Basic Income Grant in SA: WHY there are other solutions

EFF leader Julius Malema’s proposal for a Basic Income Grant in SA of R4 400 has been called out as ‘cheap politics’ ahead of local government elections in November. Efficient Group chief economist Dawie Roodt says such a grant would ‘break the bank,’ given South Africa’s narrow tax base.

South Africa is unique in that it has 28-million grant recipients and roughly 7.7-million taxpayers. Moreover, just 2.4% of top earners pay 77% of all personal income tax, explains Roodt. Therefore, he argues the fiscal account simply cannot support a Basic Income Grant in SA.

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BASIC INCOME GRANT IN SA

However, he isn’t against a Basic Income Grant in SA in principle. But his alternative is to consolidate every specialised welfare grant into one BIG one. Part should be paid as cash and part as vouchers for education and health. “Give the poor the choice to choose what they want to spend their money on,” explains Roodt.

However, the Department of Social Development and SASSA say they’re already working toward something similar. Modelled on the ‘outgoing’ SRD grant, legislation for the Basic Income Grant in SA is expected to be announced for the 2027/28 fiscal year. Meanwhile, there’s another tax-based mechanism already moving money to assist unemployed youth …

TAX ASSISTANCE, NO GRANT

Reshaping of the SRD grant to the Basic Income Grant is expected to be announced for 2027/2028 financial year. Image: File

Government says it has paid out over R4.8 billion in a single financial year through the Employment Tax Incentive (ETI), and this is no grant. Registered employers hiring anyone aged 18 to 29, earning between R2 500 and R7 500 a month, can claim back up to R1 500 of the salary bill each month. There’s no grant application form, no waiting period, you simply pay over less PAYE to SARS.

The full R1 500 rebate applies for twelve months, before dropping to R750 for a second twelve-month stretch. This is capped at 24 months in total, up to R27 000 per employee over two years. To qualify, the employer must be PAYE-registered and the employee needs a valid SA ID. The benefit excludes relatives, domestic workers and government employees. As of now, it runs until 28 February 2029.

BASIC INCOME GRANT IN SA ISN’T THE ONLY LEVER

Meanwhile, Roodt’s math on affordability is hard to dismiss. And his voucher-based Basic Income Grant in SA alternative deserves its scrutiny. Where a universal grant pays people regardless of employment status, ETI directly subsidises the act of hiring a young person.

As such, this addresses unemployment at its source, rather than cushioning its consequences. It won’t fix anything on its own but treating grants as the only lever left for South Africa’s youth unemployment overlooks the centrepiece of the crisis. Millions of young South Africans need, at the very least, the opportunity to prove what they’re capable of and be supported in their fledgling years.

But what do you think? Will a Basic Income Grant in SA solve the scourge of youth unemployment? Please share your thoughts in the comments section below …

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