Stop ‘cannibalism’ of grant money

The state must stop the cannibalisation of grants by predatory lending.

In 2007, I conducted service delivery research on the then young established SA Social Security Agency (Sassa).

The research revealed the establishment of Sassa resulted in a great improvement, not only in the payment of grants, but also in bringing back dignity to recipients who had experienced a range of discomforts and humiliations at the grant payment queues, some even dying while waiting to get paid.

One of the mechanisms that made the payment of grants more efficient, was the shifting from on-site payments to electronic payments via the banks.

The introduction of electronic payments resulted in shorter queues and faster payment times.

However, this seems to have worked only for a short period as it is clear the reality of queuing for one’s grant has simply shifted to ATMs and retail shops.

The long queues we see in towns on grant paydays are an indicator of the socio-economic precariousness of grant-dependent households.

Even though grant recipients theoretically have the choice of withdrawing their cash on any day of the month, the common acute cash and food needs of households compel people to have to go and withdraw on the exact day of payment.

A week before the payment date, some grant-dependent households are already experiencing food and cash shortages.

What this inevitably leads people to do is to approach loan sharks or micro-lenders, commonly known as omashonisa, to fill in the cash gaps in the week leading up to month-end.

This invariably results in grant recipients becoming completely trapped in a cycle of vicious debt, unable to pay their way out of their high-interest debt owed to omashonisa.

If the grant recipient cannot pay, omashonisa simply confiscates their Sassa card and identity document.

Mashonisa would then simply take these grant cards and go to the ATM themselves to make the withdrawals.

In the case of teller-point payments in retail stores, omashonisa will accompany the grant recipient and wait for them to withdraw at the till and then confiscate their cash as soon as the money has been handed over by the teller.

These violent and predatory practices basically mean the state makes a large portion of its cash transfers straight into the pockets of omashonisa.

When you think about it, omashonisa are consuming billions of rands of public money, and in effect, perpetuating the cycle of hunger.

In the formal credit market, omashonisa come in the form of furniture retailers and predatory insurance schemes which burden pensioners with debt for goods and services.

One wonders really, what would happen to the financial health of some of these major furniture retailers if the state came down hard on the illegal credit they extend to pensioners?

What all this really calls for is some serious and rigorous research by the state, universities and civil society to try to break the cycle of hunger and its related cycle of debt.

At the macro-economic end, there is of course, the problem of unemployment that results in too few people working regularly for cash within individual households.

This requires that we think about how to get a basic amount of cash into young people’s hands – especially through the dignity of work.

It is of course, absolutely vital that the state continues to take care of each child by ensuring that children are guaranteed at least two meals a day at school.

We have to start thinking what about new, localised food delivery mechanisms for the majority of poor households.

This means we need a return to a research-rooted state that can reflect on the very granular detail of how its own policy unfolds on the ground.

We cannot sit and fold our arms as large amounts of public money are being sucked into a dark hole of predatory debt.

Grants payments are our largest social programme and we cannot allow it to so be so brazenly cannibalised.