The one thing holding back a basic income grant in South Africa

South Africa’s fiscus can not afford a permanent income grant, with experts noting that the government should focus more on improving employment in the country.

Talks over a Basic Income Grant in South Africa have been on the table for a long time amidst the nation’s high unemployment and elevated wealth inequality.

Speaking in his 2025 State of the Nation Address, President Cyril Ramaphosa said that the Social Relief and Distress (SRD) Grant could be used to create a more sustainable source of income.

The SRD Grant was established in 2020 amidst the COVID-19 pandemic and was used to provide millions of South Africans with access to a small amount of funds to protect them from extreme poverty.

The grant has been expanded from R350 to R370 per month and supports over 10 million people in the country.

“The Social Relief of Distress Grant is an essential mechanism for alleviating extreme poverty.”

“We will use this grant as a basis for the introduction of a sustainable form of income support for unemployed people,” he said.

South Africa’s unemployment rate is one of the highest in the world, standing at 32.1% as per the latest available data.

Despite the commitment to create a Basic Income Grant, there are still extreme questions about how the state will be able to afford the grant.

Speaking at a media roundtable, Deloitte Southern Africa Chief Economist Hannah Marais said that the basic income grant is a good example of when political promises contrast with the realities facing the state’s coffers.

Marais said that there are still question marks over the Basic Income Grant. Although the SRD Grant has been around for years, it is a temporary measure and is not included in Treasury’s budget projections.

Although she said that a certain cushion is required to help the most in need, the primary long-term focus of the government should grow employment sustainability.

This sustainable employment should ensure that employment figures improve consistently. The focus should also be on creating the right jobs, which create products and add value.

Treasury’s headache

Marias’s comments come ahead of the 2025 National Budget, which will be delivered by Finance Minister Enoch Godongwana on Wednesday, 19 February.

A recent high court judgement also scrutinises the ‘temporary’ nature of the SRD grant, creating another funding headache for the National Treasury.

A ruling from the High Court said that the SRD Grant is now a permanent feature of South Africa’s social assistance regime.

The state has argued that the grant would be unaffordable if it was not deemed a temporary measure and requires a more dedicated funding measure.

This has also been on the basis that access to the grant has been restrictive.

However, the High Court ruled that the affordability of the grant from a fiscal perspective cannot be the reason to exclude people in poverty.

The Bureau for Economic Research said that this means that the qualifying recipients for the SRD could rise from the current budget of 10.5 million people to over 18 million.

This would require roughly an increase of R35 billion per year to afford.

Treasury said that it is studying the judgement and could appeal the ruling, meaning that may or may not be brought up in Godongwana’s speech next week.