Former public protector advocate Thuli Madonsela has weighed in on the heated debate over a basic income grant, saying there will be difficulties ahead and we must choose which we can bear best.
Both President Cyril Ramaphosa and social development minister Lindiwe Zulu have called for the grant to be considered as a way to alleviate poverty. However, business organisations have warned against it, saying it’s unaffordable and may lead to higher taxes.
It has left those in charge with a dilemma, and Madonsela says sacrifices will need to be made.
“SA will be hit by hunger and the structural inefficiencies that are a legacy of apartheid far more than a basic income grant (BIG) could, particularly if the basic income grant is initially only for those living below the poverty line. We must make a choice which hardship we can bear,” she said.
She has previously rubbished suggestions that the grant would prevent job creation.
“Ultimately it will depend on whether the president only listens to libertarian orthodox economists or also listens to development economists and common sense. There’s no way a basic income grant, which is not even pitched at the poverty level, could prevent job creation. Pay the grant,” she said,
Research commissioned by Business Unity SA (Busa) with the support of Business Leadership SA (BLSA) looked into funding options to implement the grant. It found raising tax is the only theoretically viable way to raise the required funds, as alternatives, including cutting other expenditure and issuing more debt, are unviable.
Financial services research and consulting firm Intellidex estimates a basic income grant would see personal income tax, the top rate of which is 45% in SA, raised by between 9% and 19% if used as the vehicle to raise the funds.
VAT would need to be increased by 14% and 29%, meaning an effective increase of about 2-percentage points from its current level of 15%, while corporate tax would need to be increased by between 24% and 47%.
“The basic income grant is not an allocation of funds for a few years, but rather a ‘forever’ decision that must be carefully considered as, realistically, it cannot be undone once implemented,” said Busa CEO Cas Coovadia.
In 2020, SACP leader Blade Nzimande called on the government to convert the social relief of distress grant into a “universal basic income guarantee”.
TimesLIVE's poll on the debate drew a near even split in opinions.
49% said the grant should not be implemented because “people need jobs, not grants”, while 45% said “it would help millions who are unemployed”.
Support independent journalism by subscribing to the Sunday Times. Just R20 for the first month.
'We must choose which hardship we can bear' — Thuli Madonsela on basic income grant dilemma
Image: Esa Alexander/Sunday Times/Gallo Images/Getty Images
Don't have time to read? Listen to a summary below, provided by the writer.
Former public protector advocate Thuli Madonsela has weighed in on the heated debate over a basic income grant, saying there will be difficulties ahead and we must choose which we can bear best.
Both President Cyril Ramaphosa and social development minister Lindiwe Zulu have called for the grant to be considered as a way to alleviate poverty. However, business organisations have warned against it, saying it’s unaffordable and may lead to higher taxes.
It has left those in charge with a dilemma, and Madonsela says sacrifices will need to be made.
“SA will be hit by hunger and the structural inefficiencies that are a legacy of apartheid far more than a basic income grant (BIG) could, particularly if the basic income grant is initially only for those living below the poverty line. We must make a choice which hardship we can bear,” she said.
She has previously rubbished suggestions that the grant would prevent job creation.
“Ultimately it will depend on whether the president only listens to libertarian orthodox economists or also listens to development economists and common sense. There’s no way a basic income grant, which is not even pitched at the poverty level, could prevent job creation. Pay the grant,” she said,
Research commissioned by Business Unity SA (Busa) with the support of Business Leadership SA (BLSA) looked into funding options to implement the grant. It found raising tax is the only theoretically viable way to raise the required funds, as alternatives, including cutting other expenditure and issuing more debt, are unviable.
Financial services research and consulting firm Intellidex estimates a basic income grant would see personal income tax, the top rate of which is 45% in SA, raised by between 9% and 19% if used as the vehicle to raise the funds.
VAT would need to be increased by 14% and 29%, meaning an effective increase of about 2-percentage points from its current level of 15%, while corporate tax would need to be increased by between 24% and 47%.
“The basic income grant is not an allocation of funds for a few years, but rather a ‘forever’ decision that must be carefully considered as, realistically, it cannot be undone once implemented,” said Busa CEO Cas Coovadia.
In 2020, SACP leader Blade Nzimande called on the government to convert the social relief of distress grant into a “universal basic income guarantee”.
TimesLIVE's poll on the debate drew a near even split in opinions.
49% said the grant should not be implemented because “people need jobs, not grants”, while 45% said “it would help millions who are unemployed”.
Support independent journalism by subscribing to the Sunday Times. Just R20 for the first month.
READ MORE:
Basic Income Grant may push taxpayers out of SA, study says
Poverty is unaffordable: there’s a BIG way out
Magical thinking about the BIG question does more harm than good
Tax hikes the only way to fund a basic income grant, report says
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most read
Latest Videos