R11.4 billion World Bank loan could be used to help fund new grants for South Africa: economists
On Friday (21 January), the World Bank approved an R11.3 billion ($750 million) development policy loan for South Africa, with questions now being raised about how the additional money could be used.
“The World Bank loan, which has a 13-year repayment period with a three-year grace period, will assist in financing the ongoing spending on critical health and social safety net programmes,” the Bureau for Economic Research (BER) said in a research note on Monday (24 January).
“Therefore, some of the funds may be used to help pay for the inevitable extension of the social relief of distress (SRD) grant beyond March 2022. This is at least the impression from the Treasury’s statement on the loan.”
However, Treasury deputy director-general for asset and liability management Duncan Pieterse was quoted as saying that the proceeds will be used to meet interest payments on South Africa’s foreign debt and for the redemption of foreign debt.
“Importantly, while the announcement is welcome, this should not be seen as ‘new’ financing as it already formed part of the foreign loans included in the fiscal framework outlined in the November 2021 Medium Term Budget Policy Statement (MTBPS),” the BER said.
Calls for extension
Both the ruling ANC and the country’s largest trade federation Cosatu have called for the extension of the R350 social relief of distress grant introduced in response to the Covid-19 pandemic.
“The R350 Covid SRD grant has had a significant positive impact on the lives of the poor, but more particularly the unemployed,” President Cyril Ramaphosa said in a statement on Sunday (23 January). “The government must examine the feasibility and affordability of providing some form of income support for the poor and unemployed.”
The Congress of South African Trade Unions said that the grant should be extended and form the basis of a new Basic Income Grant (BIG).
“We must extend the R350 SRD Grant beyond March, increase it to the food poverty line and use it as the foundation for a BIG. We must provide relief to battered sectors of the economy. The banks must be engaged to provide affordable loans for businesses,” it said.
“These relief measures must be incentivised to support job retention and creation. We need to mobilise every bit of stimuli for the economy including the finalisation of Regulation 28 of the Pensions Act.”
Social development minister Lindiwe Zulu has said that a new basic income grant in South Africa will likely be phased in over several years, with her department currently pushing for an extension of the R350 Social Relief of Distress (SRD) grant as a baseline.
“Depending on costs and the fiscal position of the country, it may take a few years to progressively implement. Until then, the department is, however, currently motivating for the extension of the Special Covid-19 SRD Grant, preferably over the medium-term period,” she said.
“This should provide the much-needed income support to cushion against the economic hardship occasioned by the advent of Covid-19 pandemic for the 18- 59 years.”
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