Announcement on income support in the MTBPS probable, says Godongwana

Finance minister Enoch Godongwana said an announcement on income support for the vulnerable will be made in the medium-term budget policy statement (MTBPS) to be tabled in parliament on October 26 if Treasury is ready by then.

“We are looking at different income support measures, and it is probable if we are ready we can by October 26 make some comments in that regard,” the minister said in parliament on Wednesday.

There has been much debate on the different types of income support to replace the R350 a month social relief of distress grant when it terminates at the end of March 2023. While there is strong civil society support for a universal basic income grant, neither Treasury nor business believes it is affordable given SA’s fiscal constraints.

Godongwana said the MTBPS would also deal with the problem of Eskom’s debt which now stands at about R400bn.

Replying to a question in the National Assembly, Godongwana stressed that income support had to be considered within a framework of a comprehensive social security plan of which income support would just be one part. Discussions on what form of income support is appropriate are taking place.

The minister faced a range of questions on what measures he will consider to address food inflation and the effect of rapidly rising prices on poor households; whether the Treasury intends to increase the basket of food that  is zero-rated for VAT; steps the Treasury is taking to ensure SA is not greylisted by the Financial Action Task Force, the global money-laundering and terrorist watchdog; and whether he will consider consulting the Reserve Bank to amend legislation to expand the mandate in order for the Bank to play a more developmental role by including employment creation and economic growth as one of its targets.

On increases in the cost of living Godongwana said that prices were trending downwards, but if there were any changes in prices the Treasury would announce measures in the MTBPS.

Of the benefits of inflation targeting, the minister said the Treasury’s view was that countries applying this had more success in curbing inflation than those that did not. Inflation harmed low-income households, he said.

Responding to the question about increasing the number of food items zero rated for VAT, Godongwana said a study showed such a measure would be inefficient as it would benefit the rich more. Today’s basket of zero-rated goods was well targeted. A panel of experts reached a conclusion on which food items it would make economic sense to zero-rate to benefit vulnerable communities. But if requested he was prepared to subject to expert analysis the proposals of DA finance spokesperson Dion George for chicken, beef, tinned beef, flour, margarine, peanut butter, baby food, tea, coffee and soup powder to be zero rated.

The minister said the Competition Competition was seized with looking at the concentration of the economy which had an effect on the cost of commodities.

He conceded that greylisting by the FATF would have a severe effect on the economy, especially the financial sector, and government was addressing the deficiencies identified. An interdepartmental committee was working on measures to avoid it and Treasury was working with the financial sector in a bid to avoid greylisting.

The government was in talks with key FATF members to facilitate a better discussion in February when the watchdog will decide whether to greylist SA. “It will be a tough challenge to prevent greylisting,” Godongwana said, but he believed significant progress could be made by February.

No-one could deny that crime had a malign influence on the economy and Treasury had addressed this by providing a budget to capacitate the police.

Godongwana said that the Treasury had not yet been paid for the temporary two-month fuel price relief granted earlier this year to be paid for by the sale of SA’s strategic crude oil reserves at an estimated value of R6bn. Mineral and energy resources minister Gwede Mantashe said later in reply to a question that the Treasury would be paid when the stock is sold.

ensorl@businesslive.co.za