The Treasury has sounded a warning about the fiscal risks of replacing the Covid-19 social relief of distress (SRD) grant with an “unaffordable alternative”, saying new unfunded social spending programmes could affect the sustainability of public finances.
Its stance is set to disappoint civil society organisations campaigning for the R350 per month SRD grant to be replaced by a more generous universal basic-income grant, which they want to see pegged above the food poverty line of R633 per month. The SRD grant was introduced by the government in 2020 in response to the hardship caused by the Covid-19 pandemic and currently reaches 7.97-million people, according to Treasury.
In line with President Cyril Ramaphosa’s state of the nation address (Sona) earlier in February, the Treasury has allocated an extra R36bn to maintain the provision of the SRD grant in the 2023/2024 fiscal year. But it has once again left the size of the grant unchanged, which means inflation continues to erode its purchasing power. The grant has been frozen at R350 a month since inception, while inflation averaged 4.9% between 2020 and 2022 and is projected to come in at 5.3% in 2023, according to the Budget Review.
“The government is still considering alternative options to provide appropriate social protection for the working age population that can replace or complement the current grant,” the Treasury said.
In a move that will offer some relief to the more than 18.3-million recipients of non-SRD welfare grants, the Treasury has unwound its plans to implement below-inflation increases in 2023/2024, which were announced in the medium-term budget policy statement (MTBPS) in October. These monthly grants support children, orphans, the elderly, war veterans and people with disabilities from low-income households, and will increase by between 5% and 5.2% in the coming fiscal year, in line with the Treasury’s inflation forecast.
The child support grant, which reaches more than 13.2-million beneficiaries, will increase from R480 to R505 per month, while the old-age grant, received by just less than 3.9-million people, will rise from R1,985 to R2,085. These two grants account for about 70% of the government’s grant expenditure over the medium term.
Grants for war veterans will increase from R2,005 to R2,105 and those for people with disabilities will rise from R1,985 to R2,085. The foster-care grant will increase from R1,070 to R1,125 and the care-dependency grant will increase by R100 to R2,085 a month.
Spending on the SRD and welfare grants, which accounts for the lion’s share of the budget set aside for social development, is set to rise from a revised estimate of R233bn in 2022/2023 to R253.8bn in 2023/2024, and then drops to R232.9bn in 2024/2025 as no provision has been made after 2023/2024 for the SRD grant. Social grant spending is set to rise to R248.4bn in the outer year.
Excluding SRD grant recipients, the number of welfare grant beneficiaries is expected to rise from 18.3-million at the end of 2022/2023 to 19.6-million by the end of 2023/2024, the Treasury said.
The Treasury has also taken steps to cushion poor households from the effect of food inflation by extending the diesel fuel levy refund to food manufacturers for two years, from April 1 2023 to March 31 2025. The relief was being implemented to limit the effect of power cuts on food prices, it said.
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