The Treasury has allocated above-inflation increases to welfare grants to help cushion the poor from the impact of the increase in value-added tax (VAT), announced earlier on Wednesday.
It said raising VAT was less harmful to economic growth than raising other taxes, and the zero-rating of paraffin and 19 basic foods including brown bread, beans, rice and maize would limit its effect on poor households.
VAT is to rise by one percentage point, from 14% to 15%.
The Treasury has added an extra R2.6bn to the allocation for welfare grants over the next three years to partially offset this increase, it said.
All grants except the foster-care grant would increase faster than consumer price inflation, which the Treasury estimated was 5.3% in 2017 and would remain steady in 2018. It forecasts consumer price inflation will rise to 5.4% in 2019 and 5.5% in 2020.
The foster-care grant will increase by only 4.6%, but Parliament is expected to soon consider a proposal for higher child support grants for children who have lost both parents, which the Treasury said would provide improved social protection for orphans and relieve pressure the foster-care system. The proposals are contained in the Social Assistance Amendment Bill, which is expected to be tabled in parliament in 2018-19.
The care-dependency grant, the disability grant and the old-age grant will all rise from R1,600 to R1,690 a month on April 1, and will increase by a further R10 on October 1, an annual increase of 5.9%. The child-support grant will increase from R380 to R400 a month on April 1, and to R410 on 1 October, representing an annual increase of 6.6%.
The majority of grant beneficiaries are children, who are expected to account for 12.82-million (70.6%) of the 18.1-million social grant beneficiaries by 2020-21.
Spending on social grants, which accounts for 84.5% of the social protection budget, is set to increase by 7.9% over the medium-term, rising from R150.9bn in the fiscal year 2017-18 to R162.96bn in 2018-19, and then increase to R175.7bn in 2019-20 and to R189.8bn in the outer year.
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