The Treasury says that the consequences for the country’s economy would be “disastrous” if the high court were to grant the orders sought by the Institute for Economic Justice (IEJ) and #PayTheGrants in their court case on the R350 Social Relief of Distress grant.
The two organisations have challenged the latest iteration of the regulations that govern the R350 social relief of distress (SRD) grant, first introduced during the Covid-19 lockdown to mitigate its harsh economic effects.
They say that in these latest regulations the government has put “a range of bureaucratic obstacles and criteria” that mean only half of about 16-million people who should be eligible to receive the grants are accessing them. They want these struck down as unconstitutional.
The applicants also want the government to “devise and implement a plan to redress the retrogression in the value of the SRD grant and income threshold and progressively increase the value of the SRD grant”, which would effectively result in the R350 amount being increased, to be inflation-related, and the threshold for eligibility changed — it is set at R624.
The minister of finance has intervened in the court case and, in court papers filed late in December in the Pretoria high court, said the regulations were not unconstitutional as claimed by the two applicants. The Treasury’s acting director-general Edgar Sishi said the regulations, properly interpreted, facilitated greater access to social security than was the position before their adoption and “provide as much coverage and protection to the most vulnerable South Africans that the state can afford at the moment”.
Setting out the broader context, Sishi said the government can only spend what it can “extract from the economy through taxes”, he said. Borrowing money is “nothing more than deferred taxation” and government’s fiscal position has weakened dramatically in the last decade, with debt having risen faster in South Africa than in other emerging market economies.
“So government is faced with a multifaceted challenge: the weakened fiscal position and poor economic conditions make it difficult to create growth and thereby increase employment. This causes more people to be in desperate need of assistance. But because of the weakened fiscal position, government is not in a strong position to provide as much assistance as expected,” he said.
Sishi said that if 16-million people were to receive the grant, it would cost R67.2bn. This is R5.5bn more than budgeted for the SRD grant in the 2024/25 financial year.
If inflation were to be taken into account, and the grant were to be increased to R433.11, it would cost the fiscus R41.578bn per year for the 8-million people receiving it. If 16-million people were to receive the inflation-related grant, this would double to R83.16bn.
There is no permanent funding source for the grant nor is there a policy framework.
— Edgar Sishi, Treasury acting director-general
The Treasury said it did not take issue with the applicants’ assertions about the “extreme levels of poverty faced by far too many South Africans”. It appreciated this problem and this was at the root of how it approaches the budget as a whole. “Many compromises and adaptations have to be made to address the problem as effectively as possible.” Where the Treasury parted ways with the applicants was how best to address the problem, he said.
The applicants’ approach was “not only unrealistic, based on South Africa’s current fiscal position, but somewhat short-sighted”, said Sishi. The country already had one of the highest fiscal spending on social protection of any developing or emerging-market country in the world. Its projected spend for 2024/25 of its total budget on the “social wage” — including social security, education, health and housing — will be 61.6%.
SRD grants are a temporary measure — this one was meant to last six months. “There is no permanent funding source for the grant, nor is there a policy framework.” It has been extended five times since, but resources for short-term social relief of distress measures “have always been limited”.
Sishi said the premise of the applicants’ case was that this “temporary stop-gap measure” should be transformed into a permanent or at least long-term solution to alleviate poverty — “in other words that this is now a permanent right and entitlement from which government cannot depart. This simply cannot be correct.”
Instead, the government’s approach was to progressively put other long-term interventions in place; and continue the SRD grant — in an amount of R350 — on a year-to-year basis, “but only until improved interventions are put in place”.
Government could not go as far as the applicants would like because of the “extremely serious fiscal position” of the country, said Sishi. The reality was that government did not even have the funds to extend the SRD grant for the 2024/35 year and “the necessary funds will largely have to be borrowed and at increased interest costs”.
Sishi set out how the number of social grant recipients has been expanding, while government revenue has been dropping and debt service costs increasing.
He also said that, from a policy perspective, the Covid-19 SRD grant should be temporary, because if government put all its resources towards this grant it would leave no space for long-term development, “and is a path that has no scope for sustainability or changing people’s fortunes”.
Sishi said the applicants want the SRD grants to be prioritised over all government expenditure, despite being temporary in nature and left out of account other demands like health and education. “In truth, the IEJ seeks judicial intervention on budgeting allocation. This is a highly complex and indeed contested sphere influenced by difficult (and sometimes, agonising) policy choices.”
Sishi also rejected the applicants’ argument on the use of bank account verification as a test for eligibility. According to the latest iteration of the regulations — now challenged — if applicants picked up a balance above R624, they would not be eligible for the grant that month.
The IEJ and #PayTheGrant included in their application affidavits from people whose applications were rejected because Sassa’s bank verification system had picked up “small and inconsistent donations from family members”, and money that belonged to a relative but registered because they were sharing a bank account.
But Sishi said the banking verification system was “an absolutely invaluable reform, as no other method could reliably provide proof of individual income (and financial support)”.
While there may be some deserving applicants who might slip through the cracks, the reliability of the system ensured that the system is not abused. “It is close to impossible to adopt procedures which are capable, without any exceptions and errors, of ensuring that every deserving recipient of public funds receives them,” he said. Where a worthy recipient is wrongly excluded, there was an appeal process.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.