Treasury proposed massive social grant increases alongside 2% VAT increase

Finance Minister Enoch Godongwana’s proposed 2% increase on VAT has been shot down by Cabinet ministers in the Government of National Unity, but the Treasury political head’s Budget Speech which was never delivered showed that he intended to make massive increases on the social grants paid by the government.

It is unclear if he will table different figures when he re-tables his Budget Speech on March 12.

Treasury documents released on Wednesday showed that a 2% VAT increase would have injected R58 billion into the fiscal, which Godongwana said would have been used to fund the immediate projects including the revitalisation of the public railway system for the benefit of the poor and working class, hiring and retaining teachers, doctors, front line workers and other public servants, while also capacitating the government’s early childhood development programmes. 

Godongwana also intended to announce that he would inject a whopping R23.3 billion into the social grants and welfare programmes, a massive increase which he said was aimed at shielding the over 25 million social welfare beneficiaries from the proposed massive 2% VAT increase which arguably would have left the poorest of the poor worse off.

“Spending on social grants is allocated an additional R23.3 billion. This is to ensure that low-income households are not left worse-off by the increase to the VAT rate,” Godongwana intended to say in his Budget Speech on Wednesday. 

The government's old age grant was set to increase by a massive R150 throughout the year, with an immediate R140 increase in April and an additional R10 increase in October, while the child support grant would have increased by R50 to R580 per month. 

The foster care grant was due for an R80 increase, while an additional R11 billion had been allocated for the next two financial years to fund and incentive the early retirement of public servants in order for the civil service to employ younger people. 

SOCIAL GRANT INCREASES 

“Preliminary savings are expected to average R7.8 billion per year over the medium to long term. The savings will be retained by departments,” Godongwana had intended to say. 

In terms of the COVID19 Social Relief of Distress (SRD), Godongwana had intended to extend the programme for a further year until March 2026, at a cost of R35 billion. 

The SRD has over 8 million recipients. 

“As announced by the President in the State of the Nation Address, the COVID 19 SRD will be used as a basis for the introduction of a sustainable form of income support for unemployed people.

“The future form of the COVID19 SRD will be informed by the outcome of the review of active market programmes.This is expected to be completed by September this year.

“The apprenticeship and skills development levy systems will also be reviewed. In collaboration with the private sector, our goal is to double the number of artisans completing trade tests in the next three years through increased work-based learning opportunities,” Godongwana had intended to announce. 

IOL