Did Ramaphosa hit the right note? (GCIS)
Withdrawing the R350 social relief of distress grant introduced in 2020 in response to the Covid-19 pandemic could possibly lead to people mobilising against President Cyril Ramaphosa as he campaigns for another five-year term as leader of the governing ANC.
This is according to Michael Sachs, the deputy chairperson of the Finance and Fiscal Commission, an advisory body to the government.
“Now having gone down this path where there is a grant, there is no going back,” Sachs said during a forum on Tuesday on the much-mooted basic income grant (BIG).
“There was a moment when the grant was withdrawn and then we saw the violence that took place in July 2021. Immediately following that violence, the grant was reinstated. That is when it was evident that the political costs of withdrawing the grant will be huge.”
Ramaphosa announced the extension of the grant in his State of the Nation address last month, a move that has effectively bought the ANC government another year until it has to make a call on expanding income support, the Mail & Guardian previously reported.
Asked whether Ramaphosa was staking his future as the ANC president for another term after the party’s elective conference in December on the R350 grant, Sachs said Ramaphosa was now at a point at which he could not discontinue it.
“Rather than seeing the grant as his weapon to get elected, I would say if you withdraw the grant you are going to give him a political headache, which is going to risk everything,” he said.
“And it will hand a political gift to his opponents in society, but particularly in the ANC, because it will cause social distress that could be mobilising against him. So, I think we find ourselves in a position politically where it is impossible to withdraw the grant.”
The looting and vandalism that gripped Gauteng and KwaZulu-Natal in July led to a R50-billion knock to the economy. Finance Minister Enoch Godongwana said the effect of the violence was likely to burden the economy for the next six quarters.
Godongwana announced in his budget speech last month that the extension of the R350 grant by another year would cost the fiscus R44-billion.
Sachs said, rather than debating whether the grant should become a permanent line item on the budget, the discussion should be centred around how the grant should be designed and what parameters should define it.
“The real danger we have going forward is that every election we go into populist politicians will demand an increase in this grant and over time it will increase rapidly from the very small level to something that is not reasonable to sustain out of tax increases,” Sachs warned.
“Everybody should be clear that increasing the value of the grant means raising taxes … value-added tax and personal income tax are the tried and tested means that the government can [use to] raise revenue.”
Anathi Madubela is an Adamela Trust business reporter at the M&G.