Ramaphosa celebrates 28 million social grant recipients – four times more than taxpayers

President Cyril Ramaphosa praised the government’s pro-poor policies in his State of the Nation Address (SONA), revealing that more than 28 million people receive monthly social grant payments. 

This is four times the number of South Africans who pay personal income tax. The country only has 7.4 million personal taxpayers. 

“Since the dawn of democracy, we have worked together to reduce poverty. Today, our country spends around 60% of our national budget on the social wage,” Ramaphosa said to cheers during his SONA. 

This includes social grants, healthcare, education, community development, and public employment programmes. 

“More than 28 million unemployed and vulnerable people in our country receive social assistance. More than 10.5 million learners go to public schools where they do not have to pay fees,” Ramaphosa said. 

Furthermore, over 900,000 students pursuing tertiary education received funding.

“We are providing the means through which South Africans can rise above poverty that has been passed down from one generation to the next,” Ramaphosa said. 

While South Africa has been praised for its extensive social safety net, it has also been warned that the current situation of grant recipients outnumbering taxpayers is unsustainable. 

The National Treasury’s 2024 Budget Review shows that 7.4 million individuals in South Africa pay income tax, significantly less than the number that receive social grants. 

However, the numbers are even worse on analysis, an associate at the Free Market Foundation, Nicholas Woode-Smith, said. 

His analysis showed that only three million South Africans pay 90% of income tax, which is an extremely narrow tax base. 

This not only means that a tiny number of South Africans are being squeezed to fund the government’s spending plans, but it is also highly vulnerable to external shocks. 

“On top of this, we are burdened with a host of other invasive taxes,” Woode-Smith explained. 

“Taxes on savings and investment, on what we purchase locally and overseas. We’re taxed for working. Our employers are taxed for allowing us to work.”

“We’re taxed when we commute to work through the fuel levy. We’re taxed when we die, and our heirs are taxed again.”

The most heavily taxed among us already have to pay over 45% of their income, with fears that a new Wealth Tax will further way on South Africa’s richest. 

“And the worst thing of all: despite our heavy tax burden, South Africa has little to show for it,” he said. 

“Very little of what is publicly budgeted is spent properly. Money disappears into corruption, incompetence and overpaid public staffers.”

Data from the International Monetary Fund (IMF) shows that around 30% of all government expenditure goes towards paying the salaries of state workers. 

As a result, Woode-Smith said many South Africans who do pay tax actively look to minimise their burden and may consider financially emigrating as a result. 

“It is no wonder that many South Africans don’t want to pay tax. They work hard, having to pay extra for private healthcare and private security, and then have to foot the bill for a minister’s new fleet of BMWs.”

The National Treasury estimates it will spend R266.21 billion on social grants in the 2024/2025 tax year. A massive expense funded by a dwindling tax base.

Woode-Smith explained that the end result of all of this is slow economic growth as over-taxation translates into capital flight and extracts wealth from productive members of society.