/ 25 August 2021

Basic income grant not on treasury’s watchlist — yet

Sassa Collection In Alexandra Photo Delwyn Verasamy
The MTBPS stresses that there are already 18.3 million citizens who receive one or another form of welfare grant. (Delwyn Verasamy/M&G)

The universal basic income grant does not feature in the treasury’s budget considerations, yet. 

The department’s director general, Dondo Mogajane, said this on Wednesday during a presentation to parliament’s standing committee on appropriations. Mogajane, who was at pains to detail the government’s fiscal squeeze, said the basic income grant “does not feature in our thinking currently”. 

“Work obviously is underway. There is no commitment as yet in terms of cabinet signing off and saying: ‘There shall be a basic income grant and it will start on this date.’ That has not happened,” he told legislators.

“But obviously the conversation is there … It doesn’t feature in our thinking per se. Though as you can imagine, we are responsible officials and we will obviously have to model the impact here and there.”

Mogajane added a warning: “But you can imagine what this will mean [to the budget] based on what we are saying the estimates are.”

Calls for a universal basic income grant have intensified in the face of the Covid-19 pandemic’s economic onslaught and last month’s looting, violence and arson, during which businesses in parts of Gauteng and KwaZulu-Natal were devastated. According to a presentation to parliament by the South African Special Risk Insurance Association, claims from affected businesses could amount to as much as R20-billion.

The treasury’s presentation this week came the day after Statistics South Africa once again reported record unemployment numbers. According to the agency’s quarterly labour force survey, the unemployment rate climbed to 34.4% in the second quarter of 2021.

The unemployment rate according to the expanded definition, which counts economically inactive workers as well as discouraged work seekers, is now at 44.4% — the highest the survey has recorded since 2008.

At the time of last month’s violence, the Mail & Guardian and other news outlets reported that the cabinet is considering the introduction of a basic income grant. In response to the M&G’s queries, the treasury said it could not comment while the grants was still under cabinet consideration.

The M&G later reported that allies of President Cyril Ramaphosa in his cabinet are divided on whether the government should implement a basic income grant as a permanent fixture, with some saying this would bankrupt an already strained fiscus.

Earlier this month, Tito Mboweni — the man charged with balancing the need for social relief in the wake of the pandemic against the treasury’s policy of fiscal consolidation — stepped down as finance minister. 

His resignation came a week after the treasury tussled with the president on the extension of the Covid-19 social relief of distress grant. The treasury, Mboweni said last month, had indicated that the R350 grant could be extended for only six months. 

“And we were wrestling about this matter with the president. And he — being a very good negotiator from his union days — made us cross over the line until the end of the financial year, which is March 2022.”

The treasury’s presentation on Wednesday showed that the budget deficit for the 2020-21 financial year is 11% of GDP, a 3% improvement on what was projected in the department’s budget review in February. 

While noting that performance was slightly better than expected, the treasury said: “The point of departure for fiscal policy is from this weakened and vulnerable position.”

South Africa’s three-year increase in debt to GDP is among the largest in the world, according to the presentation. “Fiscal distress is mounting in developing countries amid historically high indebtedness. In this environment of rising fiscal pressures, South Africa is losing ground to its peers.”.

The presentation underlined the treasury’s policy of fiscal consolidation, saying South Africa’s fiscal challenge “is to balance the immediate need for support to the economy during the pandemic with ongoing efforts to close a large, pre-existing budget deficit”.

“In the 2021 budget, we continued with fiscal consolidation. And we painted a situation where our fiscal outlook remains unsustainable and it’s a drag on economic growth. That is important,” Mogajane said.

He noted that despite underlying fiscal constraints, the government had offered a short-term relief package, which includes extending the R350 grant, adding: “But that obviously is not enough.

“And then we have to basically play around with the same money that we have, literally just by reducing one sector and increasing another sector and trying to shift money to productive sectors. Again, if the quantum doesn’t increase, we’ll continue to be forced to do this.”