Fiscal pathways to a universal basic income grant, and their impacts on poverty, inequality and the wider economy

The document evaluates low-, medium-, and high-ambition scenarios for transitioning South Africa's Social Relief of Distress (SRD) grant into a more permanent basic income grant (BIG). Using the DIMMSIM model, the research finds that such grants are fiscally sustainable when funded through progressive taxation and lead to significant reductions in poverty and unemployment while boosting GDP growth.

• The modelling indicates that implementing a BIG is fiscally sustainable and generates positive outcomes for economic growth, poverty reduction, and unemployment across all three tested scenarios.
• The proposed BIG pathways could reduce the national poverty rate by up to two-thirds within eight years. Specifically, the low-, medium-, and high-ambition scenarios are projected to lower the national poverty rate by 7.3, 33.5, and 39.2 percentage points respectively by 2030.
• A BIG is projected to stimulate GDP growth, increasing it from a business-as-usual baseline of 2.2% to between 2.8% and 3.5% by 2030, depending on the ambition level of the pathway.
• The implementation of a BIG is expected to modestly reduce the unemployment rate, with the high-ambition scenario projecting a decrease from a 32.1% baseline to 27.2%.
• The grant's impact on inequality is significant, though more muted than its impact on poverty. The Gini-Coefficient is projected to decline from 68.1% in 2022 to between 55.1% and 57.7% by 2030 across the three scenarios.
• The net cost of the BIG is significantly lower than the gross cost because increased consumption stimulated by the grant generates additional VAT revenue for the government. Net costs are estimated to be 29% to 50% lower than gross costs.
• The proposed funding mechanisms for the BIG include a combination of a wealth tax, a social security tax (SST), and recouped VAT revenue. The high-ambition scenario specifically includes a wealth tax of 1% and an SST at 4% of wages up to a taxable maximum of R2.5 million.

APA

Institute for Economic Justice (2024). Fiscal pathways to a universal basic income grant, and their impacts on poverty, inequality and the wider economy. https://iej.org.za/wp-content/uploads/2024/02/IEJ-policybrief-UBIGpathways-jan2024.pdf

Chicago

Institute for Economic Justice. Fiscal pathways to a universal basic income grant, and their impacts on poverty, inequality and the wider economy. 2024. https://iej.org.za/wp-content/uploads/2024/02/IEJ-policybrief-UBIGpathways-jan2024.pdf.

Wikipedia

{{cite report |author=Institute for Economic Justice |title=Fiscal pathways to a universal basic income grant, and their impacts on poverty, inequality and the wider economy |date=February 2024 |url=https://iej.org.za/wp-content/uploads/2024/02/IEJ-policybrief-UBIGpathways-jan2024.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{instituteforeconomicjustice2024fiscal, author = {{Institute for Economic Justice}}, title = {{Fiscal pathways to a universal basic income grant, and their impacts on poverty, inequality and the wider economy}}, institution = {Institute for Economic Justice}, year = {2024}, month = feb, url = {https://iej.org.za/wp-content/uploads/2024/02/IEJ-policybrief-UBIGpathways-jan2024.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }