28 million people on grants in South Africa – with only 7 million taxpayers
South Africa’s finance minister announced increases for several grants and the extension of the R350 social relief grant until 2027, benefiting 28.3 million people, while the tax base remains stagnant at 7.1 million on the back of a decline from the previous year.
The National Treasury estimates it will spend R266.21 billion on social grants in the 2024/25 financial year, equivalent to 3.6% of GDP.
According to Treasury projections, the number of people receiving grants is expected to increase from 27.78 million in 2023/24 to 28.31 million this year.
Additionally, over 9.2 million people will receive the SRD grant this year.
Grant beneficiaries – excluding Covid-19 social relief of distress grant beneficiaries – are projected to increase from 18.8 million in 2023/24 to 19.7 million in 2026/27.
In addition, Finance Minister Enoch Godongwana announced during his 2024 National Budget Speech on Wednesday (21 February) that permanent social grants were increased to keep up with inflation and improve access.
This includes increasing the old age, war veterans, disability and care dependency grants by R100, divided into R90 effective from April 2024 and R10 effective October.
There will also be a R50 increase to the foster care grant and a R20 increase to the child support grant.
Notably, he also announced that the government will continue to pay the Social Relief and Distress (SRD) Grant until March 2027.
This is despite the concern for South Africa’s fiscal health, which Godongwana noted in his speech.
Compared to a year ago, the budget deficit for 2023/24 is estimated to worsen from 4% to 4.9% of GDP.
Debt-service costs will absorb more than 20% of revenue, said Godongwana.
“To put this into perspective, spending on debt-service costs is greater than the respective budgets for social protection, health, or peace and security,” he said.
Debt will now peak at 75.3% of GDP in 2025/26.
National Treasury’s estimates of individuals and taxable income for 2023/24 clearly illustrate a problem.
It shows South Africa has 7.1 million individual taxpayers, down from 7.4 million a year ago.
So, while social grant recipients are rapidly increasing, South Africa’s registered taxpayers are declining.
What is particularly concerning is that South Africa now has four times as many grant recipients as individual taxpayers.
The table below shows the National Treasury’s estimates of individuals and taxable income for the 2023/24 financial year.
Compounding matters is that Godongwana announced that, although the government is not raising income tax rates, it won’t adjust personal tax brackets for inflation, which the government expects to run at 4.9% this year.
Bracket creep means that as salaries increase to keep up with the rising cost of living, workers get pushed into higher tax brackets and end up handing more over to the government.
Rebates and medical tax credits also won’t be adjusted for inflation.
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