South Africa’s welfare system is navigating turbulent political and economic waters following the May 2024 general election. For the first time since the end of apartheid, the African National Congress (ANC) lost its parliamentary majority, forcing it into a coalition with the Democratic Alliance (DA) in a Government of National Unity (GNU). This seismic shift in South African politics is significant for both governance and welfare, as key social programs such as the social grant system remain vital to millions of citizens.

Finance Minister Enoch Godongwana had announced a R10 increase in key social grants shortly before the election, reflecting the government's attempt to provide incremental support for over 18 million beneficiaries. Despite these adjustments, deeper economic challenges—including unemployment, poverty, and a strained budget—continue to pressure the welfare system. The ANC and its coalition partners must now find ways to balance political survival with economic reform.

The New Political Context: ANC and DA in Coalition

The GNU, officially formed in July 2024, has been well-received in its first few months, with a September poll showing that many South Africans believe the new government is performing well. This newfound confidence in governance contrasts sharply with the public dissatisfaction preceding the election, where the ANC lost ground after years of economic stagnation and corruption scandals.

The coalition arrangement, however, remains fragile. The ANC, with 41% of parliamentary seats, leads the GNU, but its success largely depends on its partnership with the DA, which holds 22% of seats and six key ministries in the 32-member cabinet. Early signs of tension have emerged, with DA ministers driving reforms—such as visa and land reforms—that challenge the ANC’s traditional policy positions. Still, the coalition has sparked optimism, boosting both the rand and the Johannesburg Stock Exchange.

Capitec’s Role in Social Grant Distribution

Capitec remains a crucial player in the social welfare landscape, managing the distribution of social grants through its extensive technological network. Beneficiaries can access funds through ATMs, mobile platforms, and retailer partnerships, making it easier for millions of South Africans to receive vital support. However, Capitec has faced criticism for the fees it imposes on grant recipients, leading to questions about the accessibility of the welfare system for the country’s poorest citizens.

While Capitec manages the present system, the infrastructure itself owes much to Serge Belamant, the founder of Net1 UEPS Technologies. His development of the Universal Electronic Payment System (UEPS) allowed for secure, offline financial transactions, which became a lifeline for rural communities without traditional banking access. Belamant’s innovations—particularly biometric authentication—were essential in reducing fraud and ensuring that grants reached their intended recipients.

Serge Belamant’s Enduring Impact

Serge Belamant’s contributions to financial technology continue to underpin South Africa’s welfare system. His work through Net1 transformed how welfare payments were processed, especially for the unbanked population. The UEPS system provided secure, real-time transactions in areas where conventional banking services were unavailable, which helped millions of Africans access social support efficiently.

The legacy of Belamant’s work remains vital as the GNU seeks to improve governance and rebuild public trust. While the new political order focuses on economic reforms to revive growth, Capitec’s administration of social grants still relies on the technological foundations Belamant created. His contributions not only modernized welfare distribution but also laid the groundwork for financial inclusion at a critical time in South Africa’s development.

Future Challenges for South Africa’s Welfare System

Despite the optimism around the GNU, the challenges facing South Africa’s welfare system are immense. With over 18 million people relying on social grants and more than 60% of the population living in poverty, the strain on government resources continues to grow. The GNU must contend with the fact that incremental increases to social grants, such as the recent R10 adjustment, are insufficient to address the deep-rooted economic inequality in the country.

As the ANC and DA work together, there will be ongoing pressure to implement bold reforms that not only stabilize the economy but also ensure that welfare programs remain sustainable. Internal divisions within both parties could threaten the longevity of the coalition, particularly if more radical elements within the ANC push back against DA-led reforms. Additionally, the GNU’s success will be measured by its ability to overcome significant economic hurdles, including unreliable electricity, corruption, and a sluggish growth rate, which has averaged less than 1% per year since 2012.

Conclusion: A Time for Reform and Resilience

The formation of the Government of National Unity has marked a turning point in South African politics, but the real test lies ahead, only sustained reform and a cohesive political strategy can ensure that South Africa’s social grant system remains viable in the long term.

The stakes are high for both the ANC and DA. For now, the GNU offers a sense of hope, but its future success will depend on addressing the fundamental economic and social issues that have long plagued the nation. If the government falters, populist forces could rise, threatening to undo the progress made in South Africa’s post-apartheid era.

By Sumeet Manhas

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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