Government pushes ahead with plans for new universal income grant

Social Development minister Lindiwe Zulu says that government has begun consultations on a new basic universal income grant for South Africa.

Presenting her departmental budget speech in a virtual parliamentary meeting on Friday (24 July), Zulu indicated that the introduction of the grant would act as an extension of the social and financial measures introduced by the government in response to the coronavirus pandemic.

“As we consider multiple ways to extend the social protection coverage to those aged 18 to 59 years in the period beyond October 2020, the Covid-19 pandemic is bringing back the discussion about the basic income grant,” she said

“The lack of social protection coverage for this group calls for an acceleration of efforts to put in place an inclusive and responsive social security system that we envisaged in the National Development Plan (NDP).

“Discussions are currently in the early stages and we look forward to working with the members of this house to shine a spotlight on this important issue and thereby advancing solutions to ensure that no one among our people is left behind.”

The ANC has previously said that it will also look at the feasibility of introducing a basic income grant as part of a series of outcomes decided upon by its National Executive Committee (NEC).

According to a document seen by Bloomberg, the ANC proposes paying a R500 monthly grant to those aged 19 to 59 who aren’t normally eligible for other aid would cost the state R197.8 billion a year.

Between 50% and 60% of the money could be recouped by levying extra taxes on those with jobs, it said.

The pandemic prompted president Cyril Ramaphosa to announce a temporary top-up of those grants by up to R300, including a R350 unemployment grant, in late March.

However, the country’s unemployment rate is predicted to have soared since the start of the lockdown, with estimates ranging between 400,000 – 1.5 million jobs lost.

There are also concerns about what will happen when the Covid-19 grant is no longer paid out.

Costly

Analysts have warned that the introduction of a universal income grant will come at a cost for the country.

Intellidex analyst Peter Attard Montalto said that debate around a basic income grant has been ongoing for around 20 years, and has even been a subject of previous research, which found it could reduce poverty in the country by as much as 75%.

Assuming the grant was R500 per month, as proposed by ANC policy makers, the maximum cost would be around R210 billion a year for the full age range, or starting at R77 billion for the narrower set of ages.

Stats SA currently defines the food poverty line as R561 a month. The poverty line band, however, is from R810 on the lower end to R1,227 a month on the high end. These suggest R500 a month is arbitrary and actually possibly too low on a needs basis, Attard Montalto said.

This changes the presumed cost base.

“If you assume that many of the employed wouldn’t claim it (say two-thirds of them), then the cost falls to R142 billion per year for the full range or R63 billion for the starting range.

“The employed would be unlikely to claim in large numbers if manual collection by card was still required and is time-consuming. One can see, however, these that these amounts can quickly escalate if, for instance, they are CPI linked or doubled to within the poverty line band,” he said.


Read: Job cuts due to South Africa’s lockdown: here’s how employees are selected for retrenchment

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Government pushes ahead with plans for new universal income grant