South Africa

Economic recovery: Solidarity recommends universal income grant reduced tax

Solidarity believes that strong economic growth must be the basis for a strong South Africa in which all communities and South Africans will come into their own.

This was the take-home statement made by economic researchers at the launch of The Solidarity Research Institute economic recovery plan in Pretoria on July 10.

A copy of this plan was also handed to National Treasury in Pretoria.

The organisation hopes that in the weeks following the election, attention will be given to proposals that can benefit the economy immediately, as well as in the long term.

Some of these recommendations include the introduction of a universal income grant.

Economic researcher Theuns Du Buisson said in his report that if a universal income grant of R500 a month were paid to everyone between the ages of 18 and 60, it could replace the social relief of distress grant and the child support grant.

According to the latest population estimates, there are currently 37.2 million adults between the ages of 18 and 60 in the country.

Du Buisson said in the report that this change cannot be made overnight and would have to be preceded by research to ensure that people currently depending on the child support grant are not disadvantaged during the transition.

He said that though more money would find its way to the poor through a universal basic income grant, the transition will have to be carefully managed.

This consideration was made on the strength of the research, which showed that despite greater access to grants, in 2023 13.5% of households and 15% of individuals said they were vulnerable to hunger and access to food.

The report also highlights priorities that the state must pursue to achieve economic recovery, which include the establishment and maintenance of infrastructure, a light tax burden and a stable currency.

The report makes certain recommendations on taxes.

According to the researchers, the enormous tax burden on ordinary South African citizens should be reviewed in its entirety.

The first to receive attention should be corporate tax.

“We must move closer to international target of 15% company tax. All fixed capital investments should be fully tax deductible, to encourage continued growth,” said Du Buisson.

Researchers also recommend that the independence of the Reserve Bank must be reaffirmed.

“Any talk of government interference in the Reserve Bank’s operations must be nipped in the bud,” said Du Buisson.

The report takes the critical decay of state entities that has taken place in South Africa into consideration and says where the decay has such adverse outcomes as in the police and justice system, education and the transport system, urgent intervention is needed.

The report claims the way to achieve this is to establish a special priority department in the Treasury, which straightens out critical sectors within 18 months. The department must have one task to complete per period. Priorities for the first five years should be crime, education and transport.

As far as healthcare is concerned, the solution according to Du Buisson is to transform the public health system into a working system that delivers quality services rather than introducing the National Health Insurance fund.

To him, this should be accompanied by the reform of the private system, to make basic care in the private sector affordable for everyone who works.

This can be achieved through state subsidies, employer contributions and new regulations for already existing medical funds.

“National health insurance that is managed by the state would have outcomes similar to the current public system and lead to reduced access to quality care for all in South Africa, while it would absorb all public funds that should be available for other goals.”

Click here to see a video of the press conference:

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