Last week, Finance Minister Enoch Godongwana announced a twelve-month extension for the Social Relief of Distress (SRD) grant. This extension is set to cost R34 billion.
The news of the grant's extension came as a surprise to many, considering that the minister had previously warned about rising debt levels, which were exerting pressure on government services, leading them to be overshadowed by debt servicing costs.
Consequently, the government is compelled to reduce its spending.
In the current fiscal year, there has already been a downward revision of spending by R21 billion, and additional reductions of R64 billion in 2024/25 and R69 billion in 2025/26 are proposed.
Godongwana stressed the need for spending reductions and "reprioritization," emphasising that "these decisions are not made lightly; they are made with a focus on the short- and long-term sustainability of public finances and the promotion of balanced and inclusive growth."
Spending on Grants
The minister also revealed that the government is in the process of finalising a comprehensive review of social grants.
Over the 2024 medium-term expenditure framework (MTEF) period, 61% of consolidated non-interest spending is allocated to the social wage, encompassing public expenditure on health, education, housing, social protection, transport, employment, and local amenities.
A total of R945.9 billion is designated for social protection transfers, covering grants such as the old age grant, the child support grant, the disability grant, and the COVID-19 social relief of distress grant.
Impact of Grants
Sifiso Buthelezi, Chairperson of the Standing Committee on Appropriations, dismissed the notion that government spending on social grants is wasteful. He explained that the money provided to grant beneficiaries is reinvested directly back into the economy.
Let's demystify this idea of spending on grants because it's often perceived as money going to waste. You must consider that when our people receive these grants, they spend them, which subsequently boosts the economy.
He added that the extension of the grant, costing just under R40 billion, not only benefits recipients but also bolsters the entire economy.
The SRD grant, commonly known as the R350 grant, serves as the sole financial support for over 9 million unemployed individuals in South Africa. Calls for making the grant permanent and increasing its value has increased in recent months as the current amount falls below the food poverty line.
The future of the grant remains uncertain, with fiscal constraints posing a significant challenge. South African President Cyril Ramaphosa underscored the positive impact of the SRD grant, as it offers crucial support to the unemployed, preventing millions from falling into extreme poverty.