Basic income grant for South Africa still on the cards

President Cyril Ramaphosa says that a basic income grant for South Africa is still part of the plan for the Government of National Unity (GNU).

Delivering his opening of parliament address on Thursday (18 July), the president laid out the GNU’s key objectives for the next five years, bringing the focus on three main goals:

1. Drive inclusive growth and job creation
2. Reduce poverty and tackle the high cost of living
3. Build a capable and ethical developmental state

He said the GNU would be tackling the rising cost of living by adding more essential items to the basket of VAT excepted goods as well as giving a comprehensive review of the petrol price to see where cost cutting could be applied.

However, he noted that a key challenge in the fight against the cost of living and poverty lies in unemployment and the lack of support structures in place.

“The best way to deal with poverty is for people to have jobs,” he said,

“We have, however, made interventions to support the unemployed through a variety of interventions, including during Covid when we introduced the SRD Grant.”

Ramaphosa said that the SRD grant has given a lifeline to millions of unemployed people in the country, and that the GNU will use this grant as “a basis for the introduction of a sustainable form of income support for unemployed people to address the challenge of income poverty”.

This is a key policy promise that has continued across administrations and has now settled into the GNU as well.

At pre-election rallies and briefings, the ANC promised to finalise a basic income grant within two years, based on the SRD grant.

The SRD grant has been extended several times since the end of the pandemic and was hiked to R370 from 1 April.

During the 2024 Budget, Finance Minister Enoch Godongwana announced that the SRD grant would be extended to 2025, and the government has provisionally allocated funding for the SRD until March 2027.

The SRD grant was allocated R33.6 billion in 2024/25 (with the hike to R370 later adding about R2.2 billion to that), with provisional allocations of R35.2 billion and R36.8 billion for the 2025/26 and 2026/27 financial years.

Outside of its intent to eventually introduce a basic income grant in South Africa, Ramaphosa and Treasury have been vague on the details and the financing plan.

Finance minister Enoch Godongwana said in March that, if properly managed, South Africa can afford to roll out a basic income grant and that the question wasn’t whether a grant was coming but rather how it would be funded.

The ANC has previously suggested that the grant be funded through a wealth tax, closing tax loopholes, addressing base profit shifting by corporations, and implementing a transactions tax.

Many experts have raised concerns about the impact on state finances if a permanent basic income grant is implemented.

The country is already struggling with a shrinking tax base. The country has around 28 million grant recipients and only 7 million income taxpayers.

Read: Permanent basic income grant plan for South Africa – with a tax warning