and its reliability continuously assured. Failure of an institution like Sassa would have significant social, economic and political consequences.

The initial problem with the design of the social assistance programme is that its reach was limited by factors like age, which were incorporated into the qualifying criteria. Consequently, children beyond the qualifying age and adults below pensionable age fell outside the ambit of the programme.

Read/listen:
How the social grant system has changed since 1994
Basic income grant back on the table: What does this mean for the economy?
Sassa R350 grant: Court action over ‘unfair exclusions’

The transition across the two dimensions – from being young enough to qualify and eventually old enough to re-qualify – required one to move towards accessing an economic wage through employment or access to economic opportunities.

A key litmus test for the success of the social assistance programme is whether it aids in facilitating a transition towards accessing an economic wage.

This means that free basic education is more effective if it enables one to transition towards the world of work or higher education in pursuit of technical and academic skills.

Citizens in limbo

When the basic education system does not facilitate such a transition, it leaves citizens in limbo – especially in an economy that does not create jobs at any pace. The problem with this truncated transition is that it may last for years as more people enter the working age band and compete for a diminishing number of jobs.

For those with no post-secondary school skills, the intensity of competition is amplified as the jobs they qualify for are defined by low barriers to access.

The realisation of the links between the strong social assistance programme and an accessible post-secondary education system have been clear to policymakers since 1994.

This informed the drive to expand capacity within the higher education sector over the past two decades.

Unfortunately for South Africa, the great promise inherent in this realisation has been undermined by foundational issues in basic education that make it difficult for students from poor, fee-free schools to transition and thrive in higher education. As a result, success rates in higher education remain poor and the cost of running the system gets more expensive.

For poor students, access to the higher education system has been enabled primarily through the National Student Financial Aid Scheme (NSFAS), which sought to provide support to poor students below a ‘family income’ level defined as R122 000 until 2017 and R350 000 since then. A longstanding weakness of the system was the lack of comprehensive support for students funded by NSFAS, which left them inadequately covered and impacted on academic performance and success.

For students failed by the system, the double whammy of not receiving a qualification and also inheriting a debt burden became a longstanding problem.

Links, overlaps … and a system at risk

The links and overlaps between Sassa and NSFAS are best captured by the number of citizens currently reliant on the ability of these institutions to deliver. Between 2008 and 2023, the number of Sassa grant recipients moved from 12.4 million to 18.5 million. At the beginning of 2023, the number of students expected to qualify for NSFAS funding was 900 000.

That results in 19.4 million citizens directly covered by the social wage.

In addition to the 19.4 million, a further 8.5 million citizens are beneficiaries of the social relief of distress grant that was put in place during the Covid-19 pandemic. While this has yet to be embedded into the country’s social security architecture, it has become a lifeblood for citizens stuck in the truncated transition between the social and economic wage; and also not in employment, education or training.

The cumulative reach of these interventions directly covers 27.9 million citizens who are only able to access these cash transfers if the institutions designed to deliver them remain capable.

The tragedy of recent months is that both Sassa and NSFAS have experienced significant glitches in payments processing that have put the stability of the country’s social security system at risk.

The payment glitches affecting Sassa recipients emanated from the PostBank’s failure to address contracting issues with some of its technical partners.

For NSFAS, the challenges originated from the decision to move from an indirect transfer model for student allowances to a ‘direct’ model involving four new technical partners.

In both cases, the failure to deliver was one element of a bigger crisis.

What we now know

The more fundamental crisis across both institutions is that the discovery of issues with technical partners also highlighted the fact that institutional capacity did not exist within either institution.

In the absence of internal capacity, the need to partner with third parties remains unavoidable.

Unfortunately, what we now know is that in the initiation of contracts between state institutions and third parties, perpetrators of malfeasance always identify an opportunity for extraction.

For Sassa, its most sobering experience of this problem related to its contract with CPS.

In that case, the lack of internal capacity was such a fundamental issue the tainted contract had to be extended under court supervision in order to avoid the catastrophic fallout associated with a universal blackout in the payment of social grants.

For NSFAS, the opportunity for malfeasance crept in when the process of finding technical partners for the new payment model was initiated. Luckily the incompetence of the new partners occurred early enough for important questions to be asked about the integrity of the technical partnerships.

In both cases however, critical questions about the ability of these two institutions to deliver will remain until they develop internal capacity.

In the absence of a roadmap towards internal capacity building, both institutions will remain at perennial risk of chancers disguised as solutions emerging and initiating another iteration of extraction where we all can do nothing more than watch in horror.

The problem with a horror story affecting almost 28 million citizens is that the social fallout would be one of the most catastrophic events in the country’s democratic history.