How to defuse SA's ticking time bomb


A basic income grant is a necessity, not a luxury, if  the country is to avoid a social catastrophe for all its citizens – according to DA MP Karen Jooste.

When, in May, the ANC rejected a recommendation that the Child Support Grant be raised to match that of the food poverty line, DA MP Karen Jooste felt a surge of “ice cold hatred” for those voting against the proposal.

Karen Jooste

It was the third time that Parliament’s Appropriations Committee had decided against recommending the proposed social grants increase. A key reason given was that it would be “too much work” to amend the Appropriations bill. The child support grant stands at R400/month while the food poverty line (FPL) is set at R441/month. The FPL is the rand value below which individuals are unable to buy or consume enough food to supply them with the minimum per-capita-per-day energy requirement for adequate health.

Jooste, who grew up in Kimberley and became an MP in 2014, representing Northern Cape, sees South Africa’s poverty levels as “a ticking time-bomb”. Governments, she says, either choose socio-economic policies that let people die, or that promote life. “The ANC government had chosen a set of unfair ‘let-die’ policies.”

A sociologist with an MA cum laude from the University of Stellenbosch, Jooste recently completed a paper, “New Socio-Economic Policy for South Africa that Promotes Life,” in which she advocates “cash transfers” as a socially just way to protect people from absolute poverty in a context of mass unemployment and extreme violence. In it she proposes a pilot study to test policies that would provide an equal basic level of social security for all. It also examines how a basic income disbursement should be financed in a time of dire economic conditions.

Mapping out a solution at a recent session of Parliament’s Appropriations Committee, it was explained how the extra R5 billion needed to realise the enhanced child benefit payments could be found by re-prioritising or re-apportioning 0.6% of the current Appropriations budget. Examples given include freezing VIP protection spending and Prestige Policy (prestige accommodation and protocol responsibilities for state functions) as well as imposing a 5% cost containment on advertising and communications.

“Given the fact that four children die of severe acute malnutrition every day; that 27% of under-fives are stunted and a staggering 76% of children are not receiving a diet adequate in nutrition, I don’t think this is asking too much,” says Jooste. “I feel a very urgent need to mobilise across sectors because if we don’t embark on this new policy set, the pace at which the country is deteriorating is going to increase exponentially. The bigger the decline, the higher the likelihood of ever-more populist, chauvinistic leaders. We live in an extremely unequal and violent society. The more that basic social insecurity increases, the more unequal and violent our society will become.”

Jooste will present her ground-breaking document in August to an international conference in Finland – which has conducted its own Universal Basic Income experiment (see box) – on the subject: “Rethinking Socio-Economic Development and the ‘Welfare State’ in the 21st Century.” Before then, she hopes to share her treatise with key stakeholders in South Africa. Jooste points out that, 24 years into democracy the government has an annual budget of R1.5 trillion, yet only 105,000 people earn more than R60,000 a month, while 30 million people have to live on less than R1,000 a month – statistics provided by Moeletsi Mbeki and Stats SA.

“Having access to so little money results in people having short, unfulfilling lives, characterised by hunger, malnutrition and violence; millions go to bed hungry; four children die every day of malnutrition-related causes; millions look for work, but cannot find a job. This results in frustration and anger, particularly amongst men.

“Women and children bear the brunt of this rage. Every day, three women and two children are killed by somebody they know. Forty-one percent of  reported rape victims are children.

“What is needed is a move from South Africa’s ‘let-die’ approach, to a ‘let-live’ approach, through a new set of socio-economic policies that values all life, responds to immediate and long-term needs and places basic security at its core.”

Jooste says South Africa’s current socio-economic policy set, which is used to speak to basic social security, consists of Black Economic Empowerment, (BEE) the Expanded Public Works Programme (EPWP) and social grants – must be rethought.

“Politicians across the board are usually quick to point out the importance of equality but fail to stipulate whether it is achieved through employment equity, nationalisation, free education, equal opportunities and/or access to land.”

