Durban – While millions of beneficiaries of the R350 Covid-19 social relief of distress (SRD) grant are waiting with bated breath to find out whether the government will permanently continue with it, economists believes the country can’t afford it.
The grant has been paid to unemployed people for the past six months as part of a R500 billion economic and social support package announced by President Cyril Ramaphosa in April.
There were also additions made to child support grants and the old-age pension which are all due to expire this month.
However, there has been a growing call to keep the SRD grant permanently due to the massive unemployment rate.
With more than 2 million people having lost their jobs due to the pandemic, the grant was said to come in handy to mitigate poverty.
This week Lindiwe Zulu, Minister of Social Development, said her department has proposed to continue paying the R350 until the end of the financial year.
Zulu insisted that a recent survey showed that the R350 has made an impact on people’s lives and she would like to see it extended.
She also said a team of experts has met for a feasibility study on the introduction of basic income grants to be paid to unemployed citizens between 18 and 59.
“We urge all people to come on board on this issue, it’s not only a social development problem, or NGO, but the private sector and other departments must also assist.
“There is support from the ruling party and we believe the state has the capacity, but we have to be creative about this. The team of expert and engagement are on an advanced stage about the basic income grant,” said Zulu in a television interview.
But economists warned no country in the world could afford such a grant permanently.
Economist Mike Schussler said in order to afford this, the government would have to increase income tax by 12% while VAT increased by at least 2%.
“This seems highly impossible. The government needs to make a politically compromising decision and focus on creating more jobs. The stats show that over 10 million people are unemployed. If you pay them R350 every month that is R4 billion which translate to 1% of our GDP (gross domestic product), where are we going to get that money from?” he asked.
“It is not sustainable. It’s going to force the government to borrow money which the international rating agency had warned against.”
Economist Professor Bonke Dumisa said apart from the feasibility, administratively the government was failing to administer the
distribution of grants. He said the country would be acting rich while it is poor if it kept the grants permanently.
“We have been warned by the rating agency that South Africa was already boxing above its weight. Our spending is very high compared to what we collect. If this is approved it will be used to score political points and they will be a demand to increase the grants for political gains. Other countries such as Greece are still suffering because of such a decision.
“If the government is not careful we will become like Zimbabwe.”