Social grants hike is no bang for your buck
It might not be an “austerity budget”, but according to Finance Minister Pravin Gordhan’s Budget Review this week, South Africa’s all-important social grants are set to fall noticeably in real terms.
Gordhan’s budget this week included a 6.4% increase for old age state pensions and a 6.1% hike for the childcare grant.
While that is more or less equal to the official “headline” inflation rate, the official rate is set to have little meaning for grant recipients this year.
According to Stats SA’s latest inflation figures for January, the inflation rate for the poorest 20% of South Africans is already at 6.6%.
Considering the role of food in poor household budgets, this situation would get worse, said Dick Forslund, economist for the Alternative Information and Development Centre. For the richest 20%, it is 6.2%.
The rate for the rich usually determined the official headline rate simply because inflation measures the value of money, and the rich spend more money.
Because of the means test tied to grants, recipients by definition fall in the lowest three “quintiles” as measured by Stats SA.
Child grant recipients automatically fall into the lowest two, where inflation is already higher than the grant increases.
In times when inflation is driven by food, poor people’s inflation tends to be higher than rich people’s.
The SA Reserve Bank expects headline inflation to go as high as 7.8% this year. The inflation rate for poor people will almost certainly be higher than that. –