So­cial grants hike is no bang for your buck

CityPress - - Business - De­wald van Rens­burg

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. –

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