Jooste draws substantially from the work of Professor Guy Standing of the School of Oriental and African Studies (SOAS), University of London, who argues convincingly that it is basic security which should be equalised. “Basic security is a fundamental human need and without it, people cannot function rationally.”

Basic security is, in fact, the foundation of all freedom, says Jooste. “The values of freedom, fairness and opportunity, and the rights enshrined in the Bill of Rights are denied those who do not have access to adequate food and shelter and/or have to endure physical violence. That is why the Constitution entrenches the right of everyone to have access to social security, including – if they are unable to support themselves and their dependents – access to appropriate social assistance.”

Appropriate social assistance, says Jooste, should therefore speak to the biggest problem – namely a lack of a basic amount of cash to buy the food their bodies need, to remove themselves from physically dangerous situations, to buy airtime; or pay for transport.  Millions cannot buy assets, do not qualify for credit and are forced to borrow from loan sharks. They cannot take economic risks, plan for the future or save. They cannot lift their children out of the poverty trap as they cannot afford nutritious food, good schools or school clothes and shoes. They don’t even have enough money to bury a loved one.”

Jooste says economic growth does not automatically translate into job creation – “though both are important,they are not sufficient”.

Despite these realities, says Jooste, the ANC still governs the country with a considerable majority. “It is the only party that has come up with a set of socio-economic policies that promises basic social security to all the majority black voters, if not in practice, at least in theory. A promise of social security is better than nothing. The current socio-economic policy set targets black South Africans and comprises at its core, Black Economic Empowerment (BEE), Expanded Public Works Programmes (EPWP) and social grants, but will later be augmented by national health insurance (NHI) and a mandatory social security contribution.”

Jooste warns however that basic security is set to decline fast because of the type of socio-economic policies being implemented, which, she says “are becoming increasingly financially unsustainable, do not allow the economy to grow and facilitate corruption, while the public sector wage bill is ballooning (R580bn this year) whilst the quality of service is questionable.

“The R50bn shortfall in the budget is increasing and the repayment of debt-servicing costs alone has now increased to R500m-a-day. At the same time, the EPWP programme and grant system are inadequate to lift people out of poverty.

“Another factor causing the rapid decline of basic security is that South Africa is ill-prepared for automation, to which 41% of jobs are currently susceptible. Workers need to be tech-savvy and continuously learn and adapt. This is very worrying considering that 78% of Grade 4 learners cannot read for meaning and about 80% of all learners do not have the minimum competency in mathematics appropriate for their grade.

“This ‘insecurity’ is fertile ground for populist leaders and the election of ‘big men’ who are perceived to be able to restore order/security. South Africans vote for – and run the risk of being governed by – ever-more authoritarian, chauvinistic leaders as insecurity increases.”

Jooste says that despite South Africa’s having a far-reaching grant system, providing 18 million unconditional cash transfers each month, the two most profound shortcomings are that the child grant is no longer linked to what it costs to feed a child and that able-bodied persons don’t qualify for any grant even though socio-economic conditions are dire.

“Even though it is a ‘right’, social assistance is allocated according to an unjust system of welfare grants and workfare assistance [‘workfare’ refers to pushing welfare recipients into jobs] that focuses on selectivity, arbitrary decisions by the state and unfair conditions.

“Able-bodied persons are denied social assistance based on the assumption they should be able to find a job. However, ‘wage employment’ has been in decline since the early ’70s and has reached unprecedentedly low levels.”

Jooste says that the Basic Income Grant Coalition, which briefed the Committee on Social Development in 2002, found that a basic income grant was affordable and had massive potential to reduce poverty, promote human development and promote economic development.

“With the Expanded Public Works Programme remaining the only available option for millions of unemployed able-bodied people, there is an urgent need for something else. It goes without saying that the economy must grow and jobs should be created. Increasing business confidence and fixed investment by the private sector is crucial. The education system needs to be fixed and an environment must be created where small-to-medium businesses can flourish.”

