Business Maverick

MEDIUM-TERM BUDGET POLICY STATEMENT

Social Relief of Distress grant (predictably) extended — with no funding mechanism

Social Relief of Distress grant (predictably) extended — with no funding mechanism
Citizens queue to collect social relief grants outside Lenasia Post Office on 11 February 2022 in Lenasia. (Photo: Gallo Images / Fani Mahuntsi)

The good news is that a grant extension has been granted. The less good news for some is that extra taxes may be required to fund it.

As widely expected, the Covid-19 Social Relief of Distress grant will be extended by another year to March 2025, although the National Treasury has dropped a strong hint that additional taxes may be needed to fund the SRD Grant going forward.

The 2019 Medium-Term Budget Policy Statement (MTBPS) noted that by 2040/41, social assistance beneficiaries – excluding the temporary Covid19 Social Relief of Distress grant – were projected to increase to R22.5-million, necessitating spending on social grants amounting to 3% of GDP annually. This is in line with current grants spending, excluding the temporary grant. 

The Social Relief of Distress grant was introduced to support lowincome individuals affected by the lockdowns during the Covid19 pandemic and was intended to be in place for one year only. However, as elections loom in 2024, the grant has been extended each year, despite a glaring lack of a funding mechanism. 

At the beginning of the year, Sassa told Parliament that about 7.5 million people were already receiving the Social Relief of Distress grant, and another 13 million had applied in January this year. At least 60% of recipients are between the ages of 18 and 35 – and at least 45% of those have a Grade 12 certificate.

Addressing the elephant in the room, the MTBPS cautioned that if (the Social Relief of Distress grant) or a similar type of new grant is made permanent, beneficiaries are expected to increase from 27.3 million in 2023/24 to 40.4 million in 2040/41. This is expected to shift social grant expenditure to 3.8% of GDP in 2040/41 and will require a “corresponding permanent source of funding, such as additional revenue measures”.

The 2023 Budget reiterated that any extension of the grant, or any replacement, would need to be funded by a new revenue source, or reprioritisation of other spending items. Since then, fiscal space has declined markedly, reducing the scope for an extension without additional financing.

A pensioner holds his Sassa card during grant collection in March 2017. (Photo: Gallo Images / Sowetan / Sandile Ndlovu)

R34bn allocated

Finance Minister Enoch Godongwana says R34-billion has been allocated to extend the Covid-19 Social Relief of Distress grant by another year. 

“Government proposes that the fiscal framework make provision for funding for the grant for 2024/25. Beyond this, a comprehensive review of the entire social grant system by the Department of Social Development and the National Treasury is required,” the MTBPS says. 

Speaking to the media ahead of his speech, the minister said it should not be assumed that the extension of the SRDG means it will come to an end in March 2025. “That is a provisional arrangement. We need a comprehensive review, looking at social assistance, social insurance and the active labour market,” he said. 

Over the 2024 medium term, South Africa is already spending about 61% of its consolidated non-interest spending on the social wage – if you combine public spending on health, education, housing, social protection, transport, employment and local amenities. 

Of this, R945.9-billion will be spent on social protection transfers, including the old age grant, child support grant, disability grant and Covid19 Social Relief of Distress grant. South Africa’s social protection expenditure programme, measured as a percentage of GDP, is one of the largest among developing countries. DM

Read Finance Minister Enoch Godongwana’s Medium-Term Budget Policy Statement below:

Gallery

Comments - Please in order to comment.

Please peer review 3 community comments before your comment can be posted

Daily Maverick Elections Toolbox

Download the Daily Maverick Elections Toolbox.

+ Your election day questions answered
+ What's different this election
+ Test yourself! Take the quiz