By Katlego Ramantsima

“I became sick when I heard that there was a lockdown because I don’t have a permanent job.”

So says Lindiwe Mthembu, a 35-year-old mother of four from Orange Farm, South of Johannesburg. She’s been struggling to feed her family during the Covid-19 pandemic and national lockdown.

“I survive on piece jobs working as a domestic worker, and on child support grants which I get for my two youngest children. The money I receive I use to pay for the burial society, PEP funeral cover, and grocery scheme with the ladies in my community. My partner used to cover other things like food, school uniforms and so on. But now no work, no pay.”

Lindiwe says when lockdown was announced, she had some food but it soon ran out. And her family has practically no income to cover their basic needs—they rely solely on social grants to survive.

“My situation is bad because my partner too no longer works. Worst of all, we don’t qualify for UIF. One of my three sons got a job to work as a security guard. But he had to delay beginning with work because of the lockdown, this was a real setback. I was desperate and went to a mashonisa (loan shark) and he gave me R300, which I still have to pay back with R150 interest. I desperately needed the money for food. I bought maize meal, cooking oil, onions and soap. We now have to only rely on grant money to survive and I have to ensure that I pay the mashonisa this month as the money I owe him will increase. I worry that my funeral cover with PEP will lapse, and I need it in case trouble arises in the family. This is a way of life in Orange Farm, it is hard.”¹

Lindiwe’s story is the reality for most households in peri-urban communities. Being from the township myself, I worry about the future consequences of our current Covid-19 responses on the development of poor communities’ after Covid-19 has passed.

So far, the lockdown is having devastating effects on the ability of poor people to sustain their livelihoods. PLAAS’s response to Covid-19 titled ‘Food in the time of Coronavirus why we should be very, very afraid’, cautioned about the urgency of food during lockdown. In fact, it cautioned about many aspects regarding income, including the availability and distribution of food in poor communities. However, for the purpose of this blog I focus on the impact of Covid-19 on peri-urban households and paint a picture of what our communities would look like in the long run. My intention is not to go against any efforts made by the government, but to demonstrate that the interventions made are not sufficient to protect the poor during this crisis— nor does it steer the development of poor communities post COVID-19.

South African government lockdown policy responses

On 23 March, South African president Cyril Ramaphosa instituted a national lockdown which, while initially only supposed to last three weeks, is still ongoing. The lockdown, now at Level 4, allows some key economic sectors to function. The decision to lockdown was a necessary and an instant response to prevent the spread of Covid-19. However, for the majority of poor households, including the homeless, food is an urgent and critical need and many fear dying from hunger more so than the virus.

In the early stages of the lockdown, socio-economic policy responses made by the South African government missed the linkage between the formal and informal sectors of the economy—overlooking the importance of securing lives and livelihoods in both sectors. After several talks with the private sector, major banks came to the party by granting payment holidays for businesses and individuals affected by the pandemic, and those unable to pay salaries and debts.²

At the same time financial institutions are enticing consumers to increase their credit limits to purchase food and essentials during the lockdown. In response to the possible food crises during the pandemic, the government proposed not to compromise the agricultural sector and ensure that food prices in supermarkets are regulated to ensure equitable access to food overlooking the importance of regulating financial institutions.

One should not take away that all ministries had plans on how to survive the lockdown, however, South Africa’s structural reality was not taken into account in their responses. Hence, some lockdown regulations such as the provision of social grants and informal trading restrictions had to be revised and relaxed to allow for more people to access food. Most of the proposed remedies to ease the lockdown stress aimed to assist those in the formal sector and the well-off. The results were catastrophic as marginalised poor groups–with limited or no income–struggle the most during the lockdown. Only then did the government recognise the importance of creating resolutions for those in need of capital.

On 22 April, the president announced the socio-economic plan to assist the economy in continuing to function and grow even under lockdown. An extraordinary economic stimulus package valued at R500 billion was announced to direct resources to fight the pandemic. For the purpose of this blog I won’t cite everything the president proposed, but only what is central in understanding my position about the financial sector exploiting the poor, deepening poverty levels and the shrinking middle-class poor.

These are:

• R500 increment in the child support grant per caregiver for the next six months
• R350 unemployment grant and,
• R200 billion loan guarantee scheme in partnership with major banks, the National Treasury and the South African Reserve Bank.

Income grants are not enough

In order to understand the impact of the government’s coronavirus response and how it affects the poor, we need to recall life before lockdown. For the majority of South Africans life was already characterised by poverty. However, there is differentiation among the urban poor as some suffer from absolute poverty and others who are relatively poor. Absolute poverty is a condition characterised by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health services, shelter, education and information. Relative poverty is characterised as people who have the ability to sustain their basic needs, but may lack the income and resources to engage in certain social activities. Usually, groups who are relatively poor qualify to supplement their income through microcredit or other means.

