Treasury’s sombre warning about the proposed basic income grant for South Africa

A green paper published by the Department of Social Development this week formally proposes introducing a basic income grant for South Africa, but finance officials have warned that the country needs to be more ‘realistic’ about its social security plans.

The green paper proposes three options for a universal income, ranging from R585 to R1,268 a month, based on the country’s existing poverty lines.

To raise enough funds for even the lowest of these options, the green paper suggests an income tax hike of 10 percentage points to raise the approximately R200 billion needed.

However, deputy finance minister David Masondo cautioned against the aspirational plans proposed by the department – warning that it’s not something the country can afford.

“We have to ask ourselves what are the preconditions for a social security grant proposed in these reforms,” he said. “As a country, we should sequence our current economic priorities, and we should not confuse our aspirations with what is possible economically.

“Many countries that have social security funds have good economic growth. Currently, we have an economy that is faced with many fiscal risks.”

Similar concerns were raised by the Treasury director-general, Dondo Mogajane, who said that South Africa’s debt to gross domestic product (GDP) is one of the largest in the world.

The major driver of this debt is the wage bill and the perennial bail-out of state-owned enterprises (SOEs), and there are requests in the pipeline for additional funding for some SOEs.

Basic income 

Despite concerns raised by officials and analysts, organised labour has called for the permanent introduction of a basic income grant in South Africa from 2022.

The Congress of South African Trade Unions (Cosatu), National Congress of Trade Unions (Nactu) and the Federation of Unions of South Africa (Fedusa) held their mid-year Nedlac organised labour school this week to assess progress on the implementation of key policy interventions in South Africa.

In a post-meeting statement, the unions welcomed the reinstatement of the special R350 Covid-19 grant until March 2022 and said that this should be the first step towards a universal income.

“It must now be made permanent and be used as a foundation for a basic income grant.

“It must be extended beyond March 2022 and adjusted in line with the food poverty level. The government needs to provide for its extension and enhancement in the October medium-term budget policy statement.”

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