The glitches experienced by the introduction of a means test for the R350 social relief of distress (SRD) grant demonstrated the weakness that this form of targeted grant distribution would have for a basic income grant, the Institute for Economic Justice said last week.
The institute is in favour of a basic income grant (BIG) being universal with the benefit accruing to the wealthy being clawed back through a variety of progressive tax mechanisms. The introduction of a basic income grant is supported by the governing ANC. The National Treasury has been exploring various options for providing financial support for the unemployed aged 18-60 years who do not qualify for any of the various grants offered by the government.
However, the Centre for Development and Enterprise said in a report released last week that a basic income grant would be unsustainable for the fiscus.
A means test was introduced for the SRD grant to limit the number of beneficiaries because only R44bn was allocated in the budget for the grant which was extended from April 1 2022 to end-March 2023. This R44bn catered for 10.5-million beneficiaries, 400,000 fewer than the number of approved applications for March.
In terms of the means test one is only eligible for the grant if one earns less than R350 a month which requires verification of monthly income by banks. Treasury imposed conditions on the banks performing this task which led to delays and resulted in the nonpayment of the grant for April and May, leaving millions destitute.
Civil society organisations expressed outrage about this nonpayment and demanded the immediate increase in the income eligibility threshold from R350 to the food poverty line of R624, and an immediate lifting of the budget cap of R44bn to cater for all who previously qualified for the SRD grant.
President Cyril Ramaphosa said during a media briefing on Friday that he had received a report on the situation and gave the assurance that payment of the SRD grants would resume this week and that there would be back payments for April and May.
At a round table discussion on the basic income grant organised by the Helen Suzman Foundation, Institute for Economic Justice senior research associate Kelle Howson said targeting had been shown over and over again to exclude upwards of 30% of eligible people and to include many who are not in the target group.
“What we have seen is that targeting is incredibly difficult to administer. It is near impossible to administer correctly and is counterproductive in achieving its policy aims,” she said. Universal distribution was much more effective and much easier to administer. Another argument for universality was that it promoted social cohesion.
Howson said a basic income grant should be introduced immediately after the expiry of the SRD grant and should be pegged at one of national poverty lines.
Wits University adjunct professor and economist Michael Sachs insisted that the shifting of resources from the affluent to the poor could not be called universal. “I don’t think it is politically feasible to have a genuinely universal grant,” he said, adding that a universal grant did not make fiscal sense. To extend the grant to the affluent would result in more spending with no additional impact on poverty and hunger. Targeting would allow the size of the grant to be bigger and technological advances would assist with addressing the administrative issues.
He was adamant that the introduction of a basic income grant would mean higher taxes. Referring to societies which have expanded their welfare systems he said: “There is an iron law which is that higher transfers mean higher taxes as a share of GDP.” The transfer and taxes were two sides of the same coin. Sachs argued that taxes were the most transparent, democratic and efficient way of transferring wealth from the affluent to those in need.
He noted that the extension of the R350 social relief of distress grant to working age adults for three years was sustainable and that it was inevitable that there would be spending of about R50bn a year in addition to the previous fiscal set of commitments of government.
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