Budget 2022 | Long-term grants can only be funded by revenue, spending cuts - Godongwana

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Finance Minister Enoch Godongwane.
Finance Minister Enoch Godongwane.
  • Finance Minister Enoch Godongwana said long-term grants would have to be funded by sustained revenue growth and spending cuts in other areas.
  • He said the 2022 budget provides for a 12-month extension of the monthly R350 Covid-19 grant.
  • The budget review said nearly half of the population currently receives at least one social grant from the state.

Finance Minister Enoch Godongwana has stressed that the one-year extension of the Covid-19 Social Relief of Distress (SRD) grant would only be sustainable in the long-term against the backdrop of reduced spending and continued tax revenue increases.

Godongwana tabled his first budget speech before a joint sitting of Parliament on Wednesday afternoon. The speech comes two weeks after President Cyril Ramaphosa announced that the R350 SRD grant would be extended by a year to the end of March 2023.

The budget review said the Covid-19 SRD grant alleviated poverty and softened the blow of the ongoing pandemic and the national lockdown, whose harshest restrictions all but ground the economy to a halt in 2020. 

"However, in a context of overstretched public finances and persistently high unemployment, the continuation of such a social transfer must be matched by a combination of permanent spending reductions and tax revenue increases," the budget review said. 

During his speech, Godongwana said that over the next three years, government will allocate R3.33 trillion "to the social wage to support vulnerable and low-income households". 

"This is approximately 60% of non-interest spending."

He said the social relief of distress grant was introduced in 2020/21 "as a temporary relief measure in view of the plight of those who have lost economic opportunities and were adversely affected during the worst periods of the pandemic".

"This emergency grant added to the country's already extensive social safety net. South Africa now pays grants to more than 46% of the population."

The budget review said the Presidency, National Treasury, and the Department of Social Development would continue to work on a sustainable long-term to social protection programme. 

"While remaining on course to stabilise debt, government proposes raising spending in the areas of greatest need. The 2022 budget provides for a 12-month extension of the R350-per-month special Covid-19 Social Relief of Distress grant," the budget review said.

The budget review said spending on the social wage has risen from 58.2% to 59.5% of consolidated non-interest spending between 2019/20 and 2021/22, "and nearly half of the population currently receives at least one social grant from the state".

High unemployment

"At the same time, a key weakness in economic performance has been persistently high joblessness, which lies at the root of poverty and exacerbates inequality. The pandemic has elevated the public debate on how government should provide social protection to poor and vulnerable households," the report said. 

The Department of Social Development's expenditure was expected to decrease by an average of 0.1% over the medium-term expenditure framework, from R233.7 billion in 2021/22 to R233 billion in 2024/25, driven by the discontinuation of the SRD grant next year.

"New allocations in this budget include R44 billion to extend the special Covid-19 Social Relief of Distress grant until March 2023; R13.1 billion for inflation-related increases in social grants; and R1.6 billion to introduce an extended child support grant for double orphans in the care of relatives," according to the department.

Over the medium term, the South African Social Security Agency's total expenditure is expected to amount to R23 billion.

The budget review said child support and old age grants accounted for more than half of total grant expenditure over the medium term period and will support 17.2 million beneficiaries in 2022/23.

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