Can a Basic Income Grant Address South Africa’s Extreme Poverty and Inequality?
South Africa’s Persistent Inequality Crisis
South Africa remains one of the world’s most unequal nations, with a per capita expenditure Gini coefficient of 0.65 – ranking among countries with the most unequal spending distribution globally. In 2023, nearly 55% of the population lived in poverty, while unemployment reached 33.5% in Q2 2024. Economic growth has stagnated since 2008, worsening these challenges.
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The Case for Basic Income Support
Addressing extreme poverty requires multi-pronged interventions, with basic income support emerging as a potential solution. The concept gained traction during COVID-19 when a temporary “social relief of distress” grant was introduced, renewing interest in permanent welfare solutions.
“The pandemic made existing inequalities worse through job losses. A ‘social relief of distress’ grant was introduced in 2020 to support the unemployed.”
Global Evidence Supporting Basic Income
Pilot programs in Namibia, India, and Kenya demonstrate potential benefits. A recent study examined three implementation scenarios:
- Universal grant for ages 18-59
- Grant exclusively for unemployed individuals
- Support targeting unemployed in extremely poor households
Research Methodology and Key Findings
Using 2017 labor force data, researchers modeled impacts of a R595 monthly grant (aligned with food poverty line). Key discoveries:
Poverty Reduction Outcomes
The universal approach and targeted support for unemployed extreme poor showed greatest poverty reduction (both headcount and gap). Income inequality decreased most significantly in these scenarios compared to unemployment-only targeting.
Implementation Considerations
While targeted programs reduce benefit leakage, they incur higher administrative costs. Universal grants offer broader impact but require greater funding. The study suggests focusing on vulnerable groups (extremely poor and unemployed) optimizes resource use.
Policy Implications and Future Directions
With persistent inequality, the research revitalizes debate about expanding South Africa’s social grant system. Effective implementation requires:
- Clear beneficiary identification criteria
- Multi-year commitment
- Balanced approach between coverage and cost-efficiency
By Carolyn Chisadza and research team. Originally published on The Conversation. Read the full study.