The social development department has made an extraordinary proposal to the interministerial committee set up to find solutions to boost the economy: double social grants payments for six months.
The suggestion comes as Statistics South Africa this week revealed the country was officially in recession following two consecutive quarters of negative growth.
Deputy Finance Minister Mondli Gungubele confirmed the social development department’s proposal.
He expressed scepticism about the possibility of the proposal’s success, however, saying the fiscus would not be able to support the increased spending required to fund the proposal.
The treasury budgeted just over R150-billion for social grants for the 2017-2018 financial period.
If the proposal by the social development department were to be implemented, R150-billion would be disbursed over six months.
Social grants target the most vulnerable in society — pensioners, people with disabilities and children.
Gungubele said the proposal to increase social grants would have to be “interrogated” to prove with certainty that implementing such a strategy would boost the economy.
“That [doubling of social grants] is a mere proposal, which must be interrogated against the fiscal challenges we are facing. I’m not dismissing it at face value, but it must be interrogated,” he said.
“Remember, if that is done within the fiscal framework, it will not be a problem. But I doubt how it will be done unless there is a reprioritising of expenditure towards the social development department,” he added.
“From where I sit, I do not see more expenditure coming from the fiscus because, in my view, we have exhausted the fiscal strength.”
Gungubele has lamented the cost of servicing government’s debt as one of the biggest strains on the fiscus, along with the state’s salary bill and social spending.
He said President Cyril Ramaphosa did not go to China to ask for loans.
“We can’t continue to get involved in loans that deepen the unsustainability of the fiscus,” he said.
“What the president is trying to do is to get investment that will get the economy going. He is not looking for money for consumption. So whatever billions that can go into improving productive capacity will be welcome.”
Last month, the Mail & Guardian reported that Finance Minister Nhlanhla Nene told the Cabinet lekgotla that government will need about R48-billion to support the implementation of stimulus packages aimed at boosting economic growth and creating more jobs. China was named as potential funder. Among other things, the packages will focus on increasing investments in public infrastructure, offering more support to small business, increasing localised procurement and offering farmer support programmes.
Ramaphosa’s spokesperson, Khusela Diko, referred all questions to Nene’s office, saying the presidency was not in a position to respond.
Thuli Nhlapo, spokesperson for Social Development Minister Susan Shabangu, said there was “no debate” about increasing social grants at the moment.
Addressing journalists in China this week, Ramaphosa downplayed the effect of the recession, saying South Africans need not feel despondent.
“We are in a technical recession but I don’t think we should be disheartened because most of it [the slowdown] was driven by agriculture. We had late rains, late harvests … and I’m sure agriculture will build up and show growth,” he said.
“All is not lost and I don’t believe a full recession will take hold in South Africa. But then again our economy is facing its own challenges, which we have to respond to. We are finalising a stimulus package that we will soon be announcing to inject impetus and growth into our economy.”