DUMA GQUBULE: Constantly rising social grants affordable in a constantly growing economy

Many years ago I discovered that my helper was a survivor of gender-based violence (GBV). Every month her boyfriend forced her to give him her salary. I remembered this chilling story when I heard that the government was considering an idiotic plan to replace the R350 Covid-19 social relief of distress (SRD) grant that is now being paid to more than 9-million people, with a family poverty grant that could go to 1-million households at the end of April 2022.

Apparently, this is one of the reasons finance minister Enoch Godongwana postponed his medium-term budget policy statement. A cabinet meeting next Tuesday will decide. It could be an explosive debate. There are divisions within the presidency and between the presidency and the National Treasury. Lest we forget, nine weeks after the Treasury stopped the SRD grant at the end of April, SA witnessed its worst social unrest since 1994.

The government first mooted the idea of a family grant in September in an antipoverty strategy. It called for the eradication of extreme poverty by 2030 and the provision of income support to 5.5-million households that live under the food poverty line of R624 a month. There would be a phased implementation that would start by providing the grant to 1-million households. Each year the number of households would increase by 1-million.

The strategy said the Treasury had commissioned the Southern Africa Labour and Development Research Unit at the University of Cape Town (UCT) to evaluate options. It would cost R58.7bn to provide the grant to 4.9-million households, with each beneficiary receiving R460 a month. The unit also concluded that the family poverty grant would be the least feasible option. It would take years to implement because it “requires verification and incentives to build an accurate household resident and income registry”.

A civil society coalition said the family grant would deepen the dependency of household members on the “head of the household” who would receive it, and therefore worsen gender power imbalances and GBV. “Even if the grant is awarded to a female head, this deepens tension in the household.” Why would the government even consider such a policy in a country that has such high levels of GBV and femicide? UCT must disassociate itself from such shameful research, which also says the grant is economically efficient.

Since it will be impossible to withdraw the SRD grant, options should be evaluated against a baseline of extending it for the 2022/2023 fiscal year at a gross cost of R40bn, or R120bn over the three years of the medium term expenditure framework. Godongwana must bite the bullet and announce a basic income grant — at the food poverty line in 2022/2023, the lower poverty line of R890 a month in 2023/2024, and the upper poverty line of R1,335 a month in 2024/2025. If we can eradicate extreme poverty next year, why should we wait for 2030?

The economy needs stimulus. Every forecast says it will revert to its prepandemic trend of low GDP growth in 2022. The IMF has forecast GDP growth of 1.5% a year between 2022 and 2026. There are two options if we want to avoid a second “lost decade” between 2020 and 2030. If there is a clawback from taxpayers, the net additional cost (or boost to the economy) of a basic income grant for adults aged 18 to 59 would be R216bn over three years. 

My preferred option of implementing the basic income grant for adults and extending it to children would provide a stimulus of R360bn over three years, after the clawback and taking into account planned spending on the child grant. It sounds like a lot of money. But it should be seen in the context of GDP of about R20-trillion over the three-year period. We can afford a forever-increase in social grants if there is a forever-increase in the size of the economy.  

• Gqubule is founding director at the Centre for Economic Development & Transformation.