Emphasising entrepreneurship has limitations, says Jooste. “Successful entrepreneurship in South Africa is estimated at 5%. It is often not a lack of skill that stops people from being entrepreneurs, but a lack of cash. Particularly in rural towns, a person might have a stunning idea, the skill and start-up capital but almost nobody in the town has money to buy the product or use the service. Cash-flow in communities is as important as start-up capital.

“A way must be found to put more money into more people’s pockets at grass-roots level.” Jooste suggests phasing in an empowerment grant to able-bodied unemployed people as a different way of doing BEE. “This way, the vast gap in the social assistance system is closed and, at the same time, the cash transfer will empower the beneficiaries and stimulate the local economy. Small towns literally come alive on pay day. People know what products and services are used in their town and there is always some level of skill in rural communities.

“As in South Africa, India’s public debates on grants have been contentious. Many prefer food subsidies or the guaranteed work scheme, similar to the EPWP. Yet 350 million people live in poverty despite these initiatives and despite two decades of high economic growth.

“As such, in 2011, two pilot studies to test the impact of BIGs were started. Randomised control studies over 18 months compared the results in households and villages receiving basic incomes with the results in 12 other control villages where nobody received the grant. Some key findings, according to Prof Standing, include:

• Beneficiaries used money to improve their housing, latrines, walls and roofs, and to take precautions against malaria;

• Nutrition was improved. There was a reduction in the incidence of seasonal illness, a greater use of private health care and, overall, a marked improvement in the health energy of children;

• Better health helped to explain the improved school attendance and performance which was also the
result of families being able to buy necessities like shoes and pay for transport to school;

• There was a shift from government ration shops to markets, made possible by increased cash flow;

• Many people made various small investments such as buying more and better seeds, sewing machines and establishing little shops where items and produce was sold or equipment was repaired (this was associated with more production, and higher incomes);

• Contrary to what is often believed, basic income increased labour and work in a number of ways: there was a shift from casual wage labour to more ‘self-employed’ farming and business activity, there was less ‘distress-driven out-migration’ and a marked reduction in ‘bonded labour’;

• Those with the basic income were also more likely to reduce debt and less likely to go into greater debt. One reason was that beneficiaries had less need to borrow for short-term purposes at exorbitant interest rates. Even though families were desperately poor, many managed to save some money.

“These findings are compatible with those of other similar studies,” says Jooste. “Even in our country, extensive research on the child grant shows that its success, small as it is, can be attributed to its being a reliable income, and since it is paid on a continuous basis it allows mothers to plan, save, negotiate risks and make investments.

“Studies show that poor South Africans use a small increase in their income differently to the way better-off people would assume. Poor people in general try to use extra money to make more money. They know how to make profitable investments but simply do not have the money and cannot borrow the small amounts needed to, for example, buy in bulk to re-sell, build a chicken coop, or construct a back room to rent out – things they know will work in their town.

“Affordability is of course an important consideration. However, three points need to be mentioned:

• It is of utmost importance to first agree on the principle of basic security – having enough money to eat and be physically safe – as the foundation of all freedom, with a basic income therefore being a right and a social justice issue before affordability is discussed. These two issues should not be conflated because affordability is often used as a cheap argument against issues that should be argued on principle.

• By contrast, the current socio-economic policy set (BEE, EPWP and social grants) will continue to facilitate insecurity and will become increasingly expensive. They will be augmented by NHI and a mandatory social security contribution in the near future that will only aggravate the situation.

• Ever-more populist policy initiatives will arise to stem the tide of public unrest and keep the ANC in control of national government.

“Simply put, South Africa’s time is up. In the past month the governing party has already started to promise free higher education and the expropriation of land without compensation. The opposition cannot afford not to suggest basic income as part of a new socio-economic policy set.

“Basic income is not suggested as a panacea for poverty alleviation, an alternative to welfare or a way to get more votes. It is a social justice issue, implemented as part of a package of policies that serve to equalise basic security in a highly unequal society in order for all South Africans to be able to experience freedom, fairness and opportunity. Agreeing on this in principle allows for creative thinking around affordability.”

