R958 billion — cost of a truly universal basic income grant for South Africa

South Africa can’t afford to implement a basic income grant, South Africa’s biggest business organization said, wading into an argument that has divided the ruling African National Congress.

The country should instead consider an “unemployment insurance type product,” Business Unity South Africa said in a statement Monday.

Even then it should only be put in place if labour market reforms are enacted to boost employment, the fiscal deficit does not widen as a consequence and payments are to those in need and are not universal, the group said.

With the impact of the Covid-19 pandemic pushing South African unemployment to a record, calls for a basic grant to be implemented have increased.

President Cyril Ramaphosa has said it could be necessary and Lindiwe Zulu, his social development minister, has backed the concept. Finance minister Enoch Godongwana has said he doesn’t favour the idea.

While about 18 million South Africans, or a third of the population, receive welfare payments, those come in the form of old-age pensions and child support payments.

“The fact that transferring a very large amount of money to households improves outcomes for them along some axes is not in doubt,” Busa said. “The consequences of a commitment to an unaffordable basic income grant will quickly undermine this. We need to take a view of the entire system and the entire economy.”

A truly universal grant, paid to all South Africans at the upper bound of the National statistics agency’s poverty level adjusted for inflation, would cost about 958 billion rand ($64 billion), according to Barclays Research.

That could be brought down considerably if the amount was cut and the number of eligible people reduced, Barclays Research said.

South Africa is the world’s most unequal nation, according to the Thomas Piketty-backed World Inequality Lab.

Now read: Expect a new plan for state-run pension fund and universal basic income in South Africa

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R958 billion — cost of a truly universal basic income grant for South Africa