South Africa to introduce basic income for all

I did my thesis on what was then called negative income tax in South Africa. So of course I am very interested in SA's moves towards a universal basic income.

From The Guardian

South Africa is facing the most dramatic political shift since the end of apartheid after the African National Congress lost its majority in the general election of 29 May. Weeks of difficult negotiations between the ANC and its rivals on how best to form a governing coalition are expected.

One commitment that unites most parties – including the incumbent ANC and its biggest rival, the Democratic Alliance – is to maintain or increase income support for adults, which includes monthly Covid payments to the poorest households.

But the ANC has gone one step further. A week before the election, it released a statement deepening its commitment to finalising a policy to transform the state’s Covid grant into a universal basic income (UBI) within two years of forming a new administration. If implemented, this would make South Africa the first country in the world to work towards a policy of paying all people between the ages of 18 and 59 a regular grant, with no condition to be seeking work.

At the moment, South Africa’s Social Relief of Distress grant (SRD) is paid to people who have less money entering their account each month than the individual food poverty line – or the minimum needed to afford food with enough calories to survive.

The ANC has committed to expanding eligibility to all adults by progressively increasing the means-test threshold. At present, the means-testing is based on the 2021 poverty line, which has increased, but the means-test threshold has not, meaning some people in food poverty do not qualify.

The idea of a basic income for all people regardless of age, class or employability has long been discussed as a way to tackle inequality. Elon Musk touted it as the solution to robots taking human jobs. Martin Luther King wrote about it as the answer to widespread poverty. A policy that captured the public imagination during the pandemic, when governments around the world paid or subsidised wages, could finally become reality.

“When you put money into the hands of the poorest households it lifts the whole economy,” says Kelle Howson, a senior researcher from the Johannesburg-based Institute for Economic Justice (IEJ), which is part of a coalition of civil society organisations calling for a basic income grant in South Africa.

Ninety-three per cent of recipients spend SRD payments on food. Meanwhile, research from a large UBI study in Kenya by GiveDirectly found that recipients used the money to save up for large purchases, improve their diet and start their own businesses.

Despite these benefits, the idea of a basic income was largely the stuff of political debate and fantasy until Covid. During the pandemic, many governments issued emergency grants and income support to replace employment in a way that would previously have been politically impossible.

Spain implemented an anti-poverty payment of €1,015 (£900) a month to 850,000 households, while the Coronavirus Aid, Relief and Economic Security Act in the US paid $1,200 to all adults earning less than $99,000 a year. In the UK, furlough and the self-employment support scheme distributed £100bn to those out of work and the self-employed, as well as raising universal credit payments by £20 between March 2020 and October 2021.

Afterwards, it was harder for governments to argue that a basic income was impossible to administer. But politics turned a sharp corner. Instead of expanding on these new social policies, many countries implemented austerity measures to address record government borrowing during the pandemic.

In the UK, the National Institute of Economic and Social Research found that maintaining the uplift in universal credit payments, which ended in 2021, would have limited the number of households in extreme poverty – defined as lacking essentials like food, shelter, heating, clothes and toiletries – to 1.5 million in 2022. Instead, destitution rocketed to 2 million.

South Africa was an exception: it maintained its Covid grants, despite broader austerity policies pushed through by the ANC. When the grants were stopped briefly, in April 2021, a summer winter of rioting followed, spurred by the imprisonment of Jacob Zuma. By August, the government had reinstated the payments.

But the system is far from perfect. The payments are just R370, the equivalent of about £16, or half the income needed to meet the extreme or “food” poverty line, and millions of people do not get the grant each month. The IEJ says the process is designed to be exclusionary. It is given digitally, in a country where not everyone has a computer and internet access, and uses automated means-testing systems that often exclude eligible people, the IEJ says.

Elizabeth Raiters is one of the many unemployed South Africans who regularly get declined. She works on the #PayTheGrants campaign, which joined the IEJ in filing court papers against the South African government in July 2023, challenging regulations excluding millions of people living in poverty from monthly payments.

In the UK, the National Institute of Economic and Social Research found that maintaining the uplift in universal credit payments, which ended in 2021, would have limited the number of households in extreme poverty – defined as lacking essentials like food, shelter, heating, clothes and toiletries – to 1.5 million in 2022. Instead, destitution rocketed to 2 million.

South Africa was an exception: it maintained its Covid grants, despite broader austerity policies pushed through by the ANC. When the grants were stopped briefly, in April 2021, a summer winter of rioting followed, spurred by the imprisonment of Jacob Zuma. By August, the government had reinstated the payments.

But the system is far from perfect. The payments are just R370, the equivalent of about £16, or half the income needed to meet the extreme or “food” poverty line, and millions of people do not get the grant each month. The IEJ says the process is designed to be exclusionary. It is given digitally, in a country where not everyone has a computer and internet access, and uses automated means-testing systems that often exclude eligible people, the IEJ says.

Elizabeth Raiters is one of the many unemployed South Africans who regularly get declined. She works on the #PayTheGrants campaign, which joined the IEJ in filing court papers against the South African government in July 2023, challenging regulations excluding millions of people living in poverty from monthly payments.

For comparison, the old age pension is roughly R2000 a month.  Unemployment benefit varies by income, but you can only get it if you've paid into the Unemployment Insurance Fund (UIF)  which obviously, if you've been unemployed, you won't have.  The unemployment rate in SA is around 33%.

Many will criticise the level of the proposed UBI, saying it's too low.  Which it is.  But as so often, the perfect is the enemy of the good.  It is impossible for people in developed countries to envisage the dire poverty of most South Africans.  Even a small payment makes a huge difference.  And once the principle and mechanism of a UBI has been established, it can be increased.  Make no mistake, even the old age pension of R2000 (US$160) a month is hard to live on.  Yet millions do.   

How do desperately poor South Africans survive?  They eke out a living working in the informal economy, doing whatever piece work they can find, scrounging through rubbish dumps, by relying on relatives.  Whole families, of children as well as nieces and nephews, will survive on the meagre income of one adult.  Yes, R370 a month is far too low.  But it would still make a real difference to the poorest of the poor, who don't have even that.  Over time, the UBI should be increased until it matches the old age pension.

The mechanism is key.  Poor South Africans can't afford to have bank accounts (the monthly fees would use up all their income).   So the government is going to have to find a way to give the UBI without using bank accounts.   I'm sure it's feasible: for example, each recipient could get a passbook, and collect their UBI every month from the post office.

I hope they do it, and I hope it works.

Golden Gate, southern Orange Free State, South Africa