A High Court judgment will thwart National Treasury’s attempts to contain expenditure on the Social Relief of Distress (SRD) grant, unless aspects of the decision are challenged and overturned.
The effect of the orders granted in terms of the judgment, delivered on 23 January, will be to increase in the amount of the grant and the number of people who will receive it. The cost of administering the grant may also increase.
The court’s observations and findings about the government’s constitutional obligations in respect of the SRD grant serve to strengthen the hand of advocates for a Basic Income Grant (BIG). The applicants in the matter, the Institute for Economic Justice (IEJ) and Pay The Grants, are among the organisations lobbying the government to introduce a BIG.
The applicants contested the constitutionality of certain of the “Regulations Relating to Covid-19 Social Relief of Distress”, introduced on 29 May 2023 by the Minister of Social Development.
They contended that various regulations and procedures pertaining to accessing the grant have resulted in the irrational, arbitrary, and unfair exclusion of individuals who are legally entitled to receive it. The applicants claimed that the Department of Social Development has admitted that these obstacles were introduced to stay within National Treasury’s allocated budget rather than to ensure “fair access”.
More than 16 million South Africans benefited from the SRD grant after it was introduced in May 2020. With the promulgation of the regulations, and the subsequent amendments to the regulations, the number of applicants who were approved to receive the grant fell significantly. In March 2023, 14 million people applied for the grant, whereas 8.3 million of those applications were approved. This resulted in National Treasury reducing its budget for the grant from R44 billion to R36bn in the 2023 Budget.
Treasury reduced the allocation to the SRD grant to R33.6bn in 2024/25, with provisional allocations of R424 million in 2025/26 and R443m in 2026/27, “pending a decision on the continuity and funding sources of the grant beyond March 2025” (2024 Budget Review).
The value of the grant was increased from R350 to R370 in April 2024.
The respondents were the Minister of Social Development, the South African Social Security Agency (SASSA), and the Minister of Finance.
Judge Leonard Twala ruled that aspects of the regulations governing the SRD grant are unconstitutional and invalid. He ordered the government to take steps to increase the value of the grant, ensure that no eligible applicants are excluded, and address systemic failures in the administration of the grant.
Treasury and the Department of Social Development said last week they were studying the judgment but have yet to announce whether they will file an appeal application.
In a statement, the IEJ said the “far-reaching judgment affirms that up to 18.3 million people should be able to access the SRD grant”. It said the judgment materially impacts more than half of South Africa’s population because the vast majority of those eligible for the SRD grant have dependants.
The IEJ said the judgment is “a sharp rebuke” to National Treasury, which has “overreached into social development policy and imposed unlawful and unconstitutional requirements on SRD grant applicants in an attempt to curtail public expenditure”.
South Africa is in a ‘precarious’ financial position
Treasury, in its submissions, was candid about the government’s financial difficulties.
It said government spending is constrained by revenue collection, primarily through taxation. Borrowing is not a sustainable solution, because it merely defers taxation to the future. The tax base is relatively small, while the government’s obligations extend across multiple sectors, not only socio-economic rights.
“The fiscal position of the country is precarious, as expenditure exceeds revenue by R321.6bn in 2024/25 and the gross borrowing requirement is R559.6bn, rising to R623bn in 2025/26. Therefore, government cannot expand social grants further due to drops in anticipated revenue and increasing debt service costs,” Treasury said.
It said “substantial expenditure” would be required to expand social grants and the SRD grant. The money would have to come at the expense of other expenditure.
“Increasing taxes is not a solution because after many years of increasing taxes to arrest the growing debt, government has instead avoided tax increases since 2020 to limit the negative impact on businesses, households, and the economy. Extending the SRD grant any further will place the entire grant system in jeopardy.”
The state spends R250bn a year on social grants, which is 12.3% of government’s main budget expenditure.
“The fiscal constraints facing government require the expenditure to be reduced by R200bn between now and 2026/27, whilst revenue is projected to drop by R66bn in 2024/2025 and R89.5bn in 2025/2026, and the debt-servicing costs will be R425bn by that time. At the same time, the pool of social grant recipients is expanding by 200 000 recipients per year, leaving aside the massive increase in grant recipients as a result of the SRD grant.”
While acknowledging that the SRD grant’s real value has diminished because of inflation, Treasury said any further increases would require reprioritising other expenditure, which is difficult because of shrinking tax revenues and rising debt-servicing costs.
Treasury said the government’s long-term strategy is to combat poverty through economic growth and job creation, rather than expanding social welfare spending indefinitely.
Significant findings by the court
Some of the most significant findings contained in the judgment, and the orders relating thereto, are discussed below.
SRD grant is not temporary
One of the most critical findings is the court’s rejection of the government’s submission that the SRD grant is a temporary measure.
The respondents argued that the grant, initially introduced under the Disaster Management Act in 2020 to assist those financially impacted by Covid-19, was not a permanent form of social assistance.
However, Judge Twala held that the SRD grant now falls within the Social Assistance Act (SAA) and has the same legal standing as other social grants.
He said South Africa faces an unemployment rate of about 30%, making the SRD grant a critical safety net rather than a temporary intervention. The court reasoned that given the high levels of poverty and joblessness, the grant serves a structural function similar to other permanent social grants under the SAA.
Procedural barriers unfairly exclude eligible applicants
Judge Twala accepted that procedural safeguards are necessary when disbursing public funds, to ensure that only eligible beneficiaries receive the SRD grant. However, he said these safeguards must be reasonable and fair, rather than designed to exclude legitimate claimants or limit government spending because of budgetary constraints.
