Cape Town -- Millions of South Africans currently relying on the Covid-19 social grant can breathe a sigh of relief as it will be extended until March 2024.
Minister of Finance, Enoch Godongwana, announced the extension of the Special Covid-19 Social Relief of Distress grant on Wednesday in Parliament during the Medium Term Budget Policy Statement (MTBPS).
The grant of R350 was originally introduced in May 2020 as a temporary measure to support poor households during the Covid-19 pandemic’s lockdown. At present, 7.4 million people are dependent on the grant.
"Given the large cost of extending this grant, increases to other social grants in 2023/24 will be slightly below inflation and other social welfare priorities may remain unaddressed," Godongwana said.
In the 2022 Budget, the government extended the grant for five more months. As noted then, 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, reprioritise spending, or a combination of the two.
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. As a result, the temporary grant will be extended for one year until March 2024," read the MTBPS.
A permanent extension of the Covid-19 social relief of distress grant, or a similar new grant, needs to be matched by a corresponding permanent increase in revenue, decrease in spending or combination of the two, according to Godongwana.
"The future of the Covid-19 social relief of distress grant introduced in May 2020 remains under discussion. For now, these transfers to low- income households are extended for another year without compromising fiscal consolidation. Over the next year, government will make a decision in line with its commitment to sustainable public finances. Any permanent increase in expenditure, such as a new social grant, will need to be matched by permanent revenue increases or spending reductions elsewhere."
Assuming the current grant value and take-up rate remain constant and it is extended indefinitely, the cost of the grant could grow at an average of 8.8 per cent per year to reach R64.9 billion in 2030/31. Without a permanent source of funding, this would threaten the sustainability of the public finances.
Weekend Argus.