R36 billion for temporary SRD grant
Finance minister Enoch Godongwana has allocated R36 billion to fund the extension of the social relief of distress (SRD) grant and brought permanent, non-SRD grants in line with inflation. He did not mention the implementation of a basic income grant (BIG).
R30 billion will be allocated to increasing the non-SRD grants in line with inflation, which will look as follows:
- The state old age grant will increase by R90 on 1 April 2023 and a further R10 on 1 October 2023. This equates to R2,090 per month.
- The child support grant will increase from R480 to R510 on 1 October 2023.
- The foster care grant will increase from R1,070 to R1,130 on 1 October 2023.
“R66 billion is allocated to Social Development over the medium term, with R36 billion to fund the extension of the COVID-19 social relief of distress grant until 31 March 2024,” said Godongwana.
In his 2023 national budget speech, Godongwana confirmed the extension of the SRD grant to 31 March 2024.
President Cyril Ramaphosa announced in his recent state of the nation address (SONA) that the SRD grant would be continued and increased to account for inflation.
The SRD grant was originally a temporary support grant of R350 that was issued during the Covid-19 pandemic.
The grant was implemented in 2020 as a temporary relief but has been extended several times.
“In October, the Treasury budgeted for a 2.3% rise in total expenditure on social grants (including the SRD) in 2023/24. This was set to decline by about 10% in 2024/25 as the SRD was assumed to fall away and then to increase by 4.5% in 2025/26,” said economists at the Bureau for Economic Research.
In 2022, 7.8 million people received the SRD grant, which cost the country R2.7 billion a month.
The extension of this grant has been heavily criticised for placing an unsustainable burden on the national budget.
“Over the medium-term, more than 60% of non-interest expenditure goes to the social wage,” said Godongwana today.
Basic income support
The continuation of the SRD grant has 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 SONA.
The ruling party announced their 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.
Bishop said that implementing a BIG could lead to substantially faster growth for South Africa’s economy.
She likened the potential growth to that seen under former President Thabo Mbeki, where economic growth was at 5% to 6%, and unemployment was down to 21% from 30%.
A 2022 Intellidex study estimated that the following tax increases would have to be implemented to fund a BIG in South Africa:
- Personal income tax (PIT) would have to be raised by between 9% and 19%
- Value-added tax (VAT) would have to be raised by between 14% and 29%
- Corporate tax would need to be increased by between 24% and 47%