Extending South Africa’s R350 grant by another year to cost taxpayers R35 billion: economist

It is now the base case view that the Social Relief of Distress (SRD) grant will be extended for at least the 2022/23 fiscal year, says Jeff Schultz, senior economist at BNP Paribas South Africa.

This comes as the country’s revenue collections continue to outstrip expectations by as much as 1% of GDP compared with the November mid-term budget estimates the National Treasury had projected, Schultz said in a research note on Tuesday (25 January).

Finance minister Enoch Godogwana has previously indicated that any SRD extension would be contingent on further upsides to the country’s revenue performance.

“Deteriorating socio-economic conditions, rising joblessness and more acute inequality in the economy suggest that an SRD extension for another year is a likely minimum requirement for the political economy right now. At a minimum, we expect another year of SRD extension to cost the fiscus R35 billion.”

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.”

Ramaphosa, Godongwana and social development minister Lindiwe Zulu held meetings with civil society in mid-January to discuss the possible extension of the grant and the possible introduction of a basic income grant.

“The meeting affirmed the need to work towards affordable and sustainable social protection mechanisms that complement job creation and drive local demand, with due consideration of the fiscal implications,” the presidency said.

“The meeting agreed to have further engagement on the proposals as part of broader consultation among all stakeholders on social protection measures that are appropriate to the country’s circumstances and the needs of the South African people.”

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Extending South Africa’s R350 grant by another year to cost taxpayers R35 billion: economist