Covid-relief grant (SRD) gets another 1-year extension
“The future form of the grant (SRD) will be informed by the outcome of a review, expected to be completed in September,’ says Finance Minister Enoch Godongwana.
In a landmark announcement during the 2025 Budget Speech, Minister Godongwana confirmed significant increases for key social grants and extended the Social Relief of Distress (SRD) grant until March 2026.
The SRD grant, initially introduced as temporary Covid-19 relief, is now positioned as the foundation for a future Basic Income Grant (BIG), signaling a transformative shift in South Africa’s social welfare framework.
SRD grant extended: A pathway to universal income support
The National Treasury allocated R35.2 billion to extend the SRD grant at its current rate of R370 per month through March 2026, with provisional allocations of R36.8 billion in 2026/27 and R38.4 billion in 2027/28.
Godongwana emphasised the grant’s evolving role, stating:
“The SRD grant will be used as a basis to introduce a sustainable form of income support for unemployed people. The future form and nature of the SRD will be informed by the outcome of the review of active labour market programmes.”
This extension comes amid ongoing debates about fiscal sustainability. While the grant currently supports 8 million beneficiaries, a recent court ruling criticized its eligibility criteria as “too onerous.”
Treasury is appealing the decision, fearing looser rules could drastically increase costs.
Above-inflation increases for Key Social Grants
SASSA social grants for older persons, war veterans, and childcare recipients will see inflation-beating increases effective 1 April 2025:
- Social grants for Old Age Persons, War Veterans, and Disabled and Care Dependency recipients have seen a significant increase by R130 (from R2,185 to R2,315).
- Foster Care Grant: Rises by R70 (from R1,180 to R1,250).
- Child Support Grant and Grant-in-Aid: Up by R30 (from R530 to R560).
While these hikes are smaller than initially proposed in February, they outpace Treasury’s revised inflation forecast of 4.3% for 2025. For example, the Child Support Grant’s 5.7% nominal increase translates to a 1.4% real-term boost.
VAT hike adjusted to fund social wage
Treasury scaled back plans for a 2% VAT increase after public backlash, opting for a phased approach:
- 15.5% from 1 May 2025.
- 16% from 1 April 2026.
Godongwana defended the move:
“By opting for a marginal increase… its distributional effect and impact were cautiously considered. The increase is the most effective way to avoid further spending cuts and to enable us to extend the social wage.”
To mitigate the VAT impact on low-income households, Treasury expanded zero-rated foods to include offal, tinned vegetables, and dairy blends. As Investec has pointed out in a recent review, ongoing discussions surrounding the fiscal framework will be crucial in determining the sustainability of such social support measures.
Court battle over SRD eligibility criteria
A January 2025 court ruling ordered Treasury to relax SRD grant requirements, which officials argue would swell beneficiary numbers and strain the fiscus. Godongwana confirmed the appeal, stating:
“More qualifying beneficiaries would lead to an unacceptably high expense.”
The outcome of this legal challenge could reshape South Africa’s social safety net, as the SRD grant transitions from emergency relief to permanent income support.
Review of SASSA social grant programs underway
Treasury is conducting a comprehensive review of all social protection and employment programs, expected by September 2025. Edgar Sishi, head of Treasury’s budget office, noted:
“The appropriation for the [SRD] grant is until March 2026 while the review process is ongoing.”
South Africa’s social grant system already supports 19 million people (excluding SRD recipients), a figure projected to grow to 19.3 million by 2027/28 due to an aging population.
Balancing fiscal responsibility and social needs
While social spending rises by R8.2 billion over the medium term, this is a sharp reduction from February’s proposed R23.3 billion increase. Critics argue the revised VAT and grant hikes reflect austerity pressures, but Treasury maintains the balance ensures long-term sustainability.
“We are committed to extending the social wage while safeguarding fiscal stability,” Godongwana concluded.
As Investec Treasury Economist Tertia Jacobs emphasised in her 2025 Budget Speech analysis, the viability of expanded social support depends on critical fiscal framework debates. “The ongoing discussions and decisions surrounding the fiscal framework will be crucial in determining the sustainability and effectiveness of such social support measures,” she noted.
