Economists had mixed reactions to the Gauteng High Court ruling which declared certain Social Relief of Distress (SRD) grant regulations unconstitutional.
The ruling, delivered by Judge Leonard Twala, declared several key regulations invalid. The judge invalidated the regulation that set the income threshold for insufficient means at R624 per person per month.
Judge Twala ordered the Departments of Social Development and Finance to progressively increase both the value of the SRD grant and the income threshold.
He also stressed the need to ensure that the SRD grant is provided to all individuals unable to support themselves financially.
Independent economic analyst Professor Bonke Dumisa expressed scepticism about the ruling’s effectiveness in reducing poverty.
He warned: “What it may unfortunately increase (is) the number of fake claims.”
Dumisa highlighted past issues where stringent regulations were necessary to prevent fraudulent activities, including instances where public servants sought to cash in on grants for the poor.
“The unfortunate unintended consequence of this court ruling is that it will increase the serious fiscal challenges faced by the government in meeting service delivery expectations.”
Dumisa also raised broader concerns about the sustainability of South Africa’s social security system.
“The levels of social security coverage in South Africa are almost the highest on the continent,” he said.
Comparing South Africa to other welfare systems, he added: “The United Kingdom, which was once the best-known social welfare country in the world, has publicly stated that their ‘dole system’ is unsustainable.
“It’s worse with South Africa, with its very high levels of unemployment at over 40% according to the Expanded Definition of Unemployment.”
Dumisa expressed doubt that the expanded grant system would significantly benefit local economies, warning it might foster a “culture of entitlement” without addressing structural economic challenges.
Professor Irrshad Kaseeram of the University of Zululand acknowledged the ruling as a victory for the poor, referencing a World Bank report indicating that approximately 55% of South Africans, or about 30 million people, live in poverty.
He emphasised that while the ruling facilitates easier access to the grant and mandates adjustments in line with rising living costs, the government’s financial constraints posed challenges.
“The government is highly indebted, and about 20% of its revenue is used for debt servicing charges, leaving very little resources for infrastructure investment to create jobs,” Kaseeram said.
He pointed out that the current debt-to-GDP ratio is around 76%, while an ideal rate should be about 40%. In short, the lofty ideals of the court ruling are unaffordable,” he said.
Professor Waldo Krugell, an economist at North-West University, highlighted the mixed outcomes of grant programmes.
“It does help to lift people a little bit out of poverty, but it is not as powerful a tool as getting a job,” he said.
“Expanded access will help, but it is not the solution to all our problems, and we have to be able to afford it.
“The Treasury has said that South Africa cannot afford a significant expansion of the grants system. The economy has been growing too slowly for too long, which means that the tax base is not growing fast enough to afford it.”
Krugell advocated for reforms aimed at accelerating economic growth and job creation as more sustainable solutions to poverty alleviation.