THE Minister of Social Development, Lindiwe Zulu, has said that the government was holding “discussions” on the introduction of a Basic Income Grant (BIG). Picture: Supplied.
THE Minister of Social Development, Lindiwe Zulu, has said that the government was holding “discussions” on the introduction of a Basic Income Grant (BIG). Picture: Supplied.

Government's proposed Basic Income Grant to target 33m South Africans

By Lyse Comins, Karen Singh and Reuters Time of article published Jul 15, 2020

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Durban - THE Minister of Social Development, Lindiwe Zulu, has said that the government was holding “discussions” on the introduction of a Basic Income Grant (BIG).

Speaking on Monday, Zulu did not give details of how the grant would be funded, or its size, but told a virtual press briefing it would be considered “post-October”.

Before the Covid-19 pandemic, the government had planned to spend R309.5billion on social security payments this year.

The pandemic prompted President Cyril Ramaphosa to announce in late March a temporary top-up of those grants by up to R300, including a monthly R350 unemployment grant for the duration of six months.

The BIG grant would target around 33 million people between the ages of 18 and 59.

South Africa’s poverty line, including non-food expenses, calculated by Statistics SA, is about R1270. That would put the annual cost at roughly R42billion.

Zulu said “discussions” for the introduction of the BIG had been “brought back to the table”.

“The grant is being considered in view of SA Social Security Agency’s (Sassa) legislated mandate as well as the primary mandate of the National Development Agency,” Zulu said.

She said Sassa had “comparatively well-developed infrastructure” that reached far more people than any other agency.

“The grant will result in most of the poorer individuals continuing to access the Covid-19 SRD (Social Relief of Distress) grant benefits. The BIG will simplify coverage and ease of grant administration,” she said.

“The proposal will help realise the government’s broader social security reform environment. The BIG will be unconditional, individually targeted and at the level that will lift individual South Africans out of poverty.”

Isobel Frye, the director of the South African-based Studies in Poverty and Inequality Institute and a minimum wage commissioner, said the grant had been discussed by the government over the past 10 months, but the Treasury had been reluctant to fund it.

“It was unexpected but incredibly welcome. It suggests there’s been a lot of reflection about the inadequacy of the R350 Covid-19 grant,” Frye said.

But economists have warned that South Africa does not have the financial capacity to provide the grant indefinitely to the poor, and that the move would weaken the economy.

Economist Mike Schussler said Zulu was the only person in the government talking about the grant, and that it wasn’t ANC policy.

“What worries me is I don’t think it is going to become policy right now, but all these ideas are floated and become policy down the line in four or five years and then they struggle to implement it because there isn’t money,” Schussler said.

“We only have about 7.5million income tax payers in the country and they are already paying the highest income tax to GDP (gross domestic product) in the world,” he said, adding that he supported the short-term grant during the pandemic, but it was not sustainable.

“A better idea is to grow the economy and give people jobs. You don’t become rich on welfare, you don’t become a major league player in the world and a great economy on welfare, because eventually you take too much away from the people who are producing, and they produce elsewhere,” Schussler said.

Economist Dawie Roodt said the state was currently spending far too much to afford the grant.

He said South Africa had a huge fiscal deficit and debt levels were rising.

“I understand the importance of trying to support the poor, but the only way we can afford this is if we spend significantly less somewhere else and that means a reduction in the wage bill and the closing down of a number of state-owned enterprises,” Roodt said.

He said South Africa was a poor country and the “state simply cannot be everything for everybody”.

“The reality is that if you pay people because they don’t have jobs then chances are they will not get jobs.”

Daniel McLaren from the Budget Justice Coalition (BJC), said there were many options available for funding the grant.

The revenue shortfall caused by Covid-19 and the lockdown required the government to explore alternative revenue-generating mechanisms regardless of the implementation of a Basic Income Grant said McLaren.

“BJC has submitted to Parliament that wealthy individuals and companies, income earned on wealth and high incomes can be taxed at a higher rate without harming economic growth,” he said.

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