The Social Policy Initiative has proposed a wide-scale introduction of a decent, universal basic incomeand rolled out over a three-year period, starting from R798 per month in the first year of up to R1,804 per month in the third year, to kick=start a new growth path. File photo
THE Social Policy Initiative (SPI) has proposed a wide-scale introduction of a decent, universal basic income (UBI) and rolled out over a three-year period, starting from R798 per month in the first year of up to R1,804 per month in the third year, to kick-start a new growth path.
In a strategic position paper titled “The Economics of Implementing UBI in South Africa”, launched last week, the SPI argued that the grant must be viewed as an economic stimulus, and not as a poverty reduction programme.
The paper advances data to show that a decent UBI benefit of R1,500 paid to everybody per month without conditions could self-fund itself by 96%.
The paper modelled the gross cost of implementing UBI for adults and children and concluded that it would be R862.9 billion over three years – R557.7 billion for adults and R305.2bn for children who received a means-tested child support grant of R505 per month during the 2023-24 financial year.
The SPI said this was a first step towards its Vision 2035 of full employment and, if implemented correctly, would be a critical step towards higher gross domestic product (GDP) growth.
Speaking to Business Report on Friday, SPI research author Duma Gqubule said that to get 11.7 million people to work was the equivalent of a war effort.
The official figure of unemployed persons in South Africa has decreased slightly to 7.8 million, but the expanded definition of unemployment puts the number of people without jobs at just below 12 million, while just about 7.2 million people pay income taxes.
Gqubule said the objective of the UBI was to achieve full employment with a less than 5% unemployment rate by 2035 through rapid economic growth.
He said there was no single policy that would see the country achieve full employment, hence the need for multiple policies to address the multiple dimensions of the crisis.
“The poverty levels in this country are just unsustainable. Half the people live in poverty and 20% of the population have no food. So how long must we keep the situation going for?” Gqubule said.
“We must create this dignity floor below which anyone cannot go. The UBI is according to the official food poverty lines.”
As of 2023, an individual living in South Africa with less than R1,058 per month was considered poor.
South Africa already has 28 million people relying on social grants, with 18 million receiving old age pension and child support grants and a further 10 million benefiting from the monthly R350 social relief of distress grant that the government introduced in 2020.
What the SPI proposes is not a novel idea, even though some may say it would make South Africa a welfare state when social grants are already one of the top three public expenditure items, amid deteriorating public finances.
In 2019, a study by the University of California that researched the work of the US charity organisation, GiveDirectly, which was giving cash grants to impoverished families in various African countries, found that when families were given the power to decide how to spend it, they managed the money in ways that improved their overall well-being.
Gqubule acknowledged that the UBI was only sustainable in the long run when the country maintained a high economic growth rate of between 4.8% and 6% per annum.
He said the government needed to invest in expanding public employment, invest in infrastructure development and industrial policies, and health and education because taxes would not finance the UBI.
The SPI paper said the government could exercise a number of options to fund the UBI, including monetary finance by the Reserve Bank, the surpluses in the Public Investment Corporation (PIC), the Unemployment Insurance Fund (UIF), and even foreign currency reserves.
It said the assets within these funds were way above what was required to pay pensions and unemployment benefits, and South Africa’s balance sheet needed to be restructured by reducing and releasing half of these assets into the economy.
To maximise the efficacy of the stimulus effect and the self-financing element of UBI, the paper said there should be no new taxes for 99% of South Africans during the economic recovery phase but taxes that could raise more than R140bn could be increased for idle wealth and high earners that would not impede a fragile recovery or reduce the efficacy of the proposed UBI stimulus.
Gqubule said their proposed funding mechanisms for the UBI would not break the bank or cripple the fiscus.
“During Covid-19, the UIF ran down the surplus by R60bn and there was no need for the surplus. And now there is still a R110bn surplus. Why should we have the surplus?” Gqubule said.
“So I'm just trying to show that some of (the funding mechanisms) are easy, some of them are less easy. But I would say the UIF one is so easy it’s so stupid.
“The employment tax incentive has been a total failure. There’s no reason for it. It doesn’t create jobs for young people and it’s free welfare. It’s basically an income grant for employers.”
BUSINESS REPORT