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<\/a><\/p>\nYet South Africa already spends 3.3% of gross domestic product on welfare, mostly in the form of child support and pensions. That\u2019s more than most countries and will amount to R222 billion in the year through February. Before the Covid-19 stipend more than 18 million people, or almost a third of the population, were on welfare.<\/p>\n
Even Ramaphosa\u2019s own economic advisers are divided. Eleven members of the Presidential Economic Advisory Council put their names to a leaked report that said a basic income grant would be a \u201cpolicy error\u201d that would crowd out spending on health, education and infrastructure. The taxes that would be needed to pay for it would stunt growth, they said.<\/p>\n
Divided advisers<\/strong><\/p>\n \u201cWe can\u2019t afford continuous additions to the welfare net in our country,\u201d said Cas Coovadia, chief executive officer of Business Unity South Africa, the country\u2019s biggest business organization. \u201cOur economy is not growing and is rated as sub-investment grade.\u201d<\/p>\n Four members of the council wrote a dissenting report that argued for such a grant.<\/p>\n Not paying one \u201cis basically a threat to our social fabric and we might see another July moment if we do not act decisively now,\u201d Zimbali Mncube, a researcher at the Institute for Economic Justice, said in reference to last year\u2019s violence.<\/p>\n Sachs, and other economists, predict Ramaphosa will extend the support to the unemployed, and that could be seen a precursor to more generous support at a later stage. The R350 payment is set at just a quarter of the monthly income the national statistics agency says is needed to escape poverty.<\/p>\n Extending the Covid-19 stipend alone for a year would cost R35 billion, according to BNP Paribas. While the government can probably afford to do so as high commodity prices are putting revenue on course to exceed estimates, a permanent basic income grant could prove unsustainable.<\/p>\n In November, Godongwana pledged to address the deterioration in state finances, regain South Africa\u2019s investment-grade credit ratings and said funding for grants beyond March would depend on revenue. He\u2019s due to announce updated spending plans in the Feb. 23 budget.<\/p>\n What Bloomberg Economics Says…<\/p>\n \u201cShould South Africa extend the Covid-19 grant by another year? Yes, the pandemic is far from over. Should we make it permanent? Yes, if the goal is poverty reduction, but this comes at a cost that requires additional fiscal and policy trade-offs. The government\u2019s track record on the latter calls for caution.\u201d <\/em><\/p>\n – Boingotlo Gasealahwe, Africa Economist<\/em><\/p>\n Unemployed youth interviewed in townships north of Pretoria, the capital, said even the R350 payment helped them pay for transport to seek work, bolstering the argument that the payments could ultimately boost employment.<\/p>\n Merely extending the monthly stipend in its current form won\u2019t be enough, said Colin Coleman, co-chairman of South Africa\u2019s Youth Employment Service and former head of Goldman Sachs in sub-Saharan Africa. To have an impact it should be more than doubled and at the same time economic reforms should be pushed through, he said<\/p>\n \u201cThis is not just about social consumption,\u201d he said. \u201cIt\u2019s good for the poor, it\u2019s good for the unemployed; it\u2019s going to save lives and prevent hunger and it\u2019s going to be massive for stimulating investment, jobs and growth.\u201d<\/p>\n
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