shops 11.1

By Neil Coleman, COSATU Parliamentary Officer

"The plight of the poor is at the top of our agenda". (President Thabo Mbeki State of the Nation Address 8 February 2002)

"The society to which we aspire… will not come about through belief alone. It is a society we seek to create…We have a responsibility for remaining activists for a more compassionate society… A society that is intolerant of poverty" (Trevor Manuel 2002 budget speech)

These bolds call from the President and Minister of Finance to declare war on poverty need to result in imaginative interventions that go way beyond tinkering with existing programmes and mechanisms inherited from the apartheid period.
One thinks here of our woefully inadequate social security measures, which are devoid of rationality or fairness. While over half the population live in conditions of poverty, and on average survive on less than R150 per person per month, only 3,8 million receive financial assistance from the state. For many access to a grant, such as the old aged pension, stands between them and total destitution.

In 1998, however, research showed that nearly 14 million of the poorest South Africans live in households where no member has access to grants. Our government recognised the irrationality of the current social protection system by appointing an investigation in 2000.

Cabinet is currently considering the Committee report, including a proposed safety net through which no South African should fall. One such proposal is the introduction of a universal Basic Income Grant (BIG), proposed initially by labour at the 1998 Presidential Jobs Summit.

On Budget day the BIG Coalition, consisting of organisations representing millions of the poor, marched to Parliament demanding a BIG of at least R100 for all South Africans. This event increased public awareness of the need to address escalating poverty and unemployment in the country.

Researchers have calculated that a BIG would close the poverty gap by three quarters, or free more than 6 million people from poverty. They compared this to full take-up of existing grants, which many poor people currently can't access. This would only reduce the poverty gap by 36%, and free less than a million more people from poverty.

Any attempt by government to make an intervention of the magnitude of the BIG proposal will provoke opposition from predictable quarters - those who are happy for things to change, as long as in essence they remain the same. Government will be accused, as it was recently by a prominent businessman, of 'being obsessed with addressing the plight of the historically disadvantaged"- what a skande!

While we have received widespread public support for the proposal to introduce BIG, some of the opposition which has been articulated has been based on inaccurate information. These misconceptions fall into three categories: firstly about the cost or affordability of the BIG; secondly about the targeting of the Grant; thirdly about the capacity to implement it.

The cost of the Grant
The Grant would be available to all South Africans as a right. Some have then concluded, incorrectly, that the Grant would cost over R40 billion. However the cost of the Grant is not calculated on the basis of one Grant per South African. Rather, those earning above an agreed threshold would return the BIG through tax.
The costs of the BIG after this initial 'claw back' would be approximately R24 billion per annum. Secondly, wealthy South Africans would contribute, through a progressive solidarity measure, towards payment of one or more grants for compatriots living in poverty.

While some may resist, our impression is many are willing to make this contribution, since it will go directly to those in need. Depending on the size of this solidarity tax, the net cost of BIG would be between R10- R20 billion per annum.
Is this affordable? This year's tax cuts cost the state a similar amount to that required to finance a BIG. The R15 billion in tax cuts, while welcomed by many, will not benefit over half the population facing harsh poverty, who are not in the tax net.

Further the reduction of the deficit from the 2,6% planned in the MTBPS in November, to the 2,1% in this year's budget, denied the fiscus R5,4 billion.

These two areas alone clearly indicate that there is the fiscal space to afford BIG, even without other funding measures proposed by the BIG Coalition. The questions should be: Is it affordable not to introduce a Grant? What is the cost of continuing to live with unacceptable levels of poverty?

Targeting
A journalist recently claimed that "a yuppie earning R400 000 would receive a BIG". However it is a misconception that the Grant is not targeted at the poor, and that wealthy South Africans would benefit. Targeting of the poor happens not in the allocation mechanism, but in claiming back the grant through tax. The hypothetical Yuppie would not only return the BIG to the taxman, but would pay the Grant of a fellow South African.

