The government has been granted leave to appeal a high court decision that made the social relief of distress (SRD) grant permanent and expanded its beneficiaries to nearly 20-million at a cost of more than R60bn a year.
The National Treasury and the department of social development will now have to convince the Supreme Court of Appeal (SCA) that the high court erred in its February ruling.
The ruling set the cat among the pigeons by ordering the Treasury to cater for 8-million more people who it said qualified but were now excluded from receiving the grant.
The decision, according to the Treasury, meant it had to double the current expenditure of social grants by more than R30bn — while it was under financial pressure.
At R370 per SRD recipient, the February ruling meant the Treasury would need to raise about R35bn more to accommodate the excluded people.
The high court judgment highlighted the conflict between the need for fiscal consolidation and the government’s constitutional obligations towards citizens.
The court said the SRD grant, introduced in 2020 in response to Covid-19, had become a permanent feature of SA’s social assistance regime.
Judge Leonard Twala found that the affordability, or lack thereof, of the SRD grant was insufficient reason to exclude millions of South Africans who qualified to receive the assistance, agreeing with the Institute for Economic Justice that the government imposed a narrow, rigid definition of what constituted income.
“It is unconscionable for the government to accept that the number of people who are without sufficient means to support themselves and there is more than 18.3-million but only budgets to provide for 10.5-million,” Twala ruled in February.
The high court’s ruling criticised the government and the Treasury, in particular, for not planning and budgeting accordingly to fulfil its obligations in terms of the constitution.
The judgment has received the attention of ratings agency Moody’s, which has said it will have a material impact on SA’s public finances if allowed to stand.
The government’s recent budget, set to be retabled later this month, once again extended the SRD grant to the coming fiscal year at a cost of R35bn (0.5% of GDP).
“The continued extension, the basis for a future basic income grant, will significantly add to spending pressures, requiring new funding sources to maintain fiscal consolidation in the coming years,” Moody’s said in its recent view on SA’s public finances.
“A recent high court decision may expand its value and coverage, meaning the cost of the SRD grant could rise substantially,” it said.
The department argued in vain at the high court that the fiscus was in a precarious position and could ill afford to expand social grants, as they already consume 12.3% of the government’s main budget expenditure.
Cost of debt
One of the reasons put forward by the Treasury was that expenditure exceeded revenue by R321.6bn in 2024/25 and the gross borrowing requirement was R559.6bn, rising to R623bn in 2025/26. It argued that the government could not expand social grants further due to drops in anticipated revenue and increasing debt service costs.
The nation’s purse keeper said the pool of social grant recipients was expanding by 200,000 recipients per year, excluding an increase in grant recipients due to the SRD grant.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.