The National Treasury said it had sought to cushion SA’s poorest households from the effects of the planned VAT increase by adding new items to its basket of zero-rated foods, including offal and tinned vegetables.
In an unprecedented turn of events in democratic SA, the cabinet failed to sign off on Treasury’s proposed budget on Wednesday due to disagreement over its plans to raise VAT to 17% from 15%. A revised budget is due to be tabled in parliament on March 12.
The new items that were to be added to the basket included dairy liquid blends, tinned vegetables and variety meat (offal) from sheep, poultry, goats, swine and bovine animals. Dairy liquid blends are a close substitute for milk that do not require refrigeration and are not treated or flavoured, according to Treasury.
The proposed additions to the basket were based on an analysis of household consumption patterns per income decile from Stats SA’s 2022/23 income and expenditure survey, and consideration of the health benefits of the food products most frequently bought by poor households, said Chris Axelson, Treasury’s acting deputy director-general for tax and financial sector policy.
Treasury had proposed the budget for social grants increase by R23.3bn over the medium-term expenditure framework to help offset higher costs of living, including the VAT increase.
All social grants except the Covid-19 social relief of distress (SRD) grant were to see inflation-beating increases on April 1. The biggest increase would strongest growth in the child support grant, which was set to rise 9.4% from R530 a month to R580. The Treasury projected inflation of 4.5% in 2025.
The SRD grant was to be extended for another year to March 31 2026, but remain fixed at R370 per month.
The old age grant, war veterans grant and care dependency grant were each to increase by R150 a month, while the child support grant and grant-in-aid grant were to increase by R50 a month each.
Consolidated expenditure on social protection, the lion’s share of which goes to social grants, was set to increase by an average of 5.8% over the medium term. Spending was set to rise from a revised estimate of R300bn in 2024/25 to R327.5bn in 2025/26, and then to R347bn in 2026/27 and R356bn in the outer year.
The total number of grant recipients, excluding SRD grant beneficiaries, was projected to increase from 19-million in 2025/26 to 19.3-million in 2027/28, primarily due to an increase in the number of older people.
“The sector’s operational budget will be subject to conditions, including the need to improve biometric verification of recipients to achieve savings,” Treasury said in its draft budget review.
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