As horrible as that may have been for you to witness, the grandma of those children will have been raised by her parents to believe that being smacked as a punishment is what is normal for the generation she grew up in. It isn't right by any means, and I don't condone her behaviour. Each generation is taught differently.
That’s horrendous, I would have said something though I don’t blame you for not doing so. I likely would have reported it too. But unfortunately far too many people still believe in abusing children and don’t see spanking (the act of physically hurting a child) to be as bad as hurting an adult