The government will extend the social relief of distress grant until 2025, Finance Minister Enoch Godongwana said on Wednesday in the medium-term budget policy statement.
The document confirmed that the state has not found a long-term solution to funding the R350 grant, which was introduced during the Covid-19 pandemic to provide relief to poor households while the country was under lockdown.
“No policy decisions have yet been made on the grant and no funding solution has been agreed to.”
President Cyril Ramaphosa hinted ahead of the MTBPS that the grant would be extended by saying it served as a lifeline to millions of South Africans.
At an annual cost of R36 billion to the fiscus, the future of the grant has become a perennial budget quandary — and extending it a stop-gap response to calls to introduce a basic income grant.
The MTBPS makes plain that the state simply does not have the money to make that long-term commitment at the moment.
It recalled that Godongwana said in his main budget speech in February that any extension or replacement of the grant needed to be funded from a new revenue source or reprioritisation of current spending.
“Since then, fiscal space has declined markedly, reducing the scope for extension without additional financing,” Wednesday’s medium-term statement said.
The treasury said “a comprehensive review of the entire social grant system” was necessary to map the way beyond 2025.
At the moment, the state spends R945.9 billion on social grants, including the social relief of distress, older person’s, child support and disability grants. This makes its social support spending among the highest in developing nations, ahead of Chile, China and India, but the MTBPS calls for spending restraint in pursuit of fiscal sustainability.
Since Godongwana tabled the national budget in February, the treasury’s revenue collection projection has shrunk by R56.8 billion as commodity prices fell faster than expected.
A priority, the treasury said, is containing the budget deficit amid persistent low economic growth.
“Moderate budget deficits are not cause for concern. The difficulty arises when deficits are too large for too long, requiring ever-higher levels of borrowing that are unmatched by improvements in public services. This is the problem facing South Africa,” the treasury said.
It forecast GDP growth to average only 1.4% over the medium term.