South Africa

Ramaphosa announces extension of R350 social relief grant – with plans for basic income

President Cyril Ramaphosa has announced the extension of South Africa’s R350 social relief of distress grant for another year.

In his state of the nation address on Thursday evening (10 February), Ramaphosa said that the grant will now continue until the end of March 2023 – a full year after it was due to expire.

The president said that more than 10 million people had benefitted from the grant since it was introduced, with several South Africans using the grants not only for basic purchases but to start businesses.

While he noted that this extension will put additional strain on the fiscus, he said that the grant was necessary as the government consider more permanent support measures.

“As much as it has had a substantial impact, we must recognise that we face extreme fiscal constraints. A fiscal crisis would hurt the poor worst of all through the deterioration of the basic services on which they rely.

“Mindful of the proven benefits of the grant, we will extend the R350 SRD Grant for one further year, to the end of March 2023. During this time, we will engage in broad consultations and technical work to identify the best options to replace this grant.

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“Any future support must pass the test of affordability, and must not come at the expense of basic services or at the risk of unsustainable spending. It remains our ambition to establish a minimum level of support for those in greatest need.”

Both the ruling ANC and the country’s largest trade federation Cosatu have called for the extension of the R350 social relief of distress grant introduced in response to the Covid-19 pandemic.

Ramaphosa, finance minister Enoch Godongwana and social development minister Lindiwe Zulu held meetings with civil society in mid-January to discuss the possible extension of the grant and the possible introduction of a basic income grant.

Finance minister Enoch Godogwana has previously indicated that any SRD extension would be contingent on further upsides to the country’s revenue performance.

“Deteriorating socio-economic conditions, rising joblessness and more acute inequality in the economy suggest that an SRD extension for another year is a likely minimum requirement for the political economy right now. At a minimum, we expect another year of SRD extension to cost the fiscus R35 billion,” said BNP Paribas South Africa in a January research note.

Ahead of the SONA, Intellidex analyst Peter Attard Montalto said that a year-long extension of the grant was likely to happen, but presented a problem for National Treasury given the expectation from social sectors for a basic income grant, and the funding challenges it presents.

The extension of the SRD grant is seen as a compromise as the funding issues are being ironed out – but markets have widely accepted that it will be a permanent fixture, going forward.

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Artmotion S.Africa

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