For a Basic Income Grant and against austerity

by May 22, 2024Amandla 92, The Economy

The calls for a Universal Basic Income Guarantee (UBIG) by academics, trade unions, and popular movements, such as the Universal Basic Income Coalition (UBIC) are mounting. There is growing local and international evidence that cash transfers can address some of the key socioeconomic challenges in South Africa. Yet the government’s approach has been characterised by reluctance, and any meaningful steps toward establishing a Basic Income Grant (BIG) have been slow.

Austerity in recent years has not only resulted in a lower value of the grant and weakened coverage in terms of who receives it. It has also resulted in the deterioration of service delivery.

The grant and jobs
A UBIG set at a sufficient level will act as an income floor. It will safeguard individuals against economic precarity and ensure coverage of essential needs. Research by the Alternative Information and Development Centre (AIDC) suggests that a UBIG set at the Upper Bound Poverty Line (UBPL) will also improve the quality of jobs and nutrition, allow for the recognition of unpaid labour, and spur job creation.

The current Social Relief of Distress (SRD) grant falls R326 below the Food Poverty Line (FPL). Beneficiaries cannot even cover 50 percent of the minimum nutritional energy intake needed per day. Implementation of a UBIG would effectively bridge the income support gap for individuals aged 18 to 59, constituting an important stride towards comprehensive social protection for all.  It is often said that South Africa has a large pool of grant recipients being funded by a small tax base. It is crucial, however, to recognise that the vast majority of social grant recipients are children and the elderly, not the unemployed. Low wages and precarious employment mean that social assistance is necessary to mitigate the effects of systemic inequality. The grant system largely caters to households where there is some form of employment, but wages are set very low, and there are often no pension packages. The grant system is arguably a result of the reluctance of the labour market and capital to provide people with dignified jobs.

Universal coverage
Coverage of the current SRD grant is sparse and insufficient. This emphasises the urgency of implementing a more substantial and permanent UBIG. Despite promises from the President and the Minister of Finance about an improvement and expansion of the SRD grant into a permanent Basic Income Grant (BIG), in March a meagre R20 was added to the R350 SRD grant. This is not only insulting, but it also speaks to the narrow imagining of the role the grant could play in adequately tackling poverty, inequality and mass unemployment.

A significant part of the unemployment problem comes from substantial labour market churn; individuals frequently transition in and out of employment. When someone becomes newly unemployed, they are often not covered by the unemployment insurance fund (UIF). So they have to exclusively rely on other types of social protection, such as the SRD grant, for their immediate needs. However, since there is a history of recent payments in their bank account, they have to wait before they can be approved by the South African Social Security Agency (SASSA). With universal coverage, this plunge into poverty can be averted.

Not enough, to not enough people
In a statement, Cosatu welcomed the government’s R20 increase: “whilst Cosatu had hoped such adjustments would have been made earlier and consistently with each Budget cycle, we nonetheless appreciate this increase by Government, in particular due to the impact the rising cost of living has upon working-class communities.” The increase, however, does not fully take into account the rising cost of living since the grant was first implemented. If the R350 SRD grant was to be adjusted for inflation, then the grant should be set at R440 in 2024, according to the UBIC. After the current increase, recipients are still R70 poorer than they were in 2020.

In an interview on Newzroom Afrika, the South African Federation of Trade Unions (Saftu) stated that the increase is a mockery since R370 is R12 per day. That’s not even enough to buy a loaf of bread. A purely inflationary increase, of course, would ignore that the initial amount was arbitrarily based on what the National Treasury deemed affordable, not on the amount of income needed to provide people with dignity.  There are approximately 16 million working-age people whose income falls below the food poverty line. Under current regulations, they all qualify for the current SRD grant. The 2024 National Budget, however, has only allocated enough funds for approximately 7.5 million recipients. Previous data from the Department of Social Development suggests that about 14 million people apply every month. Not only are there barriers of exclusion based on geography, literacy, and digital access, but there are intended errors of exclusion in the approval process for those who are able to apply.

Research by academics from Oxford and the University of Cape Town shows that the current low qualifying threshold of the FPL does not take into account how income flows. Essentially, because cash flows between households as well as within households, income or consumption per individual may sit below the FPL, but the movements of cash in and out of bank accounts inflate the figures. This results in a greater number of people who are wrongly disqualified from receiving the SRD grant. The number of people who receive the grant is determined by the money the government makes available rather than the number who should receive it. Qualifying people are being deliberately excluded.

The reluctance to bring about a permanent BIG largely reflects the government’s attitude to social protection. It uses cash transfers as a mechanism to appease rather than as a tool to empower people through a dignified income floor.

Austerity makes it worse
Austerity in recent years has not only resulted in a lower value of the grant and weakened coverage in terms of who receives it. It has also resulted in the deterioration of service delivery. Lack of domestic demand and insufficient buying power are largely responsible for South Africa’s economic stagnation. A further reduction in public sector spending, driven by austerity, not only leads to worsened standards of living. It also increases the dependence of households on the private sector for basic services. This reduces the value of the grant: recipients need to spend on goods and services that would ordinarily have been provided by the state.

While the Department of Social Development has advocated for the implementation of a BIG, the National Treasury has prevented any meaningful developments. Despite the President’s public statements hinting at a BIG for South Africans, the National Treasury is being used as a scapegoat to delay its implementation. It is also blamed for designing the grant to prioritise reducing the number of people who wrongly receive it rather than those who are wrongly excluded. The reluctance to bring about a permanent BIG largely reflects the government’s attitude to social protection. It uses cash transfers as a mechanism to appease rather than as a tool to empower people through a dignified income floor.

Recommendations
The Universal Basic Income Coalition (UBIC) is a growing group of over a dozen civil society and community organisations. Together, they have crafted a list of seven recommendations for the design, purpose and nature of a UBIG. The main recommendations include:

  • an increase of the value of the SRD grant to at least the FPL,
  • an extension of the eligibility criteria, action to fix administrative inefficiencies,
  • more effective communications with applicants and beneficiaries, and, importantly,
  • the urgent implementation of the long overdue BIG for those aged 18 to 59 years with little to no income as part of a pathway towards a UBIG.

Others, like the Cry of the Xcluded, are demanding the introduction of a BIG of R1,500 per month, targeted at unemployed and low-income workers, coupled with the expansion of dignified, free basic services. Either proposal will require additional funding in a context of low economic growth. There has been extensive research showing where the funding can come from. The UBIC recommends that financing should come through non-regressive measures, which include maximising the progressivity of the tax system through the introduction of a wealth tax and removing and reducing tax breaks for high-income earners.

Opponents of UBIG often state that the government should rather be providing jobs. But social protection and job creation are mutually reinforcing. UBIC recognises that basic income alone does not translate into a progressive policy agenda. We have been stressing that income support should be part of a broader, comprehensive policy framework that encompasses fiscal, social, industrial and employment policy. In order to maximise the impact of increased income support, basic services should be strengthened.

With the current SRD grant falling significantly short of providing adequate support to millions facing poverty, the need for a substantial and permanent UBIG is becoming more apparent. National Treasury, however, remains an obstacle in securing its implementation. Austerity measures further compound challenges. They lead to weakened service delivery and an erosion of the real value of existing income support. A UBIG provides a window to address some of the deep structural socioeconomic issues, but its implementation relies on confronting budget cuts and the underlying fiscal framework that stands in its way.

Aliya Chikte is a project officer at the Alternative Information and Development Centre and a member of the Universal Basic Income Coalition (UBIC).

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