A basic income grant: The nitty-gritty and feasibility of this proposed idea
At almost 35%, the unemployment rate as well as the impact of the COVID-19 pandemic on people have prompted government to build a policy document that will justify why South Africa needs a basic income grant.
JOHANNESBURG – A panel appointed by the Department of Social Development, the International Labor Organisation and the United Nations-backed Joint Sustainable Development Goals Fund has proposed that South Africa introduces a basic income grant for unemployed 18- to 59-year-olds as a means to offer financial assistance as the country continues to grapple with the flighting unemployment rate, exacerbated by the coronavirus.
As the country battles with an unemployment rate of 34.9%, experts who were part of the panel cautioned that while a basic income grant will not solve mass unemployment on its own, it was, however, an effective strategy for combating poverty.
The panel released a report in December 2021 proposing that government institutionalises the R350 COVID relief grant that was introduced in 2020 to help alleviate the effects of the COVID-19 pandemic.
Welfare grants are not a new means by government to support the financially needy. According to the Statista Research Department, as of 2019, approximately 18 million South Africans vulnerable to poverty or in need of state support received social grants, relief assistance or social relief paid by the government. The largest group that received social grants were black and coloured South Africans. The high poverty and inequality rates in the country placed South Africa as the most unequal country in the world in 2019, according to the World Bank. The World Bank also reported that the richest 20% of people in South Africa control almost 70% of the resources.
Considering that South Africa’s debt to GDP increased to 83% in 2020 from just over 63% in the previous year and how the country has always been struggling with meeting some of the most basic needs, what’s government’s take on the proposed grant and will they manage?
The coronavirus pandemic has ignited talks about introducing a mandatory basic income grant to help address the country's mounting crisis of poverty and unemployment.
In 2004, the Taylor Committee Report proposed a basic income grant 10 years into the country's democracy. The report noted that current social security system, at the time, had shown the effectiveness of income transfers in combating poverty. However, the social safety net inherited from the apartheid era left marginalised groups poor and without social assistance. The report then further stated that government has both a constitutional obligation and a political and moral commitment to ensuring that all in South Africa have the means to meet their basic needs and called for a basic income grant of at least R100 a month to eliminate destitution, to address different aspects of poverty, to stimulate local consumption-driven economic growth and job creation, and to lay a foundation for sustainable livelihoods.
The economists that were consulted when the report was put together concluded that this model was affordable and sustainable for South Africa. They concluded that there are feasible financing options for a basic income grant, the optimal financing package will involve a mix of tax sources, the basic income grant would significantly reduce poverty and that the basic income grant would be developmental.
Fast-forward to 16 years later, without the proposed grant being implemented, South Africa then introduces a temporary relief fund of R350 for the unemployed and those who were losing livelihoods because of the COVID-19 pandemic. Due to the continuing rippling effects of the pandemic, a panel released a report on Basic Income Support in December 2021 calling for a basic income grant to help South Africa somewhat deal with the plight of poverty that it’s faced with. The panel report recommended that an entry-level grant should be based on the poverty line and then increased on affordability until it reaches the upper-bound poverty level.
Speaking on the introduction of the R350 COVID relief fund last year, Social Development Minister Lindiwe Zulu said "Looking for alternative ways to phase in what over time we are proposing. And may I clearly say this will cost billions, but we need to be able to say what do we do to cushion our people so that they have something in their pocket, they can take care of the family, they can go out and look for jobs.”
Professor Michael Sachs of the Southern Centre for Inequality Studies department at Wits University, who was part of the expert panel, cautioned that a basic income grant would not solve mass unemployment on its own, however, it was an effective strategy for combating poverty.
But how much should the grant pay in order to help those in need meet their basic needs?
Executive director of Southern African Social Policy at University of South Africa, Prof Gemma Wright said: “A R1,300 [a month] universal BIS would eliminate extreme poverty but is very costly and would have to be worked towards.”
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Civil society organisations, trade unions and other interested parties have proposed that government put the amount of the basic income grant at R1,268 per month to people aged between 18 to 59.
Advocacy group Black Sash is among key supporters of the proposed BIG policy. Black Sash advocacy manager Esley Hooder said: “The Black Sash supports Minister of Social Development Lindiwe Zulu’s call for the implementation of the basic income grant. There is overwhelming support across political and ideological lines for a basic income grant now.”
But, can we afford another grant?
According to AfricaCheck, the South African Social Service Agency administrates seven long-term grants. Some of these include the grant for older persons, disability grant, war veterans grant child support and foster care.
Extensive research has shown that some of these grants, like the child grant, are well targeted at very poor households and that they “have been central to poverty alleviation over the post-apartheid years” – although they have had little effect on overall inequality in the country.
Research by the Southern Africa Labour and Development Research Unit and the School of Economics at the University of Cape Town indicates that the size of the grant for older persons is “sufficient to lift many households out of the poorest quintile”. In addition, a “quarter of the unemployed derives income support exclusively from the grant income of other members of their household”.
The Taylor Committee Report that proposed the basic income grant a few years ago stated that the it represented a substantial commitment of fiscal resources. It said, however, a well-managed programme was affordable and consistent with fiscal responsibility. The report said the net cost of the basic income grant represents between 2% and 3% of South Africa’s national income.
“South Africa’s tax structure has the potential to finance the entire cost of the programme without recourse to deficit spending. The long-term growth implications of the developmental impact further support macroeconomic stability and fiscal affordability. The Basic Income Grant is clearly affordable,” the March 2004 report stated.
If the Special COVID-19 Social Relief of Distress grant targeting unemployed adults aged between 18 and 59 is anything to go by, the BIG amount will be slightly higher.
Civil society organisations, trade unions and other interested parties have proposed that government put the amount of the BIG at R1,268 per month to people aged between 18 to 59.
Advocacy group Black Sash is among key supporters of the proposed basic income grant policy. Black Sash advocacy manager Esley Hooder said: “The Black Sash supports Minister of Social Development Lindiwe Zulu’s call for the implementation of the basic income grant. There is overwhelming support across political and ideological lines for a basic income grant now.”
Will the grant be rolled out anytime soon?
The Department of Social Development said the basic income grant was part of a broader agenda to ensure universal coverage of all citizens in a comprehensive and coherent social security system.
“We hope to finalise our proposals, including financing options and implementation pathways in the coming financial year, following which we will seek Cabinet and approval of the necessary Legislative processes,” the department said on its website.
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Additional reporting by Matuba Malatjie.