Social grants increased by over 1,000% since 1994

Over the last few decades, social grants have significantly increased in South Africa, with the number of grant recipients now far exceeding the number of taxpayers in the country.

In the 2025 Budget, which Finance Minister Enoch Godongwana presented on 12 March, it was announced that R284.7 billion would be allocated towards social grants in 2025/26.

Godongwana explained that this allows the government to increase the old age and disability grants by R130 to R2,315.

The Child Support Grant will also be increased by R30 to R560 per month, and the foster care grant will be increased by R70 a month.

In addition, it was revealed that the Covid-19 Social Relief of Distress (SRD) grant, in its current form, would be extended by a year to end March 2026, and R35.2 billion was allocated for this purpose.

The outcome of the review of active labour market programmes, which is expected to be completed by September 2025, will inform the future form and nature of the SRD grant.

“The truth is that ours is one of the most comprehensive social safety nets among emerging economies,” Godongwana said.

“This reflects our commitment to addressing poverty and inequality while keeping our spending sustainable.”

Momentum’s Head of Financial Planning and Advice, Bertie Nel, explained to Daily Investor that these social grants offer important relief to low-income households.

“It is positive that increases in social grants of between 5.7% and 5.9%, which is in excess of current inflation, will provide relief for those individuals reliant on this.”

“It is, however, concerning that about 28 million beneficiaries are dependent on this compared to 2.5 million in 1994.”

This means that since 1994, the number of social grant recipients has grown by 1,020%.

“This places an unsustainable burden on the fiscus and can only be reduced by creating a climate for higher economic growth and more job opportunities,” Nel said.

What is especially concerning is that while the number of social grant recipients in South Africa has increased exponentially, the country’s tax base has been shrinking.

Policy Writer and political analyst Tara Roos explained that an alarmingly small group of taxpayers supports South Africa’s tax system.

“In the 2023/24 fiscal year, gross tax revenue reached R2.2 trillion, primarily driven by personal income tax (PIT), which remains the backbone of South Africa’s revenue structure.”

“However, the tax burden falls heavily on a mere 1.6 million individuals, representing just 2.6% of the population, who contribute 76.2% of all personal income tax.”

This imbalance also exists in the corporate sector, where only 1,051 companies – just a small fraction – account for 72.3% of corporate income tax.

“These figures highlight the extent of South Africa’s dependency on a small, increasingly burdened taxpayer base,” Roos said.

The National Treasury’s 2024 Budget Review revealed that only 7.4 million individuals in South Africa pay income tax.

Roos explained that in the 2024/25 financial year, the Treasury estimates that R266.21 billion will be spent on social grants, which represents a staggering 3.6% of GDP.

“The number of grant recipients continues to grow as unemployment and poverty rates rise, with 28.3 million people projected to receive a grant in 2024/25. This means that for every taxpaying citizen, four are reliant on state support.”

She added that the country’s tax base is far too narrow, and the solutions are not as simple as taxing the rich more or cutting public services.

“What is required is a concerted effort to stimulate economic growth – through structural reforms, improved infrastructure, job creation, and a focus on expanding the economy’s productive capacity.”