South Africa's alarmingly high unemployment rate, coupled with the high uptake of the Social Relief of Distress (SRD) grant, is evidence that there is a lack of social protection available to individuals between the age of 18 and 59 years old.
While the SRD is recognised as a crucial support mechanism for unemployed adults of working age, this intervention is temporary and the SRD grant’s implementation is set to conclude in March 2023.
In an effort to find a permanent solution, The Department of Social Development (DSD) recently launched the Expert Panel Report on Basic Income Support.
This report is the second of two analyses of a basic system of income support for unemployed adults in South Africa. The first analysis, completed in 2021 examined the social and economic impact of introducing Basic Income Support (BIS) at scale, while the second analysis looked at different funding models for the introduction of basic income grants.
The results of the report indicate that it is possible to implement a grant similar to the SRD grant while protecting economic growth, a balanced budget approach and important redistributive effects. The panel added that the SRD arrangement posed limited economic and fiscal risks and should be made permanent.
Many questions have been raised about how a permanent basic income grant would be funded.
The report looks at four possible funding models for basic income support including, increasing Value Added Tax to fund an SRD type grant, an increase in the Personal Income Tax of the top three deciles to fund an SRD type grant, a wage subsidy for low earning individuals and a hybrid model which incorporates a wage subsidy and personal income tax.
The DSD’s Linton Mchunu says South Africa is close to the realisation of a basic income grant. They say the report will guide the department on their approach on how to introduce a basic income grant.
Mchunu says the conversation and debate around a basic income grant has moved from “should and basic income grant be introduced?” to “how can a basic income grant be implemented?”.
They acknowledge that the introduction of a basic income grant won’t do much in terms of job creation, but it will have a serious impact on poverty and to a large extent inequality.
Mchunu says the department has already begun working on a policy document for the possible introduction of a basic income grant. The data gathered in the report will be used by the department to strengthen the policy document.