The judgment is critical of the procedural barriers imposed by the regulations.
Judge Twala ruled that Regulation 3(2), which requires online-only applications, is unconstitutional and invalid, because it effectively excludes many poor and vulnerable individuals who lack access to smartphones, computers, and the internet. He ordered that the regulations be amended to allow for in-person applications at SASSA offices.
Additionally, he struck down Regulation 2(3)(c)(ii), which requires a bank verification test as the primary means of assessing an applicant’s financial status. The court found that this test is unfairly rigid and fails to account for real-life circumstances, leading to the exclusion of deserving applicants.
Judge Twala also criticised the process outlined in Regulation 3 that mandates the use of government databases to check whether an applicant is eligible for the grant.
Both parties in the case accepted that these databases are not updated regularly with the latest information. As a result, individuals may appear on the databases of, for example, the National Student Financial Aid Scheme, the Unemployment Insurance Fund, and the South African Revenue Service when they no longer have active records with these entities.
He criticised the government for persisting in the use of this verification process despite knowing its deficiencies: “It is incomprehensible why the respondents would continue to use the government databases verification process knowing that it provides inaccurate information, which has the result of excluding eligible applicants from receiving the SRD grant.”
The judge declared this part of the regulations unconstitutional and invalid.
Treasury’s interpretation of ‘income’ and ‘financial support’ rejected
A major contention in the case was how the words “income” and “financial support” in the Regulations should be interpreted, because this will determine who qualifies for the grant.
Regulation 2 provides that a person in need of temporary assistance may qualify for the grant if he or she is a person with “insufficient means”. Regulation 1 defines “insufficient means” to mean that a person is not in receipt of “income” or “financial support”.
The applicants challenged the respondents’ interpretation of “insufficient means”, which included any and all money reflected in a person’s bank account, including loans, ad hoc assistance from relatives, and money held on behalf of another person.
The respondents contended that if their interpretation of “income” and “financial support” were not accepted, the value of the SRD grant would increase by up to R60bn a year.
Judge Twala rejected the argument that any money received by an applicant should automatically be considered “income”.
“The interpretation ascribed by the respondents to ‘income’ and ‘financial support’ has the result of excluding and is intended to reduce the uptake of deserving beneficiaries of the SRD grant in order to save money – thus it offends section 27 of the Constitution and is therefore unreasonable and unlawful.”
He ruled that “income” must mean money received on a regular basis from formal or informal employment, business activities, or investments.
Similarly, he held that “financial support” means regular financial assistance that a person is entitled to receive for meeting their basic needs. It does not include ad hoc or once-off financial assistance (for example, occasional help from family or friends). A person should be excluded from the SRD grant only if they receive financial support from someone who is legally obliged to support them (such as a parent supporting a minor child or a spouse providing financial assistance).
Payments cannot be subject to the availability of funds
The applicants challenged the constitutionality of Regulation 5(3)(a), which makes payment of the SRD grant subject to the availability of funds. This limitation is tied to the budget appropriated for the 2024/25 financial year under the Department of Social Development’s allocation. The applicants argued that this irrationally and arbitrarily excludes eligible beneficiaries if funds are exhausted before all qualifying applicants are paid.
The respondents argued that the concern about insufficient funds was speculative, because the SRD grant budget has historically not been exceeded. They contended that if funds are depleted, non-payment is a reality of budgetary constraints and not an irrational or arbitrary decision.
Judge Twala said: “It is unconscionable for government to accept that the number of people who are with insufficient means to support themselves and their dependants is more than 18.3 million but only budgets to provide for 10.5 million. This is so because the regulations have placed barriers to exclude eligible applicants from accessing the SRD grant. The underspending of the budget by the SASSA in the previous financial years is not because there are no eligible persons to meet the estimated number, but it is because of the exclusionary barriers put in place by the regulations.”
He said beneficiaries of other social grants are not subjected to the same conditional funding constraints. The decision to treat SRD grant beneficiaries differently lacked a reasonable justification. He struck down Regulation 5(3)(a) as unconstitutional and invalid.
Government must devise a plan to increase the grant
The applicants argued that because the SRD grant has fallen far behind both inflation and the official food poverty line since 2020, the government is in breach of its constitutional obligation to realise progressively the right to social assistance for those unable to support themselves.
They said fewer people were currently eligible for the grant than in 2022 because the means-test threshold has remained at R624. This reflected the National Food Poverty Line (NFPL) when the grant was introduced, but the food poverty line has increased to R796 per person per month. Millions of people living in food poverty, but above the means-test threshold, have been excluded from accessing the grant.
The respondents defended the lack of meaningful increases in the grant, saying adjustments depend on the availability of resources, and prioritising social assistance is a function of the executive.
Judge Twala agreed with the applicants, stating: “There is no explanation why both the SRD grant and the means threshold are not linked to measures such as the food poverty line, although the purpose of the SRD grant is to alleviate hunger and poverty in society. The respondents do not deny that the SRD grant and the means threshold are worth less than when they were introduced. The ineluctable conclusion is therefore that, by allowing the retrogression of value of both the SRD grant and the means threshold, government’s decision to do so is irrational, arbitrary, and in breach of its obligations in terms of section 27(2) of the Constitution.”
The court ordered the Minister of Social Development, in consultation with the Minister of Finance, to devise and implement a plan to address the retrogression in the value of the SRD grant within four months.
In setting the grant amount, the plan must consider inflation, the cost of living, and objective income poverty measures such as the NFPL. The plan must ensure that no person living in poverty is excluded from accessing the grant.
