CAPE TOWN - The question of the expansion of the R350 Social Relief of Distress (SRD) grant into a formal Basic Income Grant (BIG) is one both experts and South Africans facing dire socio-economic conditions are hoping to have answered as Finance Minister Enoch Godongwana delivers his maiden Budget speech on Wednesday.
In his State of the Nation Address (Sona) earlier this month, President Cyril Ramaphosa announced that the Covid-19 social relief grant of R350 had been extended to end March 2023.
However, the call for the implementation of permanent income support for those aged 18 to 59 years with little to no income remains, valued at the upper-bound poverty line, currently R1 335 or R1 500 per month. It is proposed that the grant could be funded with the introduction of a wealth tax.
Frustrated by the “immoral” hourly minimum wage increase for farmworkers of R3.01 in 2020/21, the Women on Farms Project will be picketing outside Parliament today to demand the introduction of a Wealth Tax.
Meanwhile, some in the finance industry argued that the introduction of BIG was a risk.
“The government has been under enormous pressure to introduce a basic income grant. There is, however, an acknowledgement that the country does not currently have the fiscal space to introduce a basic income grant and that doing so would pose a risk to the economy. South Africa already spends 3.3% of its GDP on social expenditure which is high in comparison to other emerging marketing economies,” NFB Wealth Management, managing director, Andrew Duvenage said.
“As far as tax hikes are concerned, it is unlikely that there will be a VAT rate hike announced. A year ago former finance minister Tito Mboweni announced that the corporate tax rate would be reduced by 1% to 27% in 2022. However, no mention of this change was made in the medium-term budget which raises the question of whether it remains on the agenda.”
Anchor Capital, investment analyst, Casey Delport added: “Investors remain wary of the upside risks to the social grant and public wage bill, as well as the execution risk to what remains unusually restrained general spending budgets on the part of National Treasury (NT). Nonetheless, since the start of his tenure, Godongwana has been careful to highlight the risk to fiscal consolidation if this occurs, especially given that revenue overruns cannot be relied on continuously to finance extraordinary or other additional spending pressures. At the end of the day, reasonable fiscal consolidation without a stable, higher state revenue stream requires a shift accelerating current expenditure, with the finance minister having notably highlighted that the local economy is simply too weak for higher taxes.”
According to,University of Stellenbosch Business School development economist, Dr Nthabiseng Moleko, the Budget speech is likely to fall in line with “previous neo-liberal frameworks”.
“The minister is likely to continue cutting expenditure, maintain its current fiscal consolidation and managing of debt to GDP ratios as key themes of the speech. It is likely that the Budget will continue along the same macro-economic paradigm which has not yielded more than 2% growth before Covid and even projected over the next five years.
“The expected (GDP) growth of the nation from IMF and the IMF are 1.8%, projected growth is going back to pre-Covid levels,” she said.
However, she added that the minister should be focusing on a growth path that would lower inequality and unemployment.
“The minister should be focusing on the generation of revenue and the enabling providing a response to the current economic crisis that our country is facing. The implementation of past fiscal response measures have not proven effective economic stabilisers that transform the growth path, nor have they lowered pervasively high inequality and pandemic levels of unemployment. The focus should be on rebuilding gross fixed capital investment and ensuring inclusive growth path that will transform the economic structure that is not rebuilding the fractures of our economy which services only a minority of the people of South Africa,” added Moleko.
Cape Times