Budget 2023/2024 and the Social Relief of Distress grant

The Budget is likely to roll back social grants yet again. If it does so, government will be challenged.

SUMMARY

The President has committed to extend the Social Relief of Distress (SRD) grant. This could form the basis for a game-changing system of Universal Basic Income. Yet Treasury has different ideas, and has repeatedly undermined and underfunded the grant.

Millions of poor people continue to be excluded. Draft amendments to the regulations governing the grant fail to deal with this injustice, and brazenly fly in the face of the President’s commitment to protect the grant from inflation.

Treasury continues to tighten its chokehold on the grant and to act as an obstacle to the realisation of peoples’ constitutionally-enshrined rights. The Institute for Economic Justice (IEJ) demands that the SRD grant is adequately resourced in this year’s budget, to meet the level of need in South Africa. We will challenge any further erosion of the grant.

THE ISSUES IN BRIEF

The Positives:

The President in his State of the Nation Address made a critically important commitment to extend the SRD grant. He made it clear that the SRD is now permanent and will form the basis for a system of basic income—an “income floor below which no one must fall”. This puts South Africa on course to become a world leader in dignified, evidence-based social protection. The combination of basic income, the national minimum wage, and public services could massively raise the living standards of the poorest half of our population.

Government departments are responsible for respecting and upholding the President’s policy commitments. However in the run-up to this week’s budget, many in civil society are gravely concerned that this will not be the case.

Areas of Concern:

Over the last few years National Treasury has repeatedly opposed extension and improvement of the SRD grant, and its expansion to all those who need it. When the State of Disaster was lifted in March last year, new regulations were introduced to govern the grant. Treasury used its veto power during this transition to insert unjust conditions which limited the number of people who could receive the grant.

While 10.9 million people were receiving the grant in March 2022, only 7.5 million applications were approved in January 2023. Over 6 million applications for the grant were denied in that month. In last year’s Medium-Term Budget Policy Statement (MTBPS), Treasury unconscionably used the artificially reduced approval numbers as a justification for slashing funding to the grant further.

An estimated 18.3 million people live in extreme poverty in South Africa. In 2022/2023, Treasury budgeted R44 million for 10.5 million people to receive the grant. With beneficiary numbers falling even further, it is a real concern that Treasury, instead of expanding the budget to meet the demonstrated need in South Africa, will slash the budget to provide for even fewer people, and will continue to refuse to raise the woefully low value of the grant, or compensate for inflation.

Developments this week suggest that we are heading in this direction, and an open confrontation with civil society on the matter.

The emerging crisis:

Draft amendments to regulations released this week fail to address any of the concerns civil society has raised about aspects of the SRD grant which have resulted in the mass exclusion of beneficiaries. The new regulations extend the old regulations for a year, without amendment, retaining all their problematic features, and freeze the value of the grant at R350. Civil society partners have repeatedly demanded government address unjust aspects of the regulations in multiple submissions, and legal letters to government.

The amended draft regulations:

Violate the commitment of the President to adjust all ‘existing grants’ for inflation. The value of the SRD grant has not been increased since 2020, and will have dropped by 20% in real terms by 2024. This is a slap in the face of beneficiaries who already struggle to buy basic food with this meagre amount.
Retain the excessively low means test of R624 which is effectively excluding millions who had previously qualified for the grant.
Sets the stage for Treasury to further slash the budget for the grant, based on the collapse of grant numbers, itself caused by exclusionary regulations. This will be a retrogression of the constitutional rights of many, and certainly violate the President’s commitment to progressive realisation of basic income for all who need it.
Retains regulations which the IEJ and our partners are advised are unlawful. This lays the basis for a court challenge given that other attempts to address these concerns have failed. While we will submit comments on the Regulations, it is now clear that other interventions are necessary if this matter is to be resolved.

We call on the President even at this late stage to intervene. The grant should be increased to the Food Poverty Line (FPL) of R663; the means test raised to the Upper Bound Poverty Line; and the exclusionary provisions denying millions access to the grant revoked. At the very least, an inflationary increase for the period 2020-2023 should immediately be introduced, and a commitment to improve the grant to the FPL during the course of the year via a supplementary budget if necessary.

