Rumours of a Universal Basic Income Grant (UBIG) have been floating around for years but recently it has been picked up with renewed vigour by both the South African government and civil society. UBIG is intended to place poor people above the poverty line and would be offered to citizens aged 18 – 59. The grant would ensure that every person who qualifies receives a certain amount of monthly income which can be used to cover basic needs. However, concerns regarding how exactly the Universal Basic Income Grant would be funded have been widespread.
In his address during the African National Congress Mandela Day webinar, President Cyril Rampahosa said that “suggestions have been made that in addressing the needs of our people we must be bold enough to think about interventions such as a basic income grant. Yes, it requires bravery. This matter is being given serious consideration,”. While Minister of Social Development, Lindiwe Zulu, said during the department’s budget vote speech in May, that the need to introduce a basic income grant has become an “urgent consideration” for the national government.
What would it cost?
According to a report by the Financial and Fiscal Commission (FFC), an independent constitutional advisory institution, a true universal income set at R350 per month would cost approximately R243 billion a year.
“This amounts to 5% of GDP. The cost would increase the revised budget deficit from 15.67% of gross domestic product (GDP) to 20.15%,” wrote Business Tech in August.
A more streamlined grant of R350 per month to target the unemployed between ages 18 and 59 would cost R44.8 billion per annum or 0.9% of GDP.
“Naturally, the total costs estimated here are high and would be lower if the UBIG were to partially or totally displace grants in the existing system,” the report further stated.
How will it be funded?
According to Dr Mark Blecher, treasury official, the grant will largely be funded by tax overruns, particularly corporate income tax.
In August, The Department of Social Development published a green paper on proposed social security and retirement reforms for public comment. The paper, which has since been retracted, proposed three options for a universal income, ranging from R585 to R1,268 a month, based on the country’s existing poverty lines.
According to BusinessTech, “to raise enough funds for even the lowest of these options, the green paper suggests an income tax hike of 10 percentage points to raise the approximately R200 billion needed”.
While there are new proposals being made daily, it is clear that the question of a universal income grant won’t go away soon. South Africans are urged to, where possible, form part of the conversation and follow along for any updates and newly released green papers.