As Finance Minister Enoch Godongwana prepares to deliver South Africa’s rescheduled Budget speech on Wednesday, March 12, all eyes are on the future of the Social Relief of Distress (SRD) grant.
The grant, which currently provides R370 per month to millions of vulnerable South Africans, is set to expire on March 31, 2025. Treasury has signaled that securing a long-term funding source—likely through a VAT hike—is essential if the grant is to continue.
In the previous undelivered Budget Speech, Treasury proposed increasing VAT from 15% to 17% to raise R58 billion for grant funding and other expenditures. However, amid intense political backlash, reports now suggest the government is considering a smaller 0.5 percentage point VAT hike instead. The final decision is expected in Wednesday’s Budget address.
A lifeline or a fiscal burden?
The SRD grant was introduced during the COVID-19 pandemic as a temporary relief measure, but many argue that it has become a permanent necessity. Civil society groups warn that discontinuing it could leave millions destitute.
Oliver Meth, spokesperson for Black Sash, firmly rejected the notion that the grant is a burden on state finances:
“The SRD grant is a necessity, not a scapegoat—it is a lifeline for millions of South Africans who are struggling to put food on the table. Trying to pit the needs of the most vulnerable against VAT hikes is not only manipulative but also a distraction from the real issue: mismanagement and misplaced priorities in our country’s Budget.”
Meth further accused the government of using the grant as a “convenient excuse” for austerity measures, arguing:
“If the finance minister is serious about fiscal responsibility, he should start by plugging the holes where public funds are disappearing—not by squeezing more out of those who already have the least.”
However, Treasury maintains that without additional revenue, continuing the SRD grant beyond March 2025 is not feasible. Ministry of Finance spokesperson Mfuneko Toyana reiterated that Minister Godongwana has consistently emphasised the need for a “permanent revenue source” to sustain social support programs.
Coalition partners reject VAT hike
Treasury’s plan has sparked backlash within the Government of National Unity (GNU), with coalition partners – including the DA – warning that a VAT increase—even a small one—would hit the poorest hardest.
DA finance spokesperson Mark Burke criticised the proposal in Parliament, arguing:
“If we know that millions of SA cannot afford basic nutrition … then why is the ANC minister of finance still contemplating making that burger and that coffee and baby formula and electricity more expensive with a VAT increase—how does that achieve economic freedom?”
Good party secretary-general Brett Herron also rejected the VAT hike, calling it **“a lazy, crude and uncaring way to increase revenue.”** He pointed out that South Africa’s tax compliance gap—estimated by SARS Commissioner Edward Kieswetter to be worth R400 billion annually—should be tackled before raising taxes.
PA’s Steven Motale echoed this sentiment, stating:
“We will never support any increase on VAT because of the devastating impact it will have, especially on the poorest of the poor.”
Meanwhile, ActionSA’s Athol Trollip suggested that instead of raising VAT, the government should cut wasteful spending:
“Funding decrepit, obsolete, outdated state-owned enterprises is one of the very first places to cut the fat, including our bloated Cabinet.”
Investec: VAT hike won’t fix fiscal challenges
A pre-Budget analysis by Investec Treasury Economist Tertia Jacobs warns – that even with a VAT increase, South Africa’s fiscal challenges remain severe. Government debt currently stands at 76% of GDP, with 21.1% of tax revenues going toward debt servicing.
“The anticipated multiplier effect of the proposed budget is low,” Jacobs said, forecasting GDP growth of just 1.6% for 2025. She suggested that a smaller VAT increase, combined with other tax adjustments like bracket creep or a pension fund contribution holiday, could ease fiscal pressures without overburdening consumers.
A political gamble ahead of the budget speech
With the Budget speech just days away, the big question remains: Will the government raise VAT to keep the SRD grant alive, or will it allow the grant to lapse in March 2025?
Treasury’s apparent shift toward a 0.5 percentage point VAT increase suggests a compromise—but will that be enough to sustain the grant? Some opposition parties argue that the grant should be made permanent without any tax increases, funded instead by tackling corruption and inefficiencies in public spending.
For millions of South Africans who rely on the SRD grant, the stakes couldn’t be higher. As Minister Godongwana takes the podium on March 12, the nation waits for a decision that could determine the future of social welfare in South Africa.
