Government could announce a new R35 billion grant for South Africa next week: economists

Finance minister Enoch Godongwana is expected to give formal clarification on the feasibility of a basic income grant for South Africa when he presents his medium-term budget policy statement (MTBPS) next week, says investment bank BNP Paribas.

However, stark affordability concerns, an increasing debt service burden, and a lack of debt stabilisation will play a critical factor in exactly what the finance minister announces, the bank said in a research note on Monday (25 October).

Instead, BNP Paribas expects the finance minister to promote a grant targeted at work-seekers in the country.

“We expect Mr Godongwana to rather advocate a restructuring of the existing grant framework and perhaps the introduction of new, more targeted ‘job seekers’ grant which could look to replace the current special relief of distress grants in the 2022/2023 financial year,” it said.

“We estimate that this could cost the fiscus R30 billion – R35 billion (0.5% of GDP per annum) as early as next year and would mean that social protection spending as a percentage of revenues settles 2-3 percentage points above pre-Covid-19 levels.”

More generally, BNP Paribas expect the National Treasury to continue to call for speedier economic reforms rather than markedly increased levels of social dependence on the state.

The World Bank has called on South Africa to introduce a job-seekers grant in a report published at the start of October. It said that a job-seekers grant, set at R350 a month, could cost R16.2 billion rand a year.

“The dilemma of the future of South Africa’s social assistance system rests in the opposing pull of these two forces: The limited political appetite for cost-saving reforms and the need to consolidate expenditures,” the World Bank said.

“Feasible options for broader reform hence need to balance political will and the need to contain costs.”

The government has said that it will address the long-standing challenge of youth unemployment through the newly developed National Youth Policy (NYP).

The policy aims to strengthen youth development, both during and post the Covid-19 era, said the Department of Women, Youth and Persons with Disabilities. It also seeks to find creative and innovative ways to address the high unemployment rate, which is also linked to mental health issues.

This includes the introduction of a new basic income grant explicitly aimed at the country’s unemployed youth.

“(This will) support young people and young discouraged jobseekers’ efforts to enter the labour market by introducing a Basic Universal Income Grant – an incentive similar to the Covid-19 Social Relief of Distress grant primarily to support youth to transition into employment or entrepreneurship,” the Department of Women, Youth and Persons with Disabilities said in a June report.

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Government could announce a new R35 billion grant for South Africa next week: economists