Government Can Afford Basic Income Grant, says Analyst

While the reinstatement of the social relief of distress grant has been widely welcomed, human rights organisations believe government can do more. Economists now say that the state can easily afford a game-changing basic income grant.

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Although he also welcomes the reinstatement of the R350 social relief grant, Economist Duma Gqubule says that the South African government can afford to provide the much-debated Basic Income Grant for people between the ages of 18 and 59.

Gqubule says that President Cyril Ramaphosa missed an opportunity to implement the basic income grant:

Our economy has been battered, it needs a large stimulus, so I did the numbers and based on updated data from the presidency, this grant would be paid to 9.5 million people, that is including 3.5 million caregivers and it would cost about R26.6 billion for the rest of the financial year.

Gqubule also said that based on his calculations on a study done by the Institute For Economic Justice, 60% of people can take the grant at R585 a month at the cost of R144 billion.

He adds that the government would benefit from the public spending of R144 billion, through VAT and income tax resulting in the net cost of the grant amounting to R72 billion. Based on these calculations, he believes that it would have cost the government an extra R45 billion to launch the grant, which would increase the country's debt ratio by 1%.

Gqubule also cites Brazil as being among the countries that managed to successfully implement a similar grant package despite having a higher debt ratio than South Africa.

In response to how the government would raise the extra R45 billion to launch the grant, Gqubule is of the view that the government would have to borrow the funds and that stimulating the economy in this way would lower South Africa's debt ratio within three year of having implemented the basic income grant. 

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