SASSA Grants Become Springboard for Informal Businesses in South Africa

Millions of South Africans receiving government social grants are turning their monthly stipends into the fuel for a thriving, yet often unseen, informal economy.

New research suggests that approximately one-third of the nation’s 28 million SASSA grant recipients are supplementing their income through informal work ranging from small-scale trade to home-based services.

Grants Offer Seed Money, Not a Solution

Despite the recent 4.8% increase in grants, the amounts remain significantly below the consumer inflation rate (currently at 6.2%).

This gap, coupled with Eskom’s electricity price hike, places grant recipients in a precarious financial situation.

The inadequacy of grant amounts is a key reason why an estimated 9 million beneficiaries are motivated to seek additional income.

“The grant helps, but it is not enough. I knew I could use some of that money to make more money, so that’s what I’ve been doing,” says Nosipho Mzizi, an elderly woman from a Soweto township who runs a small baking business funded in part by her old-age pension grant.

Survival-Oriented Businesses

Childcare grant beneficiaries appear to have the highest probability (11%) of creating informal work, likely due to their younger age and focus on “survival-oriented businesses.”

Grant recipients receiving the Social Relief of Distress grant follow with a 9% engagement rate in informal income generation.

Despite this drive, it’s vital to recognize that grant recipients consistently report the money remains insufficient, even after some of it is channelled into community savings schemes like stokvels.

A recurring theme is the ongoing battle for financial stability.

Barriers to Informal Growth

Several barriers hinder the growth of SASSA grant-funded micro-businesses. Key challenges include:

  • Caregiving Responsibilities: Mothers receiving child support often find their responsibilities at home limit their ability to work.
  • Costs: High transport and childcare expenses can significantly eat into potential earnings.
  • Lack of Capital: Access to affordable and reliable microloans remains scarce.
  • Competition: Large retailers pose a significant threat to smaller informal sellers.
  • Financial Literacy Gaps: Limited financial management skills hamper business development efforts.
  • Crime: Endemic crime and violence in many townships pose risks to both individuals and their businesses.

The Value of Self-Employment

While there are clear challenges, engaging in the informal economy appears to hold value beyond pure monetary gain for many SASSA grant recipients.

It provides an avenue to stay productive and promotes personal and family well-being.

In the face of limited formal employment opportunities, informal work fosters a sense of agency and purpose.

Calls for Increased Support

The Democratic Alliance has pledged to increase SASSA Child Support grants to R760 (matching the food poverty line) if they gain power in the upcoming elections.

However, the research suggests that even with such increases, further government support would be critical.

Providing access to affordable microfinance, business training, and addressing childcare needs could significantly bolster the efforts of grant recipients, paving the way for greater income stability and overall well-being.