President Cyril Ramaphosa’s 10th state of the nation address on Thursday will be largely irrelevant, because the Treasury has a habit of cancelling many of the things he says he will do.
When finance minister Enoch Godongwana delivers his budget speech on February 19, he will have three options. He could take the middle road (continue with the status quo) and pursue a primary budget surplus of 2% of GDP. This will require him to find a way to avoid implementing a landmark high court judgment of January 23 that gave the Treasury a punch on the nose, and providing debt relief to Transnet.
The court found in favour of the Institute for Economic Justice and #PaytheGrants and ordered the Treasury to eliminate administrative barriers that prevented more than 10-million people from accessing the R370 a month social relief of distress (SRD) grant and increase its value.
Extending access to 18-million people (from 7.5-million) and increasing its value to R450 will cost about R100bn, which is R66bn higher than the R34bn that was paid during 2024/25. If Transnet gets the similar debt relief to that provided to Eskom, the Treasury could have to pay R90bn over three years.
The Treasury could cancel the SRD grant, but the last time that happened we had the July 2021 riots, which resulted in 72 deaths and damage to the economy that far exceeded the “savings”.
The Treasury could also delay implementation by appealing the judgment. In its latest assessment of the SA economy, the IMF said the middle road would increase GDP growth to 1.8% in 2030 — an annual average of 1.7% from 2025-30. But there will be no country in 2030 if we continue on this path.
Godongwana could also take the low road and implement the IMF’s mad proposals, which include increasing the primary budget surplus to 3.5% of GDP from 0.5%. The IMF does not agree with the Treasury’s dodgy accounting that classifies cash payments to Eskom as debt redemption and not government spending, hence the lower starting primary budget surplus.
The IMF said this so-called upside scenario would result in an annual average GDP growth rate of 2.7% in 2025-30. The IMF proposes a front-loaded fiscal consolidation of 3% of GDP, or slashing government spending by more than R200bn in year one. There would be an immediate recession — according to its own forecast.
But the IMF has cherry-picked SA research, which shows that austerity causes less damage to the economy through multiplier effects. But if one uses the IMF’s own research from 2012, which found that austerity causes more damage than it previously thought, GDP would collapse by 3% and there would be a jobs bloodbath until SA goes to vote in the 2026 local government elections. Such advice resulted in the Kenyan riots in 2024, where 39 people died.
Godongwana could also choose the high road and implement the court judgment. SA can implement universal basic income (UBI) over two years — as the ANC said it would do in its elections manifesto — by increasing the SRD grant to R600 during the first year and to the food poverty line (FPL) of R875 a month during the second year.
The child support grant could also increase to the FPL over two years. I am not a populist and I have done the numbers, which indicate that SA can eliminate food poverty within two years. This will provide a large stimulus to an economy that has grown by 1.1% a year from 2009-24.
In research done for the Social Policy Initiative, which closed its doors at the end of 2024, Brazilian economist Dante Cardoso found that SA’s social security spending had an accumulated multiplier of 1.74 after 10 quarters. This means the additional spending will more than pay for itself. But UBI must be introduced within the context of a growth strategy that sustains the gains after the initial stimulus effects have faded.
• Gqubule is an adviser on economic development and transformation.
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