South Africa’s big ‘basic income grant’ hole

 ·13 Feb 2024

The Social Relief of Distress (SRD) Grant will likely be hiked during the 2024 Budget – but questions remain about the government’s plans to make it a permanent Basic Income Grant for South Africa.

During the State of the Nation Address last week, President Cyril Ramaphosa doubled down on plans to ‘expand and amend’ the SRD grant, signalling a move towards making a basic income grant a reality in the country.

Economists and analysts have long expected the SRD grant to become permanent, while the ANC has been planning for this to happen since at least 2022.

However, without a clear announcement from the president nor space in the budget for additional spending, it is not yet fully clear what the government intends for the future of the SRD grant.

The R350 grant was introduced following the outbreak of the Covid-19 pandemic in 2020, and Ramaphosa says it now supports 9 million unemployed people monthly. Fact-checkers say the real number of recipients is closer to 7.7 million.

“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,” said Ramaphosa.

However, auditing firm PwC said widespread uncertainty remains over the fiscal framework after 2022/23 due to a lack of clarity on the SRD grant and possible basic income grant implementation.

“This uncertainty relates to whether SRD will be converted to a basic income grant or adjusted upward gradually. There is a hole in the 2025/2026 budget left by the planned end of the SRD, and there is no clarity as yet about what will happen after March 2025,” the accounting firm said.

It added that the 2024 Budget, which is taking place next week, should ideally provide further clarity on the future of the SRD and its impact on the fiscal framework for the years to come.

“As has been indicated, increasing the SRD grant by more than inflation would require the closure of other government programs.”

In reality, the government is still unsure about a permanent solution, it said.

“What has been suggested is to develop the SRD grant into a basic income grant. However, the challenge is at what level (value) to peg the it and how to fund it.”

“For now, the minister is likely to announce a marginal increase (inflation adjustment) to the SRD grant while noting that work is underway.”

Minister of Social Development Lindiwe Zulu recently said that funding models being explored for the proposed Basic Income Grant include:

  • An increase in taxation;

  • Reallocation of current budget allocations;

  • Borrowing

For the 2023/24 financial year, the Department of Social Development allocated 96.4% of its R263 billion for grants, meaning that the government, i.e. taxpayers, spent R253 billion on grants.

Read: Tax hikes on the cards for the rich in South Africa

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