Why does South Africa need a Universal Basic Income Guarantee?

The document advocates for a Universal Basic Income Guarantee (UBIG) in South Africa, defining it as a regular cash transfer provided as a right to all adults to cover basic necessities. It argues that a UBIG is superior to targeted grants, which often suffer from high exclusion errors and administrative complexity. The series presents evidence that basic income support improves health, education, and mental well-being, particularly for children, and empowers women by reducing their economic dependence on men and vulnerability to intimate partner violence. Economically, it contends that UBIGs do not create dependency or discourage work; instead, they can stimulate local economies through a multiplier effect and provide workers with an 'exit option' from exploitative labor. The document proposes financing the UBIG through progressive taxation, including a social security tax, wealth taxes, and the removal of subsidies for the wealthy, estimating a gross annual cost of R255 billion if set at the Food Poverty Line, which would be significantly offset by VAT recoupment and economic growth.

• South Africa faces extreme poverty and unemployment, with an expanded unemployment rate of 44.1% in the second quarter of 2022. While social grants are the most effective tool against poverty, there is currently no permanent income support for able-bodied adults aged 18 to 59.
• Targeted grant systems are often counterproductive due to high exclusion errors. A study of 25 targeted initiatives found that 12 had exclusion errors above 70% and 5 above 90%, with none below 40%.
• A UBIG can eliminate hunger and poverty if set at the value of the highest poverty line. Government estimates indicate that 18.3 million people in South Africa currently lack sufficient income to meet basic food needs.
• Cash transfers improve child health and educational outcomes. In Namibia, a basic income grant led to a 32 percentage point decrease in child malnutrition. In eight Sub-Saharan African countries, secondary school enrolment increased by 5 to 15 percentage points due to cash transfers.
• UBIG supports gender justice by providing women with financial independence and reducing their vulnerability to intimate partner violence (IPV). In South Africa, women-headed households are more likely to be unemployed (40.6% in 2020) compared to men-headed households (22%).
• Evidence contradicts the 'dependency' narrative; cash transfers do not cause labour market withdrawal. In Namibia, a basic income pilot saw the unemployment rate drop from 60% to 45% in the target area.
• Basic income creates a local economic multiplier effect. In Ghana, a cash transfer initiative increased local income by a multiplier of 2.5, and in Zambia, consumption increased by 25% over the grant value.
• A UBIG set at the Food Poverty Line (R624 per month) for all adults aged 18-59 would have a gross annual cost of R255 billion. However, the net cost could be as low as 50% of the gross cost when accounting for VAT recoupment and a social security tax.
• The government can recoup approximately 12% of grant spending through VAT, as the bottom 70% of spenders use 81% of their disposable income on VAT-bearing items.
• Proposed progressive financing options include a wealth tax on the wealthiest 1% (potentially raising R143 billion annually), a 25% VAT on luxury goods (R9 billion annually), and a Financial Transactions Tax (R41 billion annually).

APA

Institute for Economic Justice (2022). Why does South Africa need a Universal Basic Income Guarantee? https://iej.org.za/wp-content/uploads/2022/12/IEJ-UBIG-1-7-collated-factsheet-web.pdf

Chicago

Institute for Economic Justice. Why does South Africa need a Universal Basic Income Guarantee? 2022. https://iej.org.za/wp-content/uploads/2022/12/IEJ-UBIG-1-7-collated-factsheet-web.pdf.

Wikipedia

{{cite report |author=Institute for Economic Justice |title=Why does South Africa need a Universal Basic Income Guarantee? |date=November 2022 |url=https://iej.org.za/wp-content/uploads/2022/12/IEJ-UBIG-1-7-collated-factsheet-web.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{instituteforeconomicjustice2022why, author = {{Institute for Economic Justice}}, title = {{Why does South Africa need a Universal Basic Income Guarantee?}}, institution = {Institute for Economic Justice}, year = {2022}, month = nov, url = {https://iej.org.za/wp-content/uploads/2022/12/IEJ-UBIG-1-7-collated-factsheet-web.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }