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By Siboniso Mngadi 
57m ago
Durban: While millions of recipients of the R350 Covid-19 Social Distress Relief (SRD) grant wait with great anticipation to find out whether the government will continue with it permanently, economists believe the country cannot afford it.
The grant has been paid to unemployed people for the past six months as part of a 500 billion rand economic and social support package announced by President Cyril Ramaphosa in April.
There were also additions to subsidies for child support and old-age pension, which will expire this month.
However, there has been a growing call to keep the SRD grant permanently due to the huge unemployment rate.
With more than 2 million people losing their jobs due to the pandemic, the grant was said to be helpful in alleviating poverty.
This week Lindiwe Zulu, Minister of Social Development, said that her department has proposed to continue paying the R350 until the end of the financial year.
Zulu insisted that a recent survey showed that the R350 has made an impact on people’s lives and would like to see it extended.
He also said that a team of experts has come together for a feasibility study on introducing basic income subsidies to be paid to unemployed citizens between 18 and 59 years old.
“We urge all people to join in on this issue, it is not just a social development issue, or an NGO, but the private sector and other departments should also help.
“There is support from the ruling party and we believe that the state has the capacity, but we have to be creative about it. The expert and commitment team is at an advanced stage on the Basic Income Grant, ”Zulu said in a television interview.
But economists warned that no country in the world could permanently afford such a subsidy.
Economist Mike Schussler said that in order to pay for this, the government would have to increase the income tax by 12%, while the VAT would increase by at least 2%.
“This seems very impossible. The government must make a politically committed decision and focus on creating more jobs. Statistics show that more than 10 million people are unemployed. If you pay them R350 every month, that is, R4 billion, which translates to 1% of our GDP (gross domestic product), where are we going to get that money from? I ask.
“It is not sustainable. It will force the government to borrow money that the international rating agency had warned against. “
Economist Professor Bonke Dumisa said that apart from feasibility, administratively the government was not managing the
grant distribution. He said the country would act rich while poor if it kept the subsidies permanently.
“The rating agency warned us that South Africa was already outgrowing its weight. Our spending is very high compared to what we collect. If approved, it will be used to score political points and will be a lawsuit to increase grants for political gains. Other countries like Greece are still suffering from such a decision.
“If the government is not careful, we will be like Zimbabwe.”
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