Increase SRD grant to R700, says Institute for Economic Justice

Can be funded through progressive tax policies, including 'luxury VAT'

The Institute for Economic Justice (IEJ) wants the social relief of distress (SRD) grant to increase to R700, suggesting it can be funded through a combination of progressive tax policies including a luxury value-added tax (VAT).

The grant, also known as the R350 grant, was introduced in 2020 as a temporary measure to alleviate financial hardship during the Covid-19 pandemic.

While the government confirmed an increase to R370 from April, the IEJ suggests the amount falls far short of meeting the basic needs of South Africa’s most vulnerable people.

According to budget policy researcher Zimbali Mncube from the IEJ, the SRD grant should match the food poverty line of R700 a month to provide sufficient support. Mncube argues that raising the grant could have a positive ripple effect on local economies as recipients are likely to spend the money in their communities.

To pay for the increase, the IEJ has outlined several funding options, aiming to raise revenue without burdening the lower-income groups who are the primary recipients of the grants.

One proposal is the introduction of a luxury VAT, which would target high-end goods purchased by wealthier South Africans. The IEJ believes such a tax would help balance the government’s welfare spending without placing additional strain on the broader population.

In addition, the IEJ suggests a wealth tax which would involve levies on high-income earners and adjustments to their tax rebates, creating a more equitable taxation system. Another potential revenue stream suggested by the IEJ is increased duties on dividends and estates. These measures would be designed to raise funds without hurting the broader, lower-income population.

By focusing on income generated from wealth rather than consumption, the government could help ease the tax burden on the working class while ensuring continued funding for vital social services.

The government has already taken steps to adjust the SRD grant, with finance minister Enoch Godongwana announcing a R20 increase, bringing the grant to R370 a month. However, many critics, including the IEJ, argue that this increase is insufficient, given the rising cost of living and deepening poverty in the country.

The Sunday Times last year reported budget cuts were implemented for departments. The National Treasury had issued a cost-containment memorandum at the end of last August urging departments to curb spending. This after the Western Cape education MEC David Maynier confirmed that 2,400 teaching posts would be cut in 2025 due to a R3.8bn budget shortfall over the next three years.

Social development and welfare programmes, including grants like the SRD, form a significant part of South Africa’s national budget.

This year about 60% (or R3.7-trillion) of this will be spent on social services, which will pay the salaries of teachers, nurses and doctors, and will also pay for social grants. About 19.7-million people will receive social grants by March 2027.

While the increase to R370 is a positive step, many argue more needs to be done to address the growing disparities in wealth and ensure that all South Africans have a basic standard of living.

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