Finance minister Enoch Godongwana has not budgeted for an extension of the R350 social relief of distress grant beyond the March 2022 expiry date, saying that decision resides with the cabinet.
“In terms of the basic income grant or R350 or anything, our view is that it comes to an end, it was extended until the end of March. Between now and end of March, government has got to decide what they do and not Treasury.
“They will decide, do you want to extend it, do you want this? And if you want any of these things, you’ve got to decide whether you’ve got anything to cut to fund that,” he said on Thursday.
Godongwana was speaking to journalists in parliament before delivering his medium-term budget policy statement (MTBPS).
He said the fiscal framework was limited to R1.9-trillion and any additional expenditure on social welfare would mean cutting from other spending items to fund the grants.
“You can move money between programmes if the government decides to say, we are funding the extension. They will then point us in the direction where we have got to take resources and fund that,” he said.
“That’s not our call. We will contribute to that debate but it’s not our call.”
Godongwana insisted that his MTBPS did not mean the R350 grant was being discontinued but it was budgeting in line with an expiry date of end March.
“Government has said they will extend up to end of March. Whether they want to extend beyond March is government’s call,” he said.
This comes amid growing calls for a permanent universal basic income grant for the poor, including from the ANC and its alliance partners such as Cosatu.
Godongwana said if there was agreement that SA was likely to generate R1.5-trillion in the next financial year and expenditure is already going to be R1.9-trillion, with a R4bn shortfall, whatever the government decides will have to be within the R1.9-trillion.
“If we agree that it’s going to be within the R1.9-trillion, then we must also agree that there will be programmes which would be affected, and those programmes will have to lose the money, because the money will go and fund the grants. That’s the choice that government has got to make.”
The National Treasury’s MTBPS document states that the Covid-19 pandemic increased national debate on the possibility of a universal basic income grant.
It says social protection programmes should ideally complement a vibrant, job-creating economy and policy options need to consider the implication for overall economic activity.
SA spends a higher percentage of GDP on cash grants than the majority of developing countries, and the social protection system accounts for 13.9% of consolidated non-interest spending in 2021/22, reads the document.
Excluding beneficiaries of the special Covid-19 social relief of distress grants, 18.3-million people receive some form of grant.
In the absence of faster job-creating growth, it is essential to maintain social protection in a sustainable way, the document notes. Any proposals to expand this system should meet the test of sustainability and effectiveness by being:
- fully and appropriately financed to ensure that the fiscal balance does not deteriorate; and
- evaluated against pre-existing priorities of government that remain unfunded, including in basic services, education and healthcare.
These principles have not been applied consistently to new spending programmes in recent years, contributing to fiscal deterioration without increasing economic growth or reducing poverty, it says.
Given the weakened public finances, new spending commitments can only be funded by closing existing programmes to free up revenue, or through permanent increases in revenue collection.
The government responded to the pandemic with emergency fiscal support to households and businesses. This included the special Covid-19 social relief of distress grant, whose 9.5-million beneficiaries bring the number of social grant recipients to 27.8-million. Yet after a decade of declining economic growth, public finances are in a weakened state, limiting the government’s ability to provide additional targeted social and economic support, it said.
Meanwhile, the document states that three main priorities were being considered for the 2022 MTEF period:
- addressing shortfalls in social grants;
- introducing the extended child support grant for children who have lost both parents; and
- researching possible new social support options once the special Covid-19 social relief of distress grant ends in March 2022.
“However, given that all three have significant financial implications, a final decision must still be made on what is affordable given the current fiscal context.”