It is admirable that the president realised that what the people need to survive the lockdown is income. I partially welcome his response to Covid-19. The announcement of the unemployment grant was celebrated by many as the pandemic made the grant a reality for the first time; it appeared as if all households were about to be saved from the scourge of the pandemic and that everyone would have access to food and essentials. However, the Covid-19 response emphasised that as a country we are far from ending poverty, and will probably sink even deeper into it post-coronavirus. The United Nations defines extreme poverty as living on $1.25 a day or less. The unemployment grant of R350 is equal to $18.29 per month for six months, which means that every unemployed person would be surviving on $0.61 per day for the next six months. Moreover, the R350 is already substantially below the food poverty line, lower than the value of the SA Social Security Agency’s food parcels. This should be an indication that the proposed amount is not sufficient to sustain a single unemployed individual and more support should be provided.

Rising food prices, increase in informal debt

The state is also failing in its promise to regulate food prices. Food prices are rising, making it impossible for poor households to survive. Research by the Pietermaritzburg Economic Justice and Dignity, House Affordability Index, records that the cost of household food basket increased by:

  • R65,67 (1,9%) from R3408,08 to R3 473,75 from 2 April 2020 to 23 April 2020
  • R252,75 (7,8%) from R3 221,00 on the 2 March to R3 473,75 on the 23 April 2020

Some retailers were found guilty of price hiking making it even more difficult for the poor to gain access to food. Because of the inability to afford the essential food basket, many households have resorted to informal lenders to cover their needs. But, informal lenders also consider the lockdown period risky, as they have to lend to people who do not have jobs or who will soon be out of work.

As Lindiwe’s story demonstrated earlier, surviving on grants is near impossible. The R500 increment per beneficiary is still not enough, especially for the unemployed with two or more children. Moreover, if she qualified for the R350 unemployment grant it would not be sufficient to afford an essential food basket during lockdown. Currently, food parcels are unable to reach the majority of the population; many will still go hungry. Her story also demonstrates that financial institutions continue to milk the poor by taking money from them for funeral covers and other financial products even though they acknowledge the burden they have under lockdown. The money could be redirected to the immediate need of purchasing food and other essentials.

Since many people in peri-urban low-income economies cannot afford to buy food, some have turned to spaza shops for credit. This is what David, a spaza shop owner, had to say regarding his contribution to this crisis.

“Business is struggling. Since lockdown we have been stressed as there aren’t enough customers. Customers are asking for credit because they don’t work. The highest amount owed to me is R1600 and I gave them R800, groceries, sugar, eggs and cool drink. I can’t do anything, I have to close down because my shop is almost empty. I don’t complain when I give my clients credit, I know them well and I see that it is tough. Some say their children are crying because they want eggs and bread. Now, I feel unsafe because things are getting negative. I don’t know what I am going to do. I used to make enough to support my family.”³

Shrinking middle-class poor, rise in formal debt

The days immediately prior to the lockdown demonstrated the stark gap between the rich and poor. There were people buying groceries in bulk to prepare for lockdown. While on the flipside, the majority of South Africans could only buy food at the end of the month, and others didn’t know where or how to get their next meal. We need to take note that even though this occurrence revealed the gap between the haves and the have-nots, the situation is not as clear cut. The middle-class poor were among the ‘rich consumers’ who hurried to supermarkets to use credit cards. Most of them are children who come from poor households and who have managed to get some education, jobs and to qualify for some credit and loans. They have the responsibility to financially take care of their families that are usually comprised of unemployed adults and children.

Prior to the pandemic, South Africa was already in an economic crisis with debt levels increasing for all income levels. Currently, most people have lost their jobs or are in the process of losing their jobs. Yet, the only way in which the major banks are helping them is through decreased interest rates, and the provision of payment holidays which they will have to pay back by the end of the lockdown. At the same time, this class also faces the pressure of paying for funeral covers, medical aid and other financial products offered by major banks. It is unfortunate that the majority of this class will find themselves trapped in debt for a much longer period as the R200 billion loan guarantee scheme is to ‘assist’ them get into more debt. The situation faced by this class demonstrates that the heavy reliance on private banks is problematic as it will result in the shrinking of the middle-class with diminished economic power.

To conclude, even in the midst of the pandemic the government’s priority should be to eradicate poverty and mitigate inequalities. I acknowledge that the South African government is faced with the complex problem of saving the economy since the finance sector is also at risk. Nonetheless, I think instead of directing a great amount of capital to major banks, more support should go to the social sector to ensure that the poor survive lockdown and beyond. The proposed unemployment grant and child support grants are not sufficient. Over-reliance on financial institutions would not be to the of benefit to these communities as they are ill-equipped to provide inclusionary measures favourable for the poor. Debt undermines development, it would be too late to think about developing these communities only after the pandemic. It would be like dancing in the same spot.

Sources:

  1. Telephonic Interview with Lindiwe Mthembu resident of Orange Farm, 10 May 2020.
  2. Banking Association South Africa, https://www.banking.org.za/news/
  3. Telephonic interview with Spaza shop owner David, 09 May 2020.

Cover image: Nikko Knigge/Flickr