BACKGROUND

In December 2022, the Finance Minister, Enoch Godongwana, announced that the R350 COVID-19 SRD grant would not be taken away and could form the basis of permanent income support. Despite this concession, the grant faces a number of challenges. IEJ has detailed in a submission—shortly to be released—the changes that need to be made to the regulations to ensure fairness in the administration of the grant. The primary purpose of these recommendations is to address the major drop-off in approvals and subsequently in applications that has happened since the regulations governing the grant were changed in March 2022.

There can be no doubt about the immense need that the SRD grant is designed to respond to: the Department of Social Development (DSD)’s own figures show that 18.3 million people in South Africa live below the FPL, and 13.4 million have no income. Applications for the grant in February and March 2022 were well above 15 million, and 10.9 million were approved, despite many being disqualified by faulty databases.

However, in the 2022/2023 Budget, Treasury provided a budget allocation for only 10.5 million recipients. As a result, DSD and SASSA had to develop regulations and restrictions which would tighten access to the grant. Most notably these included a means-test income threshold initially set at R350 a month—an amount that does not even reach the FPL. In order to enforce this means-test, the Department made use of an onerous, intrusive and confusing online application form which resulted in people inadvertently and erroneously excluding themselves.

Applicants must also allow for checks to be conducted on their bank accounts to ensure that they do not receive any payments above the threshold into their account. The result of this is that applicants could be excluded for receiving help from families, child support maintenance or once-off payments (from for example funeral plan coverage). Given that the SRD only pays R350 a month, this restriction essentially requires applicants to survive on impossibly low means.

Taken together, the low means-test threshold and the complex and exclusionary application and approvals process are at the heart of the major drop in numbers of people receiving the grant. Starting in June 2022, approvals began dropping significantly followed by a decline in applications. Although there was some recovery in approvals, by January 2023, approvals (at 7 487 351) had still not returned to pre-March 2022 levels. This is not a reflection that the level of need in South Africa has declined.

While fewer people were managing to successfully apply for the grant, a much smaller number still were actually receiving it. Approvals as a percentage of applications dropped from ~68% in November 2021 to ~59% a year later. DSD cited concern about the low numbers of approvals in a statement in July 2022, and linked this to the low means-test threshold. The result of the drop in approvals (and subsequent drop in applications) is that DSD is likely to not use the available funds for the 2022/2023 financial year—a shocking indictment.

Equally worrying is the fact that many beneficiaries who have had their applications approved, are not actually receiving their monies. In last week’s presentation to Parliament by SASSA we heard that around 1.3 million people per month whose applications had been approved, have not been paid over the last three months.

These low approval and payment levels are artificial—they are the result of government systems, rather than actual need or eligibility. They should be understood in the context of the barriers that the regulations have placed on people’s ability to receive the grant—themselves a product of a limited budget—as well as the administrative difficulties that arise from managing a system with extensive, complex and at times irrational rules and procedures.

Further cutting the budget will only exacerbate this injustice. National Treasury must meet the President’s commitments, and ensure that the grant is adequately funded and staffed in such a way that it can serve its primary purpose: to alleviate poverty and provide support for the most vulnerable in our society.

The Government has an obligation to continue to progressively fund social protection and assistance which has been enshrined in practice and in legislation. Section 27 of the Constitution provides that everyone has the right to have access to social security, including, if they are unable to support themselves and their dependents, appropriate social assistance. The Constitution requires that social assistance be provided on the basis of a needs-based approach to identify those with a right to the grant, and that all such persons be treated consistently and equally. This is reinforced by the International Covenant on Economic, Social and Cultural Rights which South Africa has ratified.

The SRD grant must be provided for all those who need and are eligible for it, in the current as well as in future budgets and adjustment budgets. As recent experience has shown, with the political will the necessary resources can be found. But it would be inconsistent with these constitutional and international law obligations for government to refuse to assist people in South Africa who have no other means of support, and are facing dire hunger and distress, in the context of current large revenue overruns.

[ENDS]

Statement