Why basic income grant won’t work in South Africa — Ramaphosa’s advisors

A panel of economic advisers appointed by South African President Cyril Ramaphosa warned against implementing a basic income grant in the world’s most unequal nation, saying the multibillion dollar cost could deepen debt and hinder economic growth.

As recently as September, Ramaphosa has said that a basic income grant — which would be the biggest of its kind globally if implemented — should be considered to alleviate poverty.

That statement has put him at odds with his finance minister and business organisations that say the proposal is unaffordable.

“Our vision must be to promote employment rather than ever-increasing state-funded income support,” the Presidential Economic Advisory Council said in a briefing note sent to the president and seen by Bloomberg.

“We face a real danger of policy error at a macroeconomic level where we will limit our economy’s growth and job-creation potential by increasing the system of social grants payments in an unsustainable manner.”

Calls for the introduction of a basic income grant from civil society organisations and labour unions have increased after the government agreed to a temporary 350-rand ($23) payment to the unemployed because of the impact of the Covid-19 pandemic.

More than a third of South Africans are unemployed, and riots in July that were the worst since the end of apartheid were attributed to rising poverty.

The Thomas Piketty-backed World Inequality Lab said in a study that inequality in the country hasn’t improved since 1994, and the richest 3,500 South African adults own more than the poorest 32 million people.

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Why basic income grant won’t work in South Africa — Ramaphosa’s advisors