Finance minister Enoch Godongwana has kicked the basic income grant can down the road, saying in his medium term budget policy statement that a decision has not yet been made and would have to be weighed up against other spending priorities.
Any new long-term spending commitments — such as income support for the poor — would be possible only if other government programmes were closed or taxes were increased, according to the policy statement. In comments to journalists, Godongwana stressed that such a decision would be taken by the cabinet and not by the Treasury.
“Details on our interventions with regard to the social security net will be provided in the February budget,” said Godongwana said in his speech.
Tax changes are tabled only in the February budget and Treasury is generally silent on tax in the adjustment budget.
The R350 social relief of distress grant, which was introduced last year to shield the poor from the effects of the Covid pandemic and lockdown, continues until the end of March next year. Political pressure to extend the grant and ultimately replace it with permanent income support has been intense and the ANC national executive committee took a decision earlier this year that it would be introduced “subject to affordability”.
A R350 grant would cost the country R40bn to R70bn a year, depending on the uptake. A 1% increase in personal income tax yields R10bn and 1% increase in VAT raises R20bn, so tax increases to pay for a grant would need to be substantial.
An expert panel has been commissioned by the department of social development to research the options for income support. Its final report will be handed to government at the end of November.
The policy statement notes that SA’s budget is already highly redistributive in favour of the poor with the “social wage” — which includes public health, education, welfare support, housing, transport and employment programmes — amounting to 59.5% of non-interest spending. Including the 9.5-million people who received the SRD grant, a total of 27.8-million people received welfare grants over the past year.
New grants will require new taxes and must be weighed up against other social spending priorities, which have yet to be funded.
“It is essential to maintain social protection in a sustainable way,” the statement notes. “Any proposals to expand the system should meet the test of sustainability by being fully and appropriately financed to ensure the fiscal balance does not deteriorate; and evaluated against pre-existing priorities of government that remain unfunded particularly in basic services, education and healthcare.”
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