Johannesburg – The South African government is weighing a proposal to repurpose the Social Relief of Distress (SRD) grant, offering recipients the option of a lump sum payment to start businesses. This initiative is outlined in a draft growth and inclusion strategy aimed at stimulating economic growth and job creation, recently presented to the cabinet.
The concept, reportedly originating from the Department of Small Business Development, aims to promote entrepreneurship among SRD grant recipients. However, the document lacks specific details on the criteria for awarding the funds or the types of businesses the state would support. Funding sources for the initiative also remain unclear.
The draft strategy suggests that the redesign of the SRD grant should be finalized before the 2026/27 budget speech, with the Department of Social Development responsible for implementation. Despite this, government insiders have indicated that the proposal may be deemed unaffordable.
The document states that “The SRD should be redesigned to strengthen linkages to employment and productive opportunities. A single entry point should be established for all forms of support, from social protection to active labour market polices and public employment…Augmented SRD grant to provide support grant recipients, including the option of a lump sum payment and support to start and scale a business.”
This approach has drawn mixed reactions from experts and civil society organizations.
Economist Duma Gqubule argues against using social grants to address the challenges faced by small, medium, and micro enterprises (SMMEs). "I think it is evil to take resources from poor people and put them into SMMEs. These are two separate interventions, we must not mix them up because are you saying all 9-million SRD beneficiaries should start a business, no.” Gqubule believes this move is an attempt to create obstacles for people trying to access the SRD.
On the other hand, Prof Peter Baur, an associate of the school of economics at the University of Johannesburg, suggests that supporting the start and scaling of businesses could stimulate entrepreneurship, create jobs, and boost spending, leading to further economic growth.
“However, as there is no control over how the funds could be used to support households, the real effect of such a stimulation could result in diverse outcomes,” he said.
Baur acknowledges South Africa's budget constraints, noting that “The tax base is relatively small due to the low economic growth and the high level of unemployment. However, international support through organisations such as the International Monetary Fund, increasing government borrowing, and seeking additional investment by international companies may further support such an initiative. However, all of these lead to their own set of challenges. Increasing borrowing leads to additional interest payments, increasing the debt burden on the state.” He also warns of potential inflationary risks.
The proposal aligns with President Cyril Ramaphosa's recent announcement of the ANC’s 10-point economic recovery plan, which includes expanding support to SMMEs.
However, former deputy chairperson of Pay the Grants, Elizabeth Raiters, opposes the lump sum system, advocating for a universal basic grant. “That is the best option to bring SA out of poverty and actually putting the money back to society because right now R370 pays you one hamper [of food], roll on and you can’t even buy meat… so even the value of the grant is not even worth it.”
Black Sash communications manager Oliver Meth also condemns the lump sum idea, stating, “This move is deeply worrying, discriminatory, and likely to compound the exclusion of already vulnerable people. …making access to social relief contingent on entrepreneurial status or vetting of business viability is fundamentally at odds with the purpose of the SRD grant: to provide a safety net and immediate relief to those who have no other form of income or state support.”
President of the Township Economic Commission SA, Bheki Twala, believes the proposal is an election gimmick that will fail if beneficiaries are simply given cash. “People would take that money and spend it. It is really not going to work; you can’t really solve a problem by throwing money at people … if you want to give people money [to start a] small business you …give them vouchers to go and buy stock.”
African Accent Spaza Shop spokesperson Bongani Mabuza emphasized that not everyone is an entrepreneur and that the government must conduct thorough research to identify those who would effectively use the funds for business ventures.
The Ministry of Small Business Development did not respond to requests for comment by the time of publication. The debate surrounding the repurposing of the SRD grant highlights the complexities of addressing poverty and unemployment in South Africa.
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