The Department of Social Development has published a green paper on proposed social security and retirement reforms for public comment.<\/p>\n
One of the key proposals of the paper is the introduction of a Basic Income Grant (BIG), first mooted in 2002 as part of the Taylor Report.<\/a><\/strong><\/p>\n At the time of the Taylor Report, the BIG was calculated on a per-person basis of R100 per month. A household with six people – the average for the South African population at the time – would have received R600 a month, which the government would pay to the person primarily responsible for childcare.<\/p>\n However, the green paper envisions the BIG working differently – implemented for working-age South Africans only<\/strong>,\u00a0while maintaining the existing social grants for children, the elderly and people with disabilities.<\/p>\n “In line with the reform proposal for our existing social grant framework, the BIG should be unconditional, individually-targeted and at a level that will at least lift the individual out of poverty. Consideration should also be given to a universal grant for simplicity and ease of administration,” the department said.<\/p>\n While South Africa’s current grants are not universal, this would align with the government\u2019s broader social security reform proposals to make all the grants universal.<\/p>\n Over time, the department said the existing grants might converge into a BIG with ‘top-ups’ for various contingencies. However, in the short to medium term, the main objective will be to provide categorical income support for the population aged 18 to 59.<\/strong><\/p>\n A key decision\u00a0<\/strong><\/p>\n One of the key decisions that need to be made is whether South Africa should implement a universal or a means-tested grant, the department said.<\/p>\n While a universal grant would be distributed to everyone who qualifies, a ‘means test’ grant would require each recipient to be checked according to their current ‘means’, such as an income threshold.<\/p>\n This decision would be mainly influenced by the pace at which the country wants to implement the BIG and the availability of resources, it said.<\/p>\n The department said a universal grant will be the fastest route, as it could reach almost everyone within a matter of months. The funds going to wealthy households would have to be recovered, however.<\/p>\n “Administratively, it is a lot easier for SARS to recoup the grant paid to a wealthy individual with a technical adjustment to the tax brackets, than for SASSA to interview millions of applicants to determine whether the applicant qualifies based on income,” it said.<\/p>\n A means-tested BIG may prove onerous as it is only provided to those with incomes below a certain threshold. A universal benefit is one that would be provided to everyone within a particular category, the department said.<\/p>\n A universal grant is therefore potentially more efficient, cost-effective and better targeted, resulting in fewer exclusions, it said.<\/p>\n What it will cost<\/strong><\/p>\n The department said it would be much easier to implement a reform that will require a significant adjustment to taxes, as it will be easier for government to ‘sell’ an increase in taxes on the working-age population with an increased transfer to that same population.<\/p>\n “Microsimulation for universal income support at the level of the food poverty line (R585) suggest that the financial cost will be approximately R200 billion and will require a 10-percentage point increase on income taxes. <\/strong><\/p>\n “At face value, these amounts appear to be astronomically high and even impossible.<\/p>\n “For the majority of the population, depending on the level of the transfer, it is likely that the benefit received will be larger than their increase in taxes.<\/p>\n “The wealthiest deciles of the population will only see a slight reduction in income on average, and the impact of this may be reduced if phased in over a period of time.”<\/p>\n How much will it pay?\u00a0<\/strong><\/p>\n The department noted that the government has been severely criticised for the value of the Covid-19 R350 social relief of distress grant.<\/p>\n While many appreciated the Covid relief, being 40% below the poverty line,<\/a> <\/strong>it makes a tiny dent as many people are still experiencing hunger and starvation, it said.<\/p>\n “The options for the value thus depend on what objectives the state would like to achieve first, including, inter alia: reducing hunger, reducing poverty and improving the standard of living of our people.”<\/p>\n The green paper proposes the following options, depending on what objectives government would like to achieve first:<\/p>\n “Studies done on a decent standard of living suggests income of around R7,500 per person, per month<\/strong>. This is an aspirational value that government should strive to achieve through a mix of transfers, labour and economic policies,” the department said.<\/p>\n
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