MACROECONOMIC AND DEVELOPMENTAL IMPACTS OF SELECTED BASIC INCOME GRANT PATHWAYS FOR SOUTH AFRICA

The research paper assesses three Basic Income Grant (BIG) scenarios for South Africa: Low, Medium, and High Ambition. Using the Dynamically Integrated Macro-Micro Simulation Model (DIMMSIM), the author argues that a BIG can be funded through a combination of a wealth tax, a Social Security Tax (SST), and increased VAT revenue without requiring changes to existing income tax or VAT rates. The findings suggest that such a programme would significantly reduce poverty and inequality while simultaneously boosting GDP growth and employment, contradicting predictions from neoclassical CGE and DSGE models that suggest such transfers lead to economic contraction.

• The three BIG scenarios are projected to significantly reduce national poverty and the poverty gap between 2022 and 2030. The national poverty rate is expected to decline from 38.7% to 27.4% under the Low-Ambition scenario, 17.4% under the Medium-Ambition scenario, and 15.1% under the High-Ambition scenario.
• The depth of poverty, measured by the poverty gap, is projected to decline from 13% in 2022 to 4.7% (Low-Ambition), 2.3% (Medium-Ambition), and 2.1% (High-Ambition) by 2030.
• Income inequality, measured by the Gini-Coefficient, is projected to decline from 68.1% in 2022 to 57.7% (Low-Ambition), 56.0% (Medium-Ambition), and 55.1% (High-Ambition) by 2030.
• A BIG programme is projected to increase average annual real GDP growth relative to a Business-As-Usual (BAU) scenario by 0.6 percentage points (Low-Ambition), 1.0 percentage point (Medium-Ambition), and 1.3 percentage points (High-Ambition).
• The average annual unemployment rate is projected to decrease from 32.1% (BAU) to 29.7% (Low-Ambition), 28.2% (Medium-Ambition), and 27.2% (High-Ambition).
• The BIG programmes can be funded without increasing income tax or VAT rates. Funding pathways include a wealth tax (0.5% to 1.0%), a Social Security Tax (SST) of 3% to 4% on formal employment wages, and additional VAT revenue generated by increased Gross Domestic Expenditure (GDE).
• The average annual gross cost of the three scenarios as a percentage of GDP is estimated at 1.55% (Low-Ambition), 2.60% (Medium-Ambition), and 3.36% (High-Ambition).
• The number of grant beneficiaries is projected to grow by 2030 to 13.3 million (Low-Ambition), 14.9 million (Medium-Ambition), and 19.8 million (High-Ambition).

APA

Adelzadeh, A. (2023). MACROECONOMIC AND DEVELOPMENTAL IMPACTS OF SELECTED BASIC INCOME GRANT PATHWAYS FOR SOUTH AFRICA. Institute for Economic Justice. https://iej.org.za/wp-content/uploads/2023/12/Macroeconomic-and-Developmental-Impacts-of-Selected-BIG-Pathways-for-South-Africa.pdf

Chicago

Adelzadeh, Asghar. MACROECONOMIC AND DEVELOPMENTAL IMPACTS OF SELECTED BASIC INCOME GRANT PATHWAYS FOR SOUTH AFRICA. Institute for Economic Justice, 2023. https://iej.org.za/wp-content/uploads/2023/12/Macroeconomic-and-Developmental-Impacts-of-Selected-BIG-Pathways-for-South-Africa.pdf.

Wikipedia

{{cite report |last1=Adelzadeh |first1=Asghar |title=MACROECONOMIC AND DEVELOPMENTAL IMPACTS OF SELECTED BASIC INCOME GRANT PATHWAYS FOR SOUTH AFRICA |publisher=Institute for Economic Justice |date=December 2023 |url=https://iej.org.za/wp-content/uploads/2023/12/Macroeconomic-and-Developmental-Impacts-of-Selected-BIG-Pathways-for-South-Africa.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{adelzadeh2023macroeconomic, author = {Adelzadeh, Asghar}, title = {{MACROECONOMIC AND DEVELOPMENTAL IMPACTS OF SELECTED BASIC INCOME GRANT PATHWAYS FOR SOUTH AFRICA}}, institution = {Institute for Economic Justice}, year = {2023}, month = dec, url = {https://iej.org.za/wp-content/uploads/2023/12/Macroeconomic-and-Developmental-Impacts-of-Selected-BIG-Pathways-for-South-Africa.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }