Finance Minister Tito Mboweni. Picture: Nokuthula Mbatha/African News Agency (ANA)
Finance Minister Tito Mboweni. Picture: Nokuthula Mbatha/African News Agency (ANA)

Treasury defends below inflation increases in social grants and general budget cuts

By Mayibongwe Maqhina Time of article published Feb 26, 2021

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Johannesburg - The National Treasury has defended the below inflation increases for social grants and cuts in social spending projected for the next three years.

On Thursday, MPs across the political divide took a swipe at the department for the 1.6% increase in social grants in the 2021/22 financial year.

According to the National Treasury’s budget document, R36 billion cuts in social grants are projected in the medium term due to cabinet approved reductions.

The report said there will be a R5.8bn reduction in2021/22, R10.7bn in 2022/23 and R19.5bn in 2023/23 with all grant values increased by less than inflation.

DA MP Geordin Hill-Lewis was the first to launch criticism saying the decision for the very far below inflation increase in social grants was an indefensible decision when bailouts were prioritised.

“It was a poor decision. I find it a bit surprising and quite inexplicable. It says much about priorities of the government,” Hill-Lewis said.

“The result is that the poor are getting poorer in South Africa as a result of the below inflation increases,” he charged.

ANC MP Noxolo Abrahams said it was the first time in more than a decade that social grant increases were less than inflation.

“This means people will have less in their pockets with the 1.6% increases over a three-year period. Why did the Treasury opt for the below inflation increases given many families depend on social grants to survive?” Abrahams asked.

EFF chief whip Floyd Shivambu also questioned the rationale of the decreases in social grant allocation, saying the amount to be allocated to the beneficiaries would also decrease.

“What is to happen when numbers are inevitable to increase,” Shivambu said.

He noted the decrease, which is also in the education sector including the National Student Financial Aid Scheme (NSFAS), formed part of the austerity budget and the fiscal consolidation.

“It means lesser numbers of students are to be allowed in the institutions of higher learning because of fiscal consolidation you are denying without scientific value,” Shivambu said.

Responding to the MPs’ questions deputy director-general for finance Mampho Modise said the National Treasury has since 2012 when it started to reduce growth in the budget ensured social grants were protected.

“Even when we had to find R56bn for free higher education, we managed to protect social development,” Modise said.

She said what they had picked up was that there was a need for consolidation and the need to deal with the budget deficit.

“It was difficult to fully protect social development or the grants. We did look at the implications and, of course, we understand what less than inflation means, but we try to make sure that at least we do increase social spending,” she said.

“What will happen, we hope, that by doing good now and consolidation will give us leeway in the future, and if that happens, of course, social grants will be one of the first spending items to consider in  terms of where we are looking at the poverty line and other lines.

“What we do is to balance between the need to protect the poor and the need to consolidate and try to fix our problems now so we can have some leeway in the future," Modise said.

On the NSFAS funding, she said they were already working with the Department of Higher Education and Training to deal with funding issues of the bursary fund.

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Political Bureau

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