“Transforming South Africa: From Greylists to Welfare Initiatives”

“Introduction: South Africa’s Financial Landscape”

South Africa, greylisted by global financial crime watchdogs for failing to prevent money laundering and other finance proliferations, is edging closer to introducing a dole payday system for millions of jobless citizens, while tweaking the move towards providing a National Health Insurance (NHI) system and provide financial relief for the country’s cash-strapped civil servants by introducing a two-pot payment break.

Financial Challenges and Welfare Initiatives

ANC Finance Minister, Enoch Godongwana, apart from punishing the nation’s millions of social drinkers, socialites, party-goers and serial smokers, by hiking the tariffs for alcoholic beverages, cigarettes and cigars, focused on how the post-Covid-19 pandemic social relief grant of distress could become a permanent feature of the country’s burgeoning image as a welfare state, the implementation of the NHI – which is bound to hit the profits of a multitude of privately-owned hospitals and health centres the hardest – and introducing the two-pot pensions payout deal during the sixth annual Budget Day presentation in Parliament in Cape Town.

Healthcare Overhaul: National Health Insurance (NHI)

After 30 years of democratic rule, the country has to take care of almost 18 million men, women, single-parents and children – not excluding war veterans – at an annual budget running into billions of rands, a scary welfare-state scenario against a backdrop of shrinking revenue from a lower tax base for a population of 62 million is taking shape. On the flipside of the social relief of distress, grants will be pegged at R350 per jobless man, woman or student for another year.

Social Grants and Fiscal Responsibility

The minister raised the monthly social grant dished out by the South African Social Security Agency (SASSA) for old age, war veterans, disability and care dependency grants recipients by R100. Since October 2023, SASSA has been paying R2 090 monthly to recipients, aged 60 to 74, increased from R2 080 previously toR2 100.Seniors, aged 75 years and older, will receive R2 110. The amounts for 2024 will be split between R90 in April and R10 in October. Guardians of foster children will receive a R50 increase monthly for foster care and a mere R20 more for child support grant.

The budgets we have tabled since 1994, have been about securing the goal of growing the economy

Presenting the last budget of the sixth democratic administration, the minister told the nation that SASSA, which spent R232 billion on social grants in 2022, making up 11% of the national budget, paid out grants to 26 million recipients every month: “Our mission over the past 30 years has been to restore both social and economic justice to our nation, and to decisively address the inequality that was the hallmark of systemic discrimination and dispossession. The budgets we have tabled since 1994, have been about securing the goal of growing the economy, so that we can do more to address the inequalities and deprivation that still scar our society and undermine the promise of democracy.”

The minister said social grants were expected to increase to keep in line with inflation,

A study points to the country spending between R4.8 trillion and R6.2 trillion on transport, water and sanitation, basic education, and Technical and Vocational Education and Training (TVET), ranging from 2022 and 2030 in order to close the social distress grants gap in all these vital sectors, amidst a ballooning 31% unemployment rate.

The minister said social grants were expected to increase to keep in line with inflation, with increased access for eligible recipients, but does not include millions of recipients of the Social Relief of Distress Grant (SRD) at R350 each, running into R8 billion annually: “We are sensitive to the increase in the cost of living for the nearly 19 million South Africans who rely on these grants to make ends meet… we have done as much as the fiscal envelope allows.”

The minister said the social grant expenditure, barring the SRD grant, would increase from R217.1 billion in 2023/24 to R259.3 billion in 2026/27, while the Covid‐19 SRD grant would be allocated R33.6 billion in 2024/25, followed by provisional allocations for the 2025/26 and 2026/27: “Work is currently underway to improve the Covid-19 Social Relief of Distress Grant by April this year. National Treasury will work with the Department of Social Development in ensuring that improvements … are captured in the final regulations … within the current fiscal framework. For the extension of the grant beyond March 2025, the social security policy reforms, together with the funding source, will be finalized. ”Treasury forecasts beneficiaries to increase from 18.8 million in 2023/24 to 19.7 million in 2026/27.

Two-Pot Pension Payouts and Retirement System

On the two-pot pension payouts, Godongwana said: “Progress has been made on the two-pot retirement system … the first cash withdrawals could be made from the savings pot.”

On the NHI system, the minister’s allocation of R1.4-billion for NHI preparation for medical tax credits demonstrated the government’s commitment to the new policy: “However, several system-strengthening activities seen as key enablers of an improved public healthcare system must be undertaken.
The minister soberly turned his axe on the sin tax items. A nation of beer lovers will cough up 14 cents more for a can of ice-cold, thirst-quenching barley and malt; cider and alcoholic fruit beverage up by 14 cents, while millions of wine lovers will pay an extra 28 cents for a bottle of tipple, with fortified wine at an extra 47 cents; sparkling wine at 89 cents more; and connoisseurs of spirits of whisky, gin or vodka at R5.53 extra.

Sin Taxes and Fiscal Discipline

Lovers of Cuban cigars and cigarette products will pay an increase in tobacco excise duties by 4.7% for cigarettes/tobacco and by 8.2% for pipe tobacco and cigars, at R9.51 extra for cigars, 97 cents increase for a pack of cigarettes; and an extra 57 cents for a pipe of tobacco.
The budget was a balancing act between stabilising the nation’s debt burden with fiscal discipline and social investments, while no major change in tax hikes including VAT and no fuel levy increases. Catherine Wijnberg, CEO of Fetola, commented: “We urgently need to encourage a culture of buying and contracting from local SMEs (small medium enterprises) and make it easier for these businesses to access finance so that they can scale up. What the 2024 Budget clearly revealed is that the government has limited fiscal space to change the country’s economic trajectory, so it will be up to the private sector to find a way to pave a more sustainable future for the country.”

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