In the depths of the Covid-19 crisis the government introduced a special Covid social relief of distress (SRD) grant of R350 a month for unemployed adults who were not covered by any other form of social grant. It was quite a radical departure for a government that had expanded SA’s social grants to reach as many as 18-million beneficiaries, at a cost of more than R200bn a year. It had always targeted grants at the vulnerable, including children and elderly and disabled people, not at able-bodied adults.
But it was felt something had to be done, temporarily, to cushion the impact of Covid, which ramped up SA’s already high unemployment and poverty rates. At its peak the SRD, as the grant is now called, reached more than 10-million adults, adding tens of billions to the annual budget and bringing the total number of grant recipients to almost double the number of people with jobs and almost 70% of adult South Africans.
But the SRD has proved not so temporary and after more than one extension the government now has to tackle the tough issue of what to do about it. It has to do so amid calls for the SRD to morph into a permanent universal basic income grant. And it has to do so at a time when SA’s public finances remain in crisis, even though the commodities boom provided a temporary reprieve.
Going into the medium-term budget on October 26, leaked documents show the presidency and the Treasury are seized with the problem of what to do about the SRD once it expires at the end of this fiscal year. SA has long had a better social protection system than most other emerging countries, even though its anaemic economy struggles to support this.
The leaked documents show the presidency is concerned with how to create more jobs: “How do we prioritise an ‘employment-first’ approach, as opposed to simply expanding grants?” asks the presidency document.
The Treasury is concerned not only with the fact that SA’s economy cannot afford its grants system , but also that the government has no clear growth strategy in place to address this: “SA is effectively an unsustainable welfare state, with no clear path towards job-rich growth,” says its leaked document.
It’s concerned too with the evidence that the SRD grants are not particularly well targeted to the very poorest households. And as one should expect, it is particularly concerned with the fact that the government is already in a debt spiral, with debt costs crowding out other spending and consuming ever more of SA’s economic output.
It is heartening that the presidency and Treasury are focused on growth and employment and on prudent management of the public purse. By contrast, the department of social development has long supported not just keeping the SRD in place but expanding it, without necessarily worrying about how this will be paid for. This is a highly contested issue within the government and the governing party. It is not going to be easily resolved.
Arguably, SA’s social grants have been one of its most successful poverty-reduction initiatives, reaching people more effectively with less waste than many other government programmes.
But unless it can grow faster and cut its spending, there is no way SA can afford to keep expanding the grants system without running massive fiscal risks that could damage its growth prospects even further. In any event, grants are not the only call on an already tight public purse — there are plenty of others, including for public sector pay and state-owned enterprise bailouts.
The presidency has recommended that the government could instead go the route of more limited and targeted grants, including a jobseeker grant — which would encourage and enable recipients to look for jobs — and one for working-age caregivers whose duties constrain them from looking for work.
At least this more targeted approach seems a better bet than simply funding people to stay unemployed and poor forever, even if it’s not quite the jobs-rich, growth-promoting approach we would like to see. The Treasury seems to support this more targeted approach. Costing is being done and the medium-term budget will no doubt provide some answers.
But time is short. Designing and implementing a new set of grants is likely to be a challenge by April 1 2023, when the existing SRD grant expires. Chances are there could be a good deal of political turbulence in the grants space in coming months.
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.