Big changes for grants in South Africa

The National Budget is approaching, and a recent court ruling could increase the cost of the Social Relief of Distress (SRD) grant by R35 billion.
Following the South African Reserve Bank’s latest decision to cut interest rates by 25 basis points, the Bureau for Economic Research (BER) said that focus in the country has now shifted from monetary to fiscal policy.
The 2025 National Budget will be tabled on 19 February, and the BER said there are two important developments on the expenditure front to take note of—both of which could push government spending much higher.
Firstly, a recent high court judgement argued that the ‘temporary’ SRD grant has now become a permanent feature of South Africa’s social assistance regime.
The government has always considered the SRD grant a temporary measure and has not accounted for it in its long-term budgeting. Instead, the grant’s validity is extended each year and budgeted for in that financial year.
The state’s position is that the grant would otherwise be unaffordable in the fiscus and requires dedicated funding measures. It’s on this basis that access to the grant has been restrictive.
However, the court has now ruled that the affordability of the grant from a fiscal perspective cannot be the reason to exclude people who cannot support themselves.
This means that the number of qualifying recipients could rise significantly this year, from the 10.5 million people currently budgeted for to about 18.3 million.
This would require an accompanying increase of about R35 billion per year to afford it, working off the current R370 per month grant.
The Treasury said it is studying the judgement and could appeal the ruling.
The second big cost item comes from wages. The government has tabled a 5.5% wage offer for public sector workers—above the budgeted increase.
The unions are considering the proposal along with some other improvements to non-financial benefits.
The BER said that there is hope that an agreement can be reached before the Budget.
What else to keep an eye on
National Treasury said that several key tax measures are being considered for 2025.
These are all proposals received by Treasury in response to the 2024 mid-term budget (MTBPS) and not necessarily changes that will be coming—however, they are under consideration:
- Increasing the number of VAT zero-rated items;
- Increasing the headline corporate income tax rate to 28%;
- Stronger measures to combat illicit financial flows;
- Introducing a progressive net wealth tax on high-net-worth individuals and financial transactions taxes;
- Increasing PIT on high-income earners, along with increases in inheritance, estate, and luxury import taxes;
- Reducing tax evasion by, and reducing/eliminating tax breaks for high-net-worth individuals;
- Acceleration of measures to close existing tax loopholes;
- Removal of medical tax credits;
- Systematic review of tax incentives and removal of ineffective incentives;
- An increase of the Health Promotion Levy to the recommended 20%; and annual inflation-related increases thereafter.
Members of the public do have some say over the Budget and can submit their budget tips ahead of the official delivery on 19 February 2025.
National Treasury said that all suggestions and inputs made by South Africans go through a filtering process.
The top-made suggestions are sent on to policymakers, and the ‘winning’ suggestion is included in the budget speech.
The tip system, which was created in 1999 by former Finance Minister Trevor Manuel, has seen increasing engagement from South Africans over the years, with a notable spike in 2023.
Treasury said that 341 tips were received in 2021; 980 in 2022; 2,385 in 2023; and 855 in 2024.
Submissions must be submitted before 10 February 2025 and should be concise and limited to 300 words.