The government is considering repurposing social relief of distress (SRD) grant, with a proposal to pay out a lump sum to recipients who prefer to start businesses as part of a strategy to promote entrepreneurship.
This ambitious proposal is one of the options contained in a draft Growth and Inclusion strategy – a framework to revive growth and create jobs in SA – a document compiled by several departments that was recently presented in cabinet.
The idea is believed to be the brainchild of the department of small business development.
The document is mute about the criteria to be used to award the funds or the kind of business the state will sponsor. It is also not clear where the money will come from, a huge headache for a country with limping economic growth.
However, it states that redesign of the SRD should be finalised before the announcement of 2026/27 budget speech and the department of social development has the responsibility to implement the plan. But government insiders suggested that the proposal would not be adopted as it was unaffordable.
"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, underpinned by integrated data.
"Augmented SRD grant to provide support grant recipients, including the option of a lump sum payment and support to start and scale a business," the documents suggest.
The SRD should be redesigned to strengthen linkages to employment and productive opportunities
— Growth and Inclusion strategy
However, there have been opposing views on this approach.
Duma Gqubule, an economy expert, said the government cannot use social grants to solve small, medium and micro enterprises' (SMMEs) challenges.
"The Treasury has been opposed to this SRD grant for long but the ANC has been quite clear that the SRD must be converted to a basic income grant, so what we should be talking about is not the lump sum payments or SMMEs, that is something different. 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 nine-million SRD beneficiaries should start a business, no," he said.
Gqubule said the move is an effort to create obstacles for people trying to access the SRD.
Prof Peter Baur, an associate of the school of economics at the University of Johannesburg, said the plan to support, start and scale businesses can stimulate entrepreneurship, create jobs and spending which could lead 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.
He, however, said that due to budget constraints, the country would have to seek international support to sustain such an intervention.
"The tax base is relatively small due to the low economic growth and the high level of unemployment within the economy. 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 said.
Baur said the risk, however, would be on inflation, by increasing potential inflationary pressure would possibly induce restrictive monetary pressure.
The proposal comes against the backdrop of a struggling economy with SA's unemployment rate rising by 0.3 percentage points. The automotive sector is also facing thousands of job losses due to high production costs.
The proposal comes as President Cyril Ramaphosa on Monday announced the ANC's 10-point economic recovery plan, and one of its pillars is to expand support to SMMEs through investment by development finance institutions.
"In particular, concessional finance and market access for SMMEs should be expanded. Development finance institutions will be transformed into catalytic investors,” said Ramaphosa.
Former deputy chairperson of Pay the Grants, Elizabeth Raiters, said the lump sum system will not work. "I think we should stick to the 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," she said.
Black Sash communications manager Oliver Meth condemned the idea of a lump sum. "This move is deeply worrying, discriminatory, and likely to compound the exclusion of already vulnerable people.
"While the intention may be to incentivise business activity or self-reliance, 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," he said.
President of the township Economic Commission SA, Bheki Twala, said the idea for a business start would not work if beneficiaries are given cash and the proposal was an election gimmick.
"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 ... you rather come up with a system and say if you want to give people money [to start a] small business you don't give them money, you rather give them vouchers to go and buy stock and register a company," he said..
African Accent Spaza Shop spokesperson Bongani Mabuza said not everyone was an entrepreneur, and that the government would have to do its research to identify those who would use it for business ideas.
Sowetan reached out to the ministry of Small Business Development for comment but they had not responded by the time of going to print.
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