Lindy Wilson. Picture: SUPPLIED
Lindy Wilson. Picture: SUPPLIED

The Black Sash is cautiously upbeat about the above-inflation increase in social grants announced by finance minister Malusi Gigaba on Wednesday.

"The fact that [treasury] attempted to mitigate the impact of the one percentage point increase in Vat is encouraging," says Hoodah Abrahams-Fayker.

She says social grants remain a vital lifeline for 17m South Africans living in poverty.

But she says it will take some time to determine if the increase will be sufficient to cover the combined effect of inflation and the 15% Vat rate. She also notes there is a large group of vulnerable people between the ages of 18 and 59 who do not have access to any social grants but will have to deal with the increased Vat.

The DA’s Lindy Wilson is less impressed and says the budget once again proves the ANC government does not care for the poor and vulnerable. "We are disappointed in the 6.6% increase in child grants. Currently 135 children per month are dying of malnutrition-related diseases. The increase will do nothing to assist children who are being stunted by hunger."

Wilson says families of five are surviving on R760/month and the additional R50/month will do nothing to alleviate the effect of the increase in Vat and other levies.

Gigaba said government had taken deliberate steps to adjust social grant values above inflation "to at least partially cover for the proposed increase in Vat".

With effect from April 1 the old-age, disability and care-dependency grants will increase by R90 to R1,690/month. On October 1 they will increase by an additional R10 to R1,700 — equivalent to a staggered increase of just over 6%. Child support grants will increase from the baseline of R380 to R400 on April 1, with an increase to R410 on October 1.

Gigaba said R6bn had been added to the social grant budget since the medium-term budget policy statement last October.

He also assured South Africans that government will ensure that social grants will continue to be paid without disruption after April 1, but provided no details to support this assurance. With less than six weeks to go before the controversial Net1 social grant distribution contract is due to expire, uncertainty remains around how grants will be paid.

The SA Social Security Agency’s current communication strategy, which is aimed at encouraging beneficiaries to open a commercial or Post Office bank account, has led to much confusion among beneficiaries. There are efforts to develop a low-cost banking product but as yet there are no details about the cost implications for the beneficiaries.

Net1 CEO Herman Kotze suggests social grants should be increased by the R22 government currently pays Net1 for each of the 10.7m recipients collecting grants (on behalf of 17m beneficiaries). Kotze says the recipients could then decide which payment option to choose.

Social grants are set to remain one of government’s three big expenditure items, with a budgeted spend of R528bn over the medium term. This places it third behind basic education, with a medium-term spending budget of R792bn, and health with a R668bn budget. The health budget is part of government’s social protection system, designed to protect the country’s poorest and most vulnerable.

For the 2017/2018 year, spending on social grants is expected to be R150.8bn. The bill is set to rise to R189.7bn by the 2020/2021 tax year.

Government may be hoping that, over time, the steep spending on education will lead to a reduction in poverty and dependency.