Sunday 25 July was a historic day for social protection in South Africa. It is the day that Basic Income might well have arrived. During his regular televised ‘family gathering’ to update the nation about Covid-19, President Ramaphosa announced: ‘we are reinstating the Social Relief of Distress Grant to provide a monthly payment of R350 until the end of March 2022’.
The Special Covid-19 Social Relief of Distress (SRD) grant was introduced in May 2020, initially for six months, to assist ‘individuals who are currently unemployed and don’t receive any other form of social grant or UIF payment’. Under public pressure it was extended until April 2021 but then discontinued, when it seemed that the worst of Covid-19 was over.
The President must have known that reintroducing the SRD grant is probably politically irreversible. There is no way that the ANC’s support base and South Africa’s vibrant civil society will allow the SRD to be removed again in April next year. Which means that millions of unemployed South Africans and unpaid caregivers finally have a social grant, and the biggest gap in South Africa’s social protection system is now filled, at least temporarily but possibly permanently.
BIG or BIS?
The Basic Income Grant (BIG) debate has been rumbling in South Africa for two decades, ever since a BIG was recommended by the Committee of Inquiry into a Comprehensive System of Social Security for South Africa in 2002. I prefer the argument for Basic Income Support (BIS). South Africa already has social grants that deliver assistance to poor children up to 18 years of age, poor older persons over 60 and other vulnerable groups. There is no need to throw out all those programmes and replace them with one flat rate payment to every South African – the classic definition of a BIG. What is needed is a social protection instrument that would address South Africa’s unemployment pandemic by assisting people aged 18 to 59 who are living in poverty – Basic Income Support.
The case for Basic Income
There are at least five arguments for a BIS. First is the moral case for providing support to the poor, which in South Africa is also a constitutional right. Second is the positive economic impact: boosting the purchasing power of the poorest will create income multipliers, stimulating local economic growth and livelihoods.
Third is social solidarity and cohesion. The recent spate of looting in parts of South Africa, ostensibly triggered by the imprisonment of former President Zuma, was just as much an outburst of frustration and anger against a system that excludes millions of South Africans who see no hope for their future. The SRD will alleviate some of this hardship and make everyone feel recognised and included.
The fourth argument for a BIS is Covid-19. The pandemic and the lockdowns affected low-paid and informal workers badly, and prompted a R500bn (£25bn) social and economic support package from the government, including a Temporary Employer/Employee Relief Scheme (TERS) and the SRD grant. Though temporary, these interventions highlighted the underlying problems of chronic poverty and unemployment that receive too little policy attention in ‘normal’ times, prompting calls to make these emergency relief measures permanent.
Finally, a BIS would improve the effectiveness of the existing social grants. The Child Support Grant is intended to meet the basic needs of 12 million children in low-income households, but instead this cash is diluted among the entire family, because unemployed parents and carers also need food and clothes. This is one reason why there has been no decline in child stunting rates in post-apartheid South Africa, which has plateaued at around one in four children since the early 1990s, despite the introduction of the CSG in 1998 and its subsequent rollout to two-thirds of all children by 2020. A BIS that targets low-income adults would allow more CSG cash to be allocated to the needs of the child.
The case against Basic Income
Two commonly heard arguments against Basic Income relate to its supposed behavioural effects (‘dependency’) and its cost (‘unaffordability’).
Do cash transfers make poor people lazy?
The myth of the lazy welfare claimant has been comprehensively disproved in the international literature. Nonetheless, influential commentators like Mamphela Ramphele have recently argued that South Africans should pull themselves out of poverty through ‘self-liberating’ hard work, and should not continue to depend on the ‘dummies’ of social grants. This pejorative view implies that poor people are lazy (they choose leisure rather than work, as economists phrase it), that they prefer to live on handouts from the state, and that there are plenty of job vacancies waiting to be filled.
This view is not aligned with reality. South Africa’s social grants are too little to live on, and the South African economy is characterised by structural unemployment. There simply aren’t enough jobs to absorb the millions of unemployed job-seekers. People who argue against Basic Income are effectively saying that unemployed South Africans who cannot find non-existent jobs should also be denied their Constitutional right to social assistance from the state.
Is Basic Income unaffordable?
The second argument against a BIG or BIS is its cost and the assertion that it is ‘unaffordable’ or ‘unsustainable’. It is true that it will be expensive. Even at its low R350/month (less than the CSG at R460/month, and less than the Food Poverty Line at R585/month), if 10 million people claim the SRD (there are currently 10.3 million unemployed and discouraged work-seekers, only a small minority of whom can claim UIF) the cost would amount to R42 billion (£2bn) each year. Where will this money come from?
One possible source is more efficient government. Reducing corruption, mismanagement, and wasteful expenditure would release billions of Rands. Cutting government spending by 2-3 per cent would be enough to cover the cost of the BIS. The ongoing State Capture Commission, and the upcoming prosecutions of former President Zuma and ANC Secretary-General Ace Magashule for corruption, show that the State is seriously committed to cleaning up government. This is good for investor confidence, although the recent images on global television of riots and looting will not have helped South Africa’s image abroad.
The second source of revenue is to raise taxes. This is never popular. If personal income tax is raised, the middle classes will complain that they are already overtaxed. If corporate taxes are increased, business will complain and some private sector jobs could be at risk. If VAT is raised, this will impact negatively on the poor as well as the non-poor. Nonetheless, South Africa is an upper-middle-income economy, and one of the most unequal countries in the world. That suggests that there is much scope for redistribution, and the gap between rich and poor South Africans is so great that more redistribution is a moral, social and political imperative.
A third way of managing the costs of expanded social protection is to grow the economy. The flip side of the ANC government’s social policy success in establishing Africa’s most comprehensive and generous social protection system, is the failure of its economic policy to generate broad-based economic growth that creates jobs for the poor. If that can be addressed then poverty will fall, and the number of people claiming South Africa’s means-tested social grants will fall in the coming years.
A comprehensive social protection system is one that provides social assistance and social insurance to everyone who needs support from the state when they need it, at an adequate level. R350 is not enough for anyone to live on – and certainly not enough for any recipient to “choose leisure” rather than look for work – but it’s a good start. Most important of all, now that the SRD is back, civil society will start campaigning hard to raise it to an adequate level – and to make it permanent.
About the author
Stephen Devereux is a Research Fellow and Co-Director of the Centre for Social Protection at IDS. He also holds the SA-UK Bilateral Research Chair in Social Protection for Food Security at the Centre of Excellence in Food Security, University of the Western Cape, South Africa. He is currently a member of an Expert Panel that is advising the Government of South Africa on Basic Income Grant options.