NOMBEKO MBAVA: An unspent budget is not the same as declared savings

The department of social development recently declared savings of R1.8bn. According to the 2022 medium-term budget policy statement, this “saving” is due to a lower than anticipated take-up of the Covid Social Relief of Distress (SRD) grant.

The so-called “saving” is particularly baffling due to the increased public demand for social grants during the cost of living crisis and increased poverty and social distress. It also neatly sanitises the uncertainty that has plagued this grant since its inception in May 2020.

After the announcement in February that the grant would be extended for a third time, the department had to retrofit the number of beneficiaries to fit the budget, essentially ensuring potential beneficiaries will not exceed the allocated R40bn budget.

Tightening the eligibility criteria by including a new means test threshold of R350 enabled the containment of the applicant pool. In August 2022, in response to public outcry and a legal challenge by various civil society organisations, the department amended the SRD grant means-testing criteria to broaden the social safety net. Under the amendment, recipients are now eligible for the grant if they can prove, among other things, that they earn below the food poverty line of R648.

The department expected a huge increase in applications and grant uptake. However, while millions of South Africans are applying for the grant, many are not being approved. The department’s “savings” thus suggest that the grant uptake is well below estimates, creating large holes in the social safety net. This further raises questions about the effective implementation of the grant.

The success of any intervention is dependent on how well it is implemented. The implementation context of the SRD grant largely assumes easy access to internet data for many applicants. Either applicants apply themselves or access another implementing agent such as the Post Office to facilitate the online application process.

In instances where applicants lack the online application know-how or struggle to access the Post Office network, especially in rural and outlying areas, those who are in dire need are ultimately excluded from accessing the SRD grant due to the imposed application conditions.

To ensure the credibility of the public finance system concepts and explanations should be free of ambiguity. In general parlance, savings arise from putting aside income for future use. The R1.8bn, which did not reach millions of vulnerable South Africans who struggle to put food on the table, did not arise from an intentional decision around the strategic future use of income or the implementation of efficiencies that yielded cost savings.

The budget was unspent due to the consequence primarily of two gatekeeping mechanisms. First, eligible applicants who lacked online application access and know-how were in effect kept out. Second, the flawed decision to tighten the eligibility criteria of the SRD grant and attempts to backtrack and put things right further served to reduce the pool of eligible applicants.

While the SRD grant aimed to intervene and alleviate social distress, its poor implementation may have excluded many eligible applicants who were ultimately kept out through imposed restrictions and an inflexible application process.

This brings us to the issue of predictability, the cornerstone of better planning, not just for the government but also for beneficiaries of government services. In this regard, the lack of certainty around the longevity of the SRD grant has necessitated special appropriation bills and reprioritisation, to further allocate funds for the payment of the grant. For the 7.4-million people who depend on it for their survival and livelihoods, it means being on tenterhooks every few months waiting to hear what the future holds for them.

BIG policy

The SRD grant is intended to be a stepping stone towards a more permanent basic income grant (BIG) policy. The numbers show that it has been instrumental in saving millions from poverty. Given the pandemic and economic shocks we have experienced over the past two years, a BIG that serves a broad base would move millions of citizens out of chronic poverty.

However, the BIG rose-tinted glasses quickly fall when considering how it can be funded. Support of this nature is sure to have huge financial implications for our struggling economy, particularly given the broader global downswing. This is the issue that has seized the government over the past two years.

Given the dire socioeconomic conditions, we cannot wait another two years for certainty on this issue. To contribute to this debate and offer viable policy options, the Financial & Fiscal Commission is researching the fiscal incidence of social grants and whether a BIG is feasible in the current fiscal climate.

The aim is to contribute evidence-based recommendations to parliament regarding the efficiency of the social security network and the feasibility of a BIG when we table our 2024/2025 annual submission on the division of revenue in the next few months.

• Dr Mbava chairs the Financial & Fiscal Commission, an independent advisory institution established in terms of the constitution with the primary role of ensuring equitable and sustainable intergovernmental fiscal relations.