The social, economic and fiscal impact of comprehensive social security reform for South Africa

Abstract

Severe poverty persists in South Africa in spite of the country's existing social security programmes. Most of the poor live in households that receive no social security benefits at all, and the rest remain poor in spite of the benefits they receive. One of the major causes of the social security system's inability to secure adequate social protection is the low rate of take‐up of these programmes. Extremely poor individuals are likely to fail in large numbers to qualify for a grant with a complicated and expensive means test and application process. Social security reform that fails to address the structural problem of low take‐up is unlikely to yield substantial social benefits. A universal basic income grant, provided as an entitlement and without a means test, will more readily reach the poorest population. By removing the stigma that labels the recipient as “poor”, the grant bolsters economic support without draining psychological resources. Its universal nature addresses the problem of low take‐up, and dispensing with the means test lowers the cost of accessing the grant to both government and beneficiaries. Providing the grant as a fundamental right reduces arbitrary discretion, minimising opportunities for corruption. The basic income grant enables the social security system to reduce the poverty gap by 74%. The basic income grant also supports economic growth through facilitating the accumulation of human and social capital, and job creation, and bolstering aggregate demand in the economy. A well‐managed basic income grant programme is affordable and consistent with fiscal responsibility.

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