Social grant crackdown in South Africa

National Treasury says that the Department of Social Development (DSD) and the South African Social Security Agency (Sassa) need to improve their checks and balances to insure that grant money is going to valid beneficiaries.

It said it would be imposing conditions on the sector following the passage of the Adjusted Appropriation Bill to ensure that the millions of rands lost to social grant fraud can be stemmed.

“The DSD and Sassa need to increase the use of large data crosscheck to improve assessment of income and better validate beneficiaries,” the Treasury said.

It noted that social development expenditure has overtaken health to become the second largest area of government spending, outside debt.

Social development spending will rise from R357.6 billion in 2024/25 to R418.5 billion in 2027/28, taking up a massive portion of the budget.

Over the next three years, the government has committed R1.17 trillion to social grants and welfare services.

This includes funding for old-age pensions, child support grants, social security funds, and other welfare programs.

Over the next three years, 30% of the population will receive some form of social grant – excluding the Covid-19 Special Relief of Distress (SRD) Grant.

This is roughly 19.2 million people. However, this is projected to increase to 19.7 million in 2026/27.

Including the SRD grant, 44% of its population—approximately 28.7 million people—are on social grants, relying on only 7.4 million income taxpayers.

The situation is unsustainable in the long term, especially as government spending on social development programs continues to grow without a corresponding increase in tax revenue.

While personal income tax contributes the largest share of the national revenue, those earning above R1.5 million a year — a group that comprises only 2.7% of taxpayers — contribute about 32% of total personal income tax revenue.

This concentration of tax responsibility among a small elite group makes the tax base both narrow and vulnerable to economic downturns, where even a slight decline in high-income earners could have outsized effects on the nation’s revenue.

A fundamental problem is that while social spending is rising, economic growth and job creation lag behind.

Treasury said that the DSD and Sassa need to work with other government institutions to strengthen the transition of grant beneficiaries to a range of jobs and skills programmes.

It emphasised this when looking at the SRD grant as well, which many have pegged to become a permanent basic income grant in some form.

Officials pointed out that the SRD grant already costs an extra R40 billion a year, and that any move to increase its value and distribution would be impossible without a large tax hike to fund it.

The Institute of Economic Justice (IEJ) has argued that increasing South Africa’s Social Relief of Distress (SRD) to R700 per month is possible through the introduction of luxury VAT and other wealth taxes.

This would put the grant still below the food poverty line of R796, but would still require Treasury to find an additional R170 billion per year.

“The fiscus cannot afford these large increases without permanent large tax increases,” Treasury said.

Read: Big announcement about basic income grant for South Africa