SOCIAL GRANTS: A country leaning on welfare

Just under half of the SA population gets a grant from the government — a staggering figure that includes 10.5-million recipients of the Covid social relief of distress grant, which was introduced in 2020. The continuation of that R350 a month grant will add R44.4bn to the government’s spending in the 2022/2023 financial year.

Though this is a hefty top-up to the government’s social grant bill, by far the largest part of that bill continues to be the 18.4-million beneficiaries of other social grants — primarily old-age and child-support grants. It means that in all, spending on social grants in 2022/2023 will increase to an unprecedented R364.4bn, equivalent to 3.9% of GDP.

In theory, that spending is set to fall after 2023, as the government says it remains committed to its decision to terminate the Covid grant in March 2023. It remains to be seen, however, whether this happens.

But even if that grant is removed from the equation, the total spending on social grants is forecast to be about R317bn in 2024 — equivalent to 3.1% of GDP. In that case, the "social wage" is forecast to take up 59.4% of the government’s entire noninterest spending over the next three years.

In his budget speech, finance minister Enoch Godongwana reminded South Africans that the Covid grant would be extended for only 12 months. And, lest there be any thought that the grant would be used as an introductory platform to a permanent basic income grant (BIG), the Budget Review made several references to the temporary nature of the 12-month extension and the need for fiscal discipline.

"Any permanent extensions of social support need to be matched by new tax measures or expenditure reductions," says the Review.

During the press conference ahead of Godongwana’s speech, National Treasury deputy director-general Ismail Momoniat also reiterated the stance that any permanent expenditure programmes — as a BIG would be — could not be funded using temporary revenues. Still, he said, the government would look at the totality of the packages it provides to determine the best way of using all of the resources it has.

As it is, the R44.4bn allocated for Covid grants in 2023 represents a 40% hike on the R31.5bn "revised estimate" for 2022, though the number of recipients is expected to increase only slightly to 10.5-million people, while the grant value remains at R350.

It’s not quite clear why that is. The Budget Review provides no explanation for the steep increase, but one community-based nonprofit organisation says this calculation probably took into consideration the steady increase in Covid grant recipients during 2021/2022 as well as a slight increase in the coming 12 months.

The latest Covid grant report from the SA Social Security Agency (Sassa) says 9.5-million Covid grants were paid out in January — considerably fewer than the 15.1-million applications for this grant received by Sassa.

In a recent report on the Covid grant, the Black Sash says this should not be seen as a handout or a burden on the state, but rather a constitutional imperative, which aids economic growth and is an investment in SA’s collective future.

"While the government’s economic reconstruction & recovery plan, and the presidential employment stimulus programme, sound promising, they are not sufficient," says the Black Sash. "The test for these plans and programmes remains whether the state is capable of efficiently implementing what has been promised."

The organisation calls on the government to begin phasing in permanent income support for those aged 18 to 59 with little or no income. It also calls on officials to remove the administrative and design flaws in the current distribution system.

This isn’t simply an academic concern. Rural recipients of the grants often have to travel far to post offices or banks to collect their grant.

The Sassa report also reveals that Capitec is the single largest distributor of the grants — paying out 3.9-million of them a month, which amounts to 41.4% of the total number of grants. This is slightly more than the SA Post Office, which paid out 3.6-million Covid grants.

While Covid grants have captured much of the headlines over the past few months, the bigger story — in rand terms anyway — continues to be the old-age grant.

In 2021/2022, 3.7-million people received that grant, which accounted for R86.5bn of government spending. This is forecast to increase steadily to R102.4bn in 2024/2025.

The next largest social grant category is child support, with 13.2-million children benefiting from R73.3bn in grants in 2021/2022. That figure is due to increase to R84.3bn by 2024/2025.