The National Treasury has dismissed the idea of a basic income grant for South Africans, estimating it would cost around R400 billion per year, a burden the economy cannot bear without permanent tax hikes, as reported by Cape {town} Etc.
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This stance contrasts with previous political promises to pursue a basic income grant.
In its Medium Term Budget Policy Statement (MTBPS) released in October 2024, the Treasury explained that without a means test, a basic income grant is unfeasible and immeasurable.
Over the next three years, 30.6% of South Africans will receive some form of social assistance, excluding the COVID-19 social relief of distress (SRD) grant.
According to BusinessTech, the SRD grant is the only form of basic income support likely to be sustained.
Originally introduced during the pandemic, this grant increased from R350 to R370 per month earlier this year, currently supporting about 13 million recipients. Although the SRD grant was set to end in March 2025, extensions are likely, as has been the trend in recent years.
The SRD grant budget for 2024 was R33.6 billion, rising to R35.8 billion with the recent R20 increase.
However, if this grant were to become permanent, Treasury estimates its annual cost could climb to R171 billion to keep pace with inflation – an unsustainable figure without substantial long-term tax increases.
Treasury’s opposition to a basic income grant primarily stems from the absence of a means test, which could extend the grant to over 30 million South Africans aged 18 to 60, placing an enormous financial strain on the economy.
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