Ramaphosa makes BIG promises – again

President Cyril Ramaphosa said the social relief of distress (SRD) grant will be extended again and hinted at establishing a basic income grant (BIG).

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

“In the midst of 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. Finance Minister Enoch Godongwana extended the grant to March 2025 during his mid-term budget in November 

“These grants and subsidies do much more than give people what they need to live. They are an investment in the future,” Ramaphosa said.

“Social assistance has been shown to increase school enrolment and attendance, lower drop-out rates, and improve the pass rate.”

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

Ramaphosa spoke in his capacity as president of the ruling African National Congress during the party’s annual strategy meeting.

“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,” he said.

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

The ruling party has mentioned the implementation of a BIG for years, but little action has been taken to realise their promises.

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.

The continuation of the SRD grant sparked a conversation about implementing a permanent BIG modelled after this grant. 

“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 State of the Nation Address. 

“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 mid-term budget 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 in 2021 that led to R50 billion in losses to the economy.

The Treasury’s head of budget office, Edgar Sishi, told a central bank conference last year that the institution had battled to sell spending cuts to the government.

“When those things happen, political leaders find it very difficult. They feel constrained in withdrawing the support,” Sishi said.

Business Leadership South Africa CEO Busi Mavuso said the SRD grant was extended for another year because the government knows ending the grant would be “suicidal” ahead of an election year.

“It’s going to cost the government another R34 billion, and although the government knows that they can’t afford the extension, they also know that it’s going to be suicidal to try and remove the R350 grant, especially with the elections that are coming around the corner,” she said.

Bank of America senior economist Tatonga Rusike has also said South Africa’s finances will remain under severe pressure over the next two years due to the government’s consistent bailouts of state-owned enterprises and the payment of grants to a growing share of the population. 

According to Bank of America’s analysis, the SRD grant alone costs up to 0.5% of South Africa’s annual GDP. 

Rusike said the bank has taken the position that the SRD grant will be made permanent as a basis for an eventual BIG. 

“The mechanics of withdrawing it have proved difficult given structurally high unemployment and a looming election in May 2024. Discussions and technical work have focused on how to make the social grant permanent,” he said.