The reason for this approach is that means testing (or limiting allocation of grants to those earning below a certain income) has been exposed worldwide as expensive administratively, subject to bureaucratic interference, and actually discriminatory against the poorest of the poor, who find it difficult to access grants. Because of the means test, less than half the eligible South Africans actually receive social grants.

BIG would go to all the poorest South Africans as a right, and implement constitutional obligations to 'progressively realise' social security for those in need. Arguments that we could not develop capacity to deliver BIG are exaggerated. Since BIG is universal, and no complicated means test applies, administration would be streamlined. SARs has demonstrated its capacity to handle the tax administration side.
Payments of BIG would be facilitated in the medium term through Post Office Banks or the 'Smart Card' proposed by the Department of Home Affairs. This would give the poor access to financial services, and eliminate wastage involved in endless queues.

The Social Implications
It is an illusion to think that unemployment, crime, disease and other social problems can be tackled as long as the majority of our people are trapped in poverty. Many causes of these problems are deep and structural, and will take considerable time to address.

BIG's advantage, however, is that it can make a difference over a relatively short time, dramatically impacting on lives of the poor, without the disadvantages of schemes prone to bureaucratic interference and corruption. While government is battling to spend money effectively, and embarrassed by rollover of unspent funds, BIG would be an effective way of injecting resources where most needed.

BIG would:
Provide a measure of income security, thereby increasing options available to the poor;
Encourage beneficiaries to initiate income-generating activities;
Inject much needed resources into local communities, encourage pooling of resources in large households, and
Assist in integrating marginalised communities into the economic mainstream.

Since BIG would not be means tested, or contingent on unemployment, it would not act as a disincentive to look for work. Accessing employment will not result in automatic loss of the grant. Far from 'creating dependency' it will liberate millions from the worst type of dependency arising from abject poverty.

The economically liberating effect of BIG is supported by experiences internationally. For example, evaluation of the bolsa escola (minimum income schemes) in Brazil showed they reduced the dependency of Brazilian women and sharply increased their labour market participation.

According to the ILO, reasons for this was that women had enough money to afford clothing and travel in search of work. Their children were also more likely to be attending school. Surely a similar dynamic would apply in South Africa.
A BIG will not be a panacea or cure-all for South Africa's problems. It must be part of a broader package of measures required to put our country on a new development path, including measures to promote employment, a comprehensive social security net, and steps to ensure that basic services are accessible to all, including health, transport, housing, and education.

It should be seen as contributing to an 'economic settlement' to underpin the political settlement in our country, designed to redress past injustices, and give economic citizenship to those who find themselves in poverty through no fault of their own. This is not only a moral imperative, and an act of social solidarity, but an essential precondition to drive the type of economic and social development needed to address the apartheid social deficit.

Now is the time to intensify the campaign for a Basic Income Grant

The public profile of COSATU's proposal, supported by other organizations is growing by the day. Now is the time to take the campaign to a new level, to send a message to the government that our people want to see a decisive intervention against poverty, and that BIG is an important first step. The government will take a decision on the matter in the next couple of months, since Cabinet will soon consider the report of the Committee of Enquiry. We therefore need to urgently mobilize our structures to intensify engagement on this issue. We need to discuss ideas to take the campaign forward. Some areas we can act on immediately include:

Engaging with Alliance structures at the Provincial and Local level, to propose support for the campaign, and explain the idea. It is also important in the run-up to the ANC Policy Conference in September, and the National Conference, that this issue is being raised in as many areas as possible.

Engage with our elected representatives in local government and provincial government, and where possible request public fora or hearings to allow structures to engage on this issue.
Mobilise support from our allies in the MDM structures, as well as society more broadly wherever the opportunity presents itself

It is important that in taking forward our campaign for a Basic Income Grant .we link it to our overall campaign for affordable public services, such as health, water, transport etc. The BIG campaign also offers us the opportunity to open up broader public discussions on our package of proposals designed to fight poverty and raise the quality of our people's lives.