Government gears up for BIG budget 

Finance Minister Enoch Godongwana is expected to extend the R350 Social Relief of Distress (SRD) grant in the Budget Speech later this month and potentially lay out how it will be used as a basis for a Basic Income Grant (BIG). 

This is feedback from BDO partner and associate professor David Warneke, who said that despite the potential negative impact on the country’s fiscus, the government is unlikely to walk back on its promises. 

“As intimated by the President in his SONA address, it is almost certain that the minister will announce a continuation of the SRD grant,” Warneke said.  

In his State of the Nation Address (SONA) on 8 February 2024. Rampahosa said the SRD grant – introduced during Covid-19 as temporary relief for struggling households – would be extended again.

“Amid the pandemic, we introduced the special SRD Grant, which currently reaches some 9 million unemployed people every month,” he said. 

“We have seen the benefits of this grant and will extend it and improve it as the next step towards income support for the unemployed.”

This R350 grant has been extended repeatedly on an annual basis since 2020.

“Having already factored in an extension of the grant in the Medium-Term Budget until March 2025, it is unlikely the minister will go back on this,” Warneke said.

He explained that the reasons for this are simple and have a lot to do with the national election coming up later this year. 

“This grant, vital for around nine million South Africans, underscores the government’s commitment to supporting vulnerable segments of society, especially in an election year.” 

However, with a cost of approximately R44 billion a year, the grant’s long-term sustainability and impact on the national budget are broadly negative.

The ANC government has long planned for the R350 SRD grant to be transformed into a larger BIG. 

Ramaphosa hinted at introducing a BIG earlier this year, saying there is a “strong case” for it despite the nation’s “fiscal constraints”.

“The challenge remains that millions of working-age adults in our country remain unemployed without any form of support and little prospect of gaining employment until economic growth picks up,” Ramaphosa said.

“There is, therefore, a strong case for a permanent form of a targeted income-support grant for the unemployed within our fiscal constraints.”

“Discussions should continue among us about what we have termed a basic income grant.”

The ANC announced its intention to implement a BIG, which will be financed through a wealth tax, closing tax loopholes, addressing base profit shifting by corporates, and a transactions tax at the 2022 ANC policy conference.

BIG became a notable talking point during the Covid-19 pandemic when the government implemented the SRD grant to support South African households.

“Work is underway to develop a mechanism for targeted basic income support for the most vulnerable within our fiscal constraints,” Ramaphosa said in his 2023 SONA. 

“This will build on the innovation we have introduced through the SRD grant, including linking the data we have across government to ensure we reach all those in need.”

This comes despite the National Treasury warning that South Africa’s fiscus cannot support South Africa’s estimated 28 million grant recipients, as it faces a massive deficit.

Godongwana warned in his Medium-Term Budget Policy Statement in November that a comprehensive overhaul of the social support system was necessary.

The National Treasury has tried numerous times to shut down the unfunded grant but has repeatedly had to re-introduce it following a series of domestic shocks, including civil unrest.

However, Warneke said dreams of a BIG may remain deferred, given current economic constraints.

In the past, Godongwana rightly emphasised the need for sustainable economic growth to finance such initiatives. 

Implementing a BIG requires a stable economic foundation, which the government must prioritise building before introducing such a measure into the budget, he explained.