More money for grants, but Godongwana was spared the BIG decision

The national budget assesses the longer term extension of income support to the poor, either through a further extension of the social relief of distress grant in response to Covid-19 or a similar measure, depending on spending cuts and higher tax revenue.

According to the budget review tabled on Wednesday, social development has been allocated an additional R1-trillion over the three-year medium-term framework period, of which R44-million will cover paying the R350 a month social relief of distress grant until the end of March 2023.

This figure pales next to the estimated R220-billion that is needed to introduce a universal basic income support grant, as the government is pressed to do with official unemployment at a record of 34.4% and a fresh acknowledgment in the budget that the effect of the pandemic and last July’s riots may depress job prospects throughout the year.

The extension was announced by President Cyril Ramaphosa in the State of the Nation address a fortnight ago. It was both a sizable commitment from the state and a sign that the bigger decision has been kicked down the road for now, for Finance Minister Enoch Godongwana to answer in another year’s time.

In the meanwhile, the 2022 budget review speaks of the future income support in cryptic clues.

“Over the medium term, conditions for extending this or a similar grant will include improved targeting to ensure that the people who most need this grant can access it, as well as improved linkages with labour market programmes,” it says.

The extended grant is destined for 10.5-million beneficiaries.

The budget acknowledges that the debate on an income grant has grown louder as a result of the Covid-19 pandemic and that the social relief of distress grant has helped to alleviate poverty.

“However, in the context of over-stretched public finances and persistently high unemployment, the continuation of such a social transfer must be matched by a combination of permanent spending reductions and tax revenue increases,” says the budget.

The revenue boon was forecast to be R61.7-billion above forecasts in last November’s medium-term budget policy statement. Tax revenue was expected to be R71-billion above the medium-term expenditure framework projections in the coming financial year and to overshoot those in 2023-24 and 2024-25 by R86.3-billion and R92.4-billion respectively.

The improvement was largely a result of the surge in commodity prices and at least “a portion of the positive impact” of this looked likely to be temporary, Godongwana’s first full budget warned.

Announcing the extension of the R350 grant by one further year to the end of March 2023 earlier this month, Ramaphosa said the government would “engage in broad consultations and detailed technical work to identify the best options to replace this grant”.

“Any future support must pass the test of affordability, and must not come at the expense of basic services or at the risk of unsustainable spending. It remains our ambition to establish a minimum level of support for those in greatest need,” he added.

Godongwana hinted after the president’s address that it might take two years to settle the question of a long-term basic income support grant.

Wednesday’s budget makes a new allocation of R1.6-billion in the two outer years of the medium-term period for an extended child support grant for children who have lost both parents “to encourage the care of orphans within families rather than foster care”.

A further R13.1-billion is allocated in the two outer years to provide for inflationary increases to permanent social grants.

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