A spectre haunts South Africa’s public finances: the possible introduction of a basic income grant (BIG) – a monthly cash transfer to all qualifying beneficiaries. The precise cost of the proposal is unclear because proponents of a BIG differ on critical questions of how much the grant should be and how many people ought to receive it.

This report makes the case that, while horrific levels of unemployment and poverty in South Africa, combined with slow economic and employment growth, make calls for a BIG understandable, a BIG that is large enough to make a meaningful impact on poverty would (at best) slow economic growth and may even lead to fiscal and financial crisis. The bottom line is that public spending in South Africa already exceeds the bounds of what is affordable, so adding a large new spending commitment will make matters worse.

The report is framed around six questions, each of which stands alone, although we would recommend reading them in order:

• Why is South Africa thinking about a BIG now?
• What do proponents of a BIG say they want?
• Doesn’t South Africa already do a lot of redistribution?
• Can we afford a BIG?
• Will a BIG induce more rapid economic growth?
• What alternatives exist for reducing poverty?

Report by the Centre for Development and Enterprise