Basic Income Grant Is Unaffordable, Researchers Say

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In 2020, a report by the United Nations found that one in five South Africans live in extreme poverty. Poverty, along with high levels of unemployment and inequality require solutions from the government to improve the lives of South Africans.

 


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Last year, the Department of Social Development (DSD) commissioned a study into the impact that a Basic Income Grant (BIG) would have on South Africa.

The team of experts argued that South Africa should gradually introduce a BIG as it would not result in major trade-offs in relation to existing social support mechanisms, economic sustainability and the fiscal position of the government.

Researchers from the Centre for Development and Enterprise (CDE) are of the view that a basic income grant is unaffordable.

They put forward that the government’s finances are already unsustainable, and adding a large and permanent new spending programme will only make this worse. The generation of funds for this intended spending program would likely be done through increased tax.

Director of CDE Ann Bernstein says that raising tax comes at a high price and could result in slower economic growth and lead to a lower employment rate in the country.

She said, “You have to ask where will we find the money? South Africa is already spending way beyond our means, our current expenditure is unaffordable, we're already cutting back on absolutely vital government functions from basic education to policing to infrastructure and other things that the state can no longer afford”.

It is estimated that the implementation of the R350 grant will cost the government R44 billion over a period of twelve months. Bernstein questions what tradeoffs would have to be made to continue the implementation of the grant.

“The truth is South Africa has made appalling decisions over the last 10 years and we have dug ourselves into a terribly deep hole. In order to get out of this hole to deal with poverty that affects millions and millions of people we cannot go on as we are today,” concluded Bernstein.

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