Proposal for a Universal Basic Income Grant as economic stimulus

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 to up to R1804 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 R1500 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 it would be R862.9 billion over three years – R557.7bn 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 11.7million people to work was the equivalent of a war effort.

The official figure of the unemployed in South Africa has decreased slightly to 7.8 million, but the expanded definition of unemployment puts the number 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 asked.

“We must create this dignity floor below which anyone cannot go. The UBI is according to the official food poverty lines.”

As of last year, a person living in South Africa with less than R1058 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 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 University of California study that researched the work of GiveDirectly, a US charity organisation which was giving cash grants to impoverished families in African countries, found that when families were given the power to decide how to spend the money, they managed it in ways that improved their well-being.

Gqubule acknowledged that the UBI was only sustainable when the country maintained a high economic growth rate of 4.8% to 6% per annum.