Abstract:
The study investigates the potential welfare effect of
basic income support (BIS) in reducing poverty and
inequality in South Africa. Using the 2017 labour force
survey and a benefit incidence analysis, we consider
three BIS scenarios: (i) universal income support for
those aged between 18 and 59; (ii) only those who
are unemployed receive the benefit; and (iii) only
unemployed individuals in extremely poor households
defined by the food poverty line receive the benefit.
Results show that BIS can reduce poverty and inequality.
However, the specific effects of the BIS will depend on
the targeting scenario considered. The universal BIS is
more costly and has higher leakage, with more benefits
going to the non-poor. However, this universal support
has the biggest overall impact on poverty and inequality
reduction because more South Africans receive income
support under this scenario. Meanwhile, targeting only
the unemployed and the impoverished makes the BIS
more pro-poor and progressive, as well as mitigating
the leakage of the benefit to the non-poor. This would, however, require that an appropriate targeting mechanism be in place.
