Basic income grant for South Africa is coming

President Cyril Ramaphosa says that work is underway to develop ‘targetted basic income support’ in South Africa – separate from the temporary Social Relief Distress (SRD) grant, which will be extended.

Speaking during his State of the Nation Address on Thursday (9 February), the president noted that 60% of the national budget is spent on social wages, which includes providing free services to indigent households and setting up social grants to support millions of South Africans.

He said that the government is working to counter the rising cost of living in the country and will continue with the SRD grant as well as increase existing grants to cushion the poor from rising inflation.

Further details on the grants will be detailed in the 2023 Budget, set to be delivered by finance minister Enoch Godongwana on 22 February.

National Treasury is also considering the feasibility of urgent measures to counter the effects of load shedding, he said.

On top of these measures, however, Ramaphosa said that the government is working on a basic income grant.

“Work is underway to develop a mechanism for targeted basic income support for the most vulnerable while within our fiscal constraints.

“This will build on the innovation we introduced with the SRD grant, including linking the data we have across government to ensure we reach all those who are in need,” he said.

Economists and analysts have for a long time taken the baseline that South Africa would get a basic income grant, and have so far been treating the SRD grant as a permanent fixture in the budget.

However, a major question mark around such a grant has been funding.

Research by Intellidex in partnership with South African business groups in 2022 outlined the cost and funding complications of a basic income grant in South Africa.

While the baseline view is that a BIG will be implemented in the country whether opponents like it or not, Intellidex warned that the government must tread carefully to ensure that the project doesn’t have the opposite effect of its intended goal.

The group warned that if a basic income grant was introduced at an unaffordable level it could lead to further strain on the economy and cause knock-on effects that cause harm to all – including the people such a grant purports to aid.

Intellidex said that proposals have ranged from a modest R240 grant given to households that initially qualified for the Covid-19 social relief distress (SRD) grant – approximately 6.5 million people – to a universal living wage grant of R3,500 given to everyone.

The cost of the BIG to the economy then covers a similar range – from R20 billion a year, to R2.5 trillion a year. Most proposals, however, fall into the range of R60 billion (roughly the cost of expanding the SRD to more people) and R250 billion (about R800 per month for all unemployed adults).

At R350, the cost of the grant would range from R27 billion if offered to original SRD recipients, to R252 billion if offered to everyone in the country (universal grant).

According to Ramaphosa, approximately 7.8 million people in South Africa are currently on the SRD grant.

Read: Tax hikes can fund new basic income grant in South Africa: study