Social relief of distress grant extended for another year

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Finance Minister Enoch Godongwana on Wednesday extended the Covid-19 social relief of distress grant for another year until the end of March 2024.

The extension announced in the treasury’s medium-term budget policy statement (MTBPS) indicates that the state is still grappling with the prospect of introducing a basic income grant, and will make no firm commitment in that regard in the budget in February next year. 

“Discussions are still under way to consider options for a replacement for this temporary grant. No final decision has been made about a replacement or how it would be financed,” the treasury said.

“As a result, the temporary grant will be extended for one year until March 2024.”

The social relief of distress grant was introduced in May 2020 as a pandemic lifeline to the most vulnerable in society and has been extended several times since. It now reaches some 7.4 million South Africans. 

Keeping it in place for the current financial year is costing the state R44-billion, but it is estimated that R220-billion would be needed to introduce a universal income support grant.

“The introduction of a new grant in the fiscal framework is a permanent spending increase. To be sustainable, it needs to be financed with permanent increases in revenue, spending prioritisation, or a combination of the two.”

In his speech to parliament, Godongwana added: “This is what is meant by trade-offs: balancing the need to address one priority over another.”

Acting treasury director-general Ismail Momoniat said in another trade-off, the government accepted that extending the social relief grant meant that other welfare grants could not be increased, and that in real terms the benefit of the recipients of those would shrink.

“It is hard to choose between those but this is the choice that has been made for this MTBPS,” he told a media briefing ahead of the minister’s speech to MPs.

The MTBPS warns of facing the current global risks of soaring inflation and currency devaluation without the benefit of fiscal buffers and commits to narrowing the budget deficit and stabilising state debt at 69% of GDP in 2024/25.

The treasury’s efforts to trim the deficit have been helped along by higher-than-expected revenue collection. 

But the minister warned that this windfall may not last in the current, turbulent economic climate.

“Moreover, the possibility of a major price correction in financial markets is a significant risk. This will affect fiscal revenues going forward,” he said.

“It is for this reason that the medium-term strategy needs to maintain a prudent approach to fiscal policy.”