Basic income grant in SA: Doable or detrimental?

South Africa's Finance Minister Enoch Godongwana is set to deliver his first full budget later this month, sparking a debate among social activists about the possible implementation of a basic income grant (BIG). The BIG has been a topic of discussion due to its potential social and economic repercussions, with critics questioning whether the state can afford it and if it will effectively reduce the country's deeply rooted income inequalities. Peter Attard Montalto, Head of Capital Markets Research at Intellidex, sheds light on the feasibility and implications of the BIG. Montalto highlights the ambiguity surrounding the BIG, stating that its affordability is contingent on its scope and design features, with estimates ranging from 1% to 4% of GDP. Despite the uncertainty, Montalto suggests that incremental steps towards a basic income grant are more likely than a sudden implementation due to budget constraints. He anticipates extensions to the Social Relief of Distress (SRD) grant in the upcoming budget, emphasizing the importance of clarifying the purpose of the BIG to address issues such as food poverty or unemployment. While acknowledging the positive impact of providing additional social security, Montalto emphasizes the need to strike a balance between income support and investments in other sectors like healthcare and infrastructure development. The source of funding for the BIG remains a key concern, with potential tax hikes and revenue-generating measures expected in the medium term to sustain such social welfare initiatives. Montalto raises doubts about the sustainability of a BIG in addressing systemic issues like unemployment and poverty, suggesting alternative interventions like public employment schemes and lowering barriers to labor market entry. As South Africa grapples with complex socio-economic challenges, the debate over the BASIC continues to intensify. While the BIG holds promise for improving social well-being, questions linger over its long-term effectiveness and fiscal viability. The upcoming budget and State of the Nation Address (SONA) will provide further insights into the government's stance on social welfare programs and economic recovery strategies. As the nation awaits crucial policy announcements, the discourse on the BASIC Income Grant underscores the ongoing quest for inclusive growth and equitable development in South Africa.