The government will extend the social relief of distress grant until 2025. Photo: Pieter Bauermeister/AFP
If some iteration of a basic income grant is eventually rolled out, it will not be because the treasury has buckled under political pressures, Finance Minister Enoch Godongwana said on Wednesday.
He was speaking at a media briefing ahead of his budget speech about how a basic income grant might be financed. “The budget for an election is this one — 2024 is too late to deal with elections,” he said.
“Now if you are saying that we will have pressure to raise taxes next year for this election … I don’t think so.”
Last October, when he delivered his medium-term budget speech, Godongwana announced the extension of the R350 social relief of distress (SRD) grant to the end of March 2024. At the time, the government was considering options for a more permanent replacement for the grant, although there had been no decision of how it would be financed.
According to the treasury’s 2023 budget tabled on Wednesday, the department of social development has been allocated R35.7 billion to fund the extended SRD grant. The South African Social Security Agency will get R400 million to administer it.
“Government is considering alternative options to provide appropriate social protection for the working age population that can replace or complement the current grant,” the document notes.
The social relief of distress grant, which reaches about 7.8 million people, was introduced in May 2020 as a Covid-19 pandemic lifeline to the most vulnerable in society. It has been extended several times since.
Earlier this month, President Cyril Ramaphosa said the R350 grant would continue, but was vague about how long it would be extended for. He also announced that work was underway “to develop a mechanism for targeted basic income support for the most vulnerable, within our fiscal constraints”.
The treasury’s medium-term budget policy statement noted that the introduction of a new grant in the fiscal framework is a permanent spending increase and that, to be sustainable, “it needs to be financed with permanent increases in revenue, spending reprioritisation, or a combination of the two”.
Keeping the R350 grant in place for another year cost the state R44 billion. “Assuming the current grant value and take-up rate remain constant and it is extended indefinitely, the cost of the grant could grow at an average of 8.8% per year to reach R64.9 billion in 2030-31. Without a permanent source of funding, this would threaten the sustainability of the public finances,” the October medium-term budget policy statement noted.
The government and civil society have been in disagreement about what form the replacement grant should take.
In an August 2022 presentation, the treasury floated the idea of partially replacing the R350 grant with a jobseekers grant or household grant for some. The idea seemingly adapted a 2021 proposal made by the World Bank to replace the grant with one targeted at active jobseekers.
A July 2022 paper drafted by the presidency also proposed possible alternatives to the R350 grant, including a jobseekers’ grant.
The South African Federation of Trade Unions responded to the government’s proposals by noting that they would significantly limit access to the grant.
“The presidency and national treasury’s prejudice against the BIG [basic income grant] on the basis that it is unaffordable is based on a neoliberal fiscal framework. That our government acts in line with the dictates outlined by global financial institutions such as the World Bank, serves to demonstrate in whose interests is the ANC government ruling,” the federation added.
Meanwhile, organisations such as the Institute for Economic Justice (IEJ) have disputed the government’s unaffordability argument. According to the IEJ — which has proposed a number of financing options, including a wealth tax — a portion of the amount the government spends on a basic income grant would inevitably be clawed back through value-added tax.
Spending on the grant would flow back into government revenue in other ways through increased local economic activity, the IEJ has argued.