In an effort to assist unemployed citizens during the pandemic, government implemented the temporary Social Relief of Distress (SRD) grant which is set to conclude in March 2023.
However, many have expressed that there is a great need for a more permanent solution to be implemented to assist people in need.
Last week, The Department of Social Development (DSD) launched the second report into the sustainability and feasibility of a system for a permanent basic income support in South Africa.
The results of the report found that the SRD grant can be adopted permanently without sacrificing economic growth, while protecting economic growth, a balanced budget approach and important redistributive effects.
Acting Director-General of the DSD Linton Mchunu explains that the report answered several crucial questions on basic income support, such as where the money would come from, and how the department plans to implement it.
“Before, the discussion was whether we should bring a Basic Income Grant and that was in the first report launched last year, but this discourse is now shifting to how best can we implement the grant,” says Mchunu.
The second report the department launched looks at the various options available in terms of bringing the grant into fruition.
In terms of how the grant will be funded the report has looked at four possible funding models which includes:
- Increasing Value Added Tax (VAT)
- An increase in the Personal Income Tax system
- A wage subsidy for low earning individuals; and a
- Hybrid module which incorporates a wage subsidy and personal income tax.
Many have raised questions on whether the permanent implementation of the grant would help or hinder the economy.
The report suggested that the SRD arrangement posed limited economic and fiscal risks should it made permanent and to minimise it having further negative impacts on the economy, it proposed that "a phased approach” be adopted for the progressive enhancement of the SRD benefit over time.
Mchunu stated that following the report, the department would in the next three months undertake certain processes, including taking the policy paper to the Cabinet, public inputs, and amendment of the regulations before implementation.
