Medium-term budget: Basic income grant decision deferred to next year

Despite the demands and expectations, Finance Minister Enoch Godongwana was almost certainly never going to announce new social grants on Thursday and his maiden medium-term budget policy statement (MTBPS) deferred the issue to the main budget in February.

The MTBPS does not mention the words basic income grant per se. Nor does it allude the findings of a study on the subject commissioned by the treasury. Instead it speaks of three priorities, the first being “addressing shortfalls in social grants”. This is followed by introducing an extended child support grant for orphans and “researching possible new social support options once the Covid-19 special social relief of distress grant ends”.

“However, given that all three have significant financial implications, a final decision must still be made on what is affordable given the current fiscal context,” the document says.

Godongwana, after just more than 100 days in the post, told the media the decision was not his alone, but that of the cabinet, and would come later.

“That is not our call. We will contribute to that debate but it is not our call,” he said.

He was blunt in saying that should a new grant be introduced or the current R350 social relief distress grant be extended again, the collective would have to decide where else to cut spending to make it possible.

The minister stressed that the MTBPS was silent as to whether the social relief distress grant would be extended again after the current extension ends in March next year.

“We have not said that. We know that the extension ends at the end of March. Whether they want to extend it beyond the end of March is the government’s call.

He added that should this happen, “we have to decide what we are going to cut to fund it”.

The current six-month extension of the benefit has cost the state R26.7-billion, and Godongwana suggested that extending it for the year should cost R40-billion.

This figure pales next to the estimated R220-billion required to introduce a universal basic income support grant, as progressives and the left are pressing for in a pandemic-stricken economy with record unemployment of 34.4% and soaring food and fuel prices.

The MTBPS stresses that there are already 18.3 million citizens who receive one or another form of welfare grant, excluding those who benefit from the social relief distress, and that fiscal consolidation remains a priority, and tighter monetary policy and borrowing conditions a real risk.

Though the economy recovered faster this year from the biggest contraction in a century, brought on by the Covid-19 pandemic and lockdowns, there was no guarantee that the country was emerging from the woods, particularly while it remained in the throes of an electricity crisis.

“There is profound uncertainty about the durability of the economic recovery, mainly due to renewed volatility in global conditions and the risk of renewed Eskom power cuts,” the document warned.

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