South Africa

Ramaphosa holds meetings around new basic income grant for South Africa – and extending R350 Covid grant

President Cyril Ramaphosa, finance minister Enoch Godongwana and social development minister Lindiwe Zulu held meetings with civil society this week to discuss the possible extension of South Africa’s R350 social relief of distress (SRD) grant beyond March 2022 – and the introduction of a basic income grant.

The meeting was held at the request of several civil society groups, including the Institute for Economic Justice (IEJ) and the Black Sash Studies in Poverty and Inequality Institute (SPII), the presidency said in a statement on Friday (21 January).

“The SRD grant coverage has grown significantly since its introduction, from six million to 10.3 million recipients a month. Through this grant, the Department of Social Development and the South African Social Security Agency has successfully reached many of those most vulnerable in our society. Research has confirmed the positive impact of this grant in reducing poverty and hunger,” the presidency said.

“President Ramaphosa expressed his deep concern around the hardship faced by the more than 13 million unemployed and impoverished people in South Africa and the need for government to protect the dignity of all its people while being mindful of the resource base.”

Recommendations made by the various civil society groups include:

  • Improving the design of the grant;
  • Extending it beyond March 2022;
  • Expanding the eligibility criteria to reach more people who need it;
  • Increasing the value of the grant.

“The meeting affirmed the need to work towards affordable and sustainable social protection mechanisms that complement job creation and drive local demand, with due consideration of the fiscal implications,” the presidency said.

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“The meeting agreed to have further engagement on the proposals as part of broader consultation among all stakeholders on social protection measures that are appropriate to the country’s circumstances and the needs of the South African people.”

A basic income grant

While the presidency was largely non-committal on whether the R350 grant would be extended following the meetings, the government has made it clear that it has long-term aspirations to introduce a basic income grant in South Africa.

In a research note this week, economists at Nedbank said there was a ‘real risk that the current Covid-19 emergency social grants are extended’ when finance minister Enoch Godongwana present his maiden budget speech in February.

Social development minister Lindiwe Zulu has said that a new basic income grant in South Africa will likely be phased in over several years, with her department currently pushing for an extension of the R350 Social Relief of Distress (SRD) grant as a baseline.

“Depending on costs and the fiscal position of the country, it may take a few years to progressively implement. Until then, the department is, however, currently motivating for the extension of the Special Covid-19 SRD Grant, preferably over the medium-term period,” she said.

“This should provide the much-needed income support to cushion against the economic hardship occasioned by the advent of Covid-19 pandemic for the 18- 59 years.”

This aligns with recommendations made by an expert panel in December 2021, which proposed that the country gradually implement a basic income grant beginning with the institutionalisation of a monthly welfare payment.

The panel was appointed by the Department of Social Development, the International Labor Organisation and the United Nations-backed Joint Sustainable Development Goals Fund.

“There is no alternative to a system of income support for income-compromised adults from the ages of 18-59 as a permanent part of the social protection framework,” said Alex van den Heever, the chair of social security systems administration and management studies at the University of Witwatersrand and a member of the panel.

Who pays?

While the exact amount of funding will be dependent on how much support government plans to offer to disadvantaged people, it will likely be taxpayers who foot the bill for these additional grants – either through increases or adjustments.

In a presentation in mid-December, the expert panel said that an entry-level version of Basic Income Support (BIS) could be safely implemented using a mix of financing approaches, including:

  • Limited debt financing;
  • Tax revenue improvements arising from any demand stimulus; and
  • Carefully calibrated tax increases where required.

Data published by the World Bank in September showed that a third of citizens are beneficiaries of a social grant directly, which rises to close to two-thirds when those who benefit indirectly are included.

The World Bank recommended the basic income grant take the form of a “jobseekers’ grant, targeted at the unemployed. It said that a job-seekers grant, set at R350 a month, could cost R16.2 billion a year.

Data from investment bank JP Morgan shows that a basic income grant of R624 a month (the food poverty line) would cost the fiscus an additional R30 billion a year, while raising living standards to the lower-bound poverty line of R890 a month will cost an additional R60 billion a year.

Read: World Bank approves R11.4 billion loan for South Africa

Artmotion S.Africa

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