The government is set to review all social grants as it looks for “optimal” ways to support the poor, finance minister Enoch Godongwana said on Wednesday.
In his budget speech on Wednesday, Godongwana said R87.6bn would be allocated for social welfare and free basic services — an amount that includes R44bn for the 12‐month extension of the special Covid‐19 social relief of distress grant (SRD). The grant, which amounts to R350 a month, is meant to support unemployed adults.
During a news conference before tabling the budget in parliament, Godongwana said the “comfortable” extension of the relief grants was made possible by the tax overrun, but was at pains to highlight this will not be sustainable without permanent spending reductions and tax revenue increases.
He said a review of all the grants was necessary to find an “optimal way to support the poor”. While it is unclear what the review will consider, Treasury has previously noted that 46% of the entire population receives social grants, which represents an unusually high coverage for a developing nation. The social wage amounts to 59.5% of consolidated non‐interest spending.
“Our view is that you do not fund permanent programmes using temporary revenue ... we may well look at the totality of all these grants and say what is the optimal way to support the poor ... that is what we will be doing in the next 12 months,” Godongwana said.
SA has five major social security grants, which are financed through general tax revenues: old age pensions; disability grants; child support grants; foster child grants; and care dependency grants.
The social relief of distress grant was introduced in 2020/2021, as a temporary relief measure in view of the plight of those who have lost economic opportunities and were adversely affected during the worst periods of the pandemic. This emergency grant added to the country’s already extensive social safety net.
In his state of the nation address earlier in February, President Cyril Ramaphosa said the government would continue consultations on a replacement for the Covid‐19 SRD grant but stressed that this must be affordable and must not be at the expense of service delivery.
Between now and end-March, Ramaphosa said, the government would “engage in broad consultations and detailed technical work to identify the best options to replace this grant. Any future support must pass the test of affordability, and must not come at the expense of basic services or at the risk of unsustainable spending. It remains our ambition to establish a minimum level of support for those in greatest need.”
Experts have warned that the introduction of a basic income grant would require tax increases and have highlighted the danger of extending the Covid-19 SRD grant on the grounds that this will be difficult to remove.
In his budget speech, Godongwana said that the department of social development will receive the largest allocation of R58.6bn over the medium term to initiate a new extended child support grant for double orphans. This is to encourage the care of orphans within families rather than foster care. The funding will also provide for inflationary increases to permanent social grants.
The Treasury estimates that tax revenue for 2021/2022 to be R1.55-trillion. This is R62bn higher than estimates from four months ago, and R182bn higher than our estimates from the 2021/2022 budget.
Godongwana said the improved revenue performance is not a reflection of an improvement in the capacity of the economy.
“As such, we cannot plan permanent expenditure [such as a new social grant] on the basis of short-term increases in commodity prices. To be clear, any permanent increases in spending should be financed in a way that does worsen the fiscal deficit,” the minister said.
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