Consensus that the government should temporarily top up welfare grants as a response to the Covid-19 economic crisis is growing as both business and labour endorse the idea and finance minister Tito Mboweni heads to cabinet with a proposal on Wednesday.
In a briefing to journalists on Tuesday, Mboweni said that the Treasury would present a package of fiscal measures to the cabinet for consideration.
The Treasury was reprioritising the budget to shift resources into health care and would need to revise its revenue projections and debt consolidation timetable in line with the new reality of the lockdown.
He said he would present a consolidated budget statement to the country soon.
Of the proposals going to cabinet the two most significant are the topping up of welfare grants and a proposal for a credit guarantee scheme through which the government would act as a backstop to credit extension to the private sector.
The full economic consequences of the lockdown are not yet clear, but a large contraction in the economy and large-scale business failures and job losses are expected.
"We are looking at adjusting the child support grant and the old age pension temporarily. We need to think strategically about each one and how they can provide support to the broader community. Tomorrow we will have a firm position," he said.
The government pays out 18-million grants every month at a cost of about R15.3bn. The grants vary in size from the child support grant of R445 a month to the old age pension of R1,860 a month. Disability grants, foster child grants and caregiver grants range between the two.
A clear advantage of using the grant system is that 95% of grants are paid into bank accounts directly, which will facilitate distribution and reduce opportunities for corruption.
Evidence shows that existing welfare grants are well targeted at the poorest section of society, who are expected to suffer the most as informal economic activities come under pressure from the lockdown and poor communities lose access to earnings.
The department of social development has also proposed the distribution of food parcels and cash to the most destitute, for which a budget allocation of about R400m has already been made.
Business for SA (B4SA), a coalition of business organisations, said on Tuesday that it had also proposed an income support scheme to social partners in Nedlac and believed the most plausible and fastest way of doing so would be to use the existing social grant system.
"Doing so could rapidly provide substantial relief: a once-off R500 Covid-19 emergency grant paid to everyone who currently receives one of the main categories of social grant would cost just over R9bn a month and would increase annual spending on social grants 5%.
"Should such a payment be made more than once, total costs would, of course, rise proportionately," says the
B4SA proposal.
Cosatu has also tabled a proposal to top up social grants as "the quickest way to get immediate relief to the poorest households", said the federation’s co-ordinator, Matthew Parks.
"It is a simple transfer of money. To design a universal income grant would take time as a new data base would need to be built. Our first prize is for the doubling of all grants for three months, but if that cannot be done, we support a top-up R500 on all grants," Parks said.
Mboweni said he could not elaborate on the credit guarantee system that is to be presented to cabinet, but in his prepared remarks for the briefing he said that "among the measures we are looking [at] is expanded support for SMME lending through the banking system, similar to in other countries".
More than 51 countries have so far adopted huge emergency loan schemes to bridge finance the economy and encourage banks to extend new loans to businesses to enable their survival.
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