Jooste notes: “The current BEE model comes at great cost. It functions on two levels, employment equity and preferential procurement. Employment equity is most profound in the public sector where black people are more likely to be employed than any other race group. This sector has ballooned over the last 24 years. Its growth should have been justified by the need for specific services or goods and not for ‘job creation’.

“It is true that the black middle class has expanded as a result but the public-sector wage bill stands at a staggering R550bn a year. Moreover, it is debatable whether the payment of salaries in departments that form part of the ‘social wage’ should be seen as a benefit to the poor – and the quality of services often leaves much to be desired. Money spent on the social wage does not mean a poor child has a text book in school or that the local clinic has medicine for a sick baby.

“In turn, preferential procurement requires that the state discriminates in favour of black-owned companies in awarding tenders. A point system is used to determine the extent that a company ‘empowers’ black people, with procurement being the strongest component. The system has become complex, increasing costs for almost 65% of South African businesses.

“According to Grant Thornton’s International Business Report 2016, more than 76% of businesses reported increased costs due to the employment of outside consultants, 44% appointed in-house BEE teams and 41% enlisted specialist service providers to assist with procurement as well as other requirements. This is over and above of the actual cost of BEE.

“Apart from this, BEE is generally considered to foster corruption, discourage investment, hamper economic growth and waste skills. It is distrusted by most South Africans because it is an inherently unfair system that only benefits a connected few who have inside knowledge of government initiatives.

“One of the major beneficiaries of the system is current billionaire president, Cyril Ramaphosa. An evaluation of BEE ownership deals since 2001 by Intellidex shows that R317bn has been transferred to black South Africans by the top 100 companies on the JSE (the overall value of these deals is of course very much higher and was estimated at R6,000bn in 2013). Subsequently, some black business people have become super rich in a very short time. Many of these black business elite are politically connected.

“It goes without saying that a close relationship between a small group of economic and political elite, facilitated through BEE legislation, deepens corruption. The current BEE model has little to do with the empowerment of the roughly 30 million black South Africans who make ends meet with less than a R1,000 a month. The system is designed to benefit the new elite by tapping into the profitability of established business. It is a sort of millionaire’s welfare system for the connected, while offering piecemeal programmes with little financial value, such a minimum wage, EPWP and grants, to silence the rest.

“There is an urgent need in South Africa to move from a ‘let-die’ to a ‘let-live’ policy that cherishes all life and recognises the inherent value of people over and above their ability to work. Such a policy must address both immediate and long-term needs and aim to equalise basic security.”

Jooste says opposition parties should highlight the shortcomings in delivering basic security of the current socio-economic policy set and offer a policy alternative. “If this does not happen urgently, South Africa will be governed by ever-more tyrannical leaders and there will be no stopping the rapid decline of socio-economic conditions. Basic income needs to compliment economic growth and the creation of work.

“In the first phase of this new policy set, the child grant needs to be aligned to an objective measure of what it costs to feed a child, followed by the phasing-in of an empowerment grant as an alternative to the BEE model.  This will result in a more appropriate and socially just social-assistance system which recognises that even though many people want to work, they will not find a job. The empowerment grant is not a substitute for wage employment or a grant given to people while between jobs. It is an unconditional cash transfer to people to live, be productive and to creatively use their talents to make a living.

“The introduction of the BIG can creatively be funded in a win-win situation,” says Jooste. “The most effective way to spend on the poor is to give money to them directly. Everyone deserves a basic amount of cash in order to eat and be physically safe. This is true empowerment, the only just way to creatively grow and transform the economy in a context of mass unemployment and extreme violence.
“The fact that the ANC chooses in the early 2000s to deny all South Africans a basic income despite the incredible evidence in its favour, including its affordability, surely constitutes the biggest crime since democracy. Basic security is the basis of all freedom.

How to ensure that everybody has it, is the real question 21st Century politicians should answer. We need politicians who care, who value all life, who believe in the goodness of humankind and who fight for everyone.”

Jooste cites the book Give a Man a Fish: Reflections on the New Politics of Distribution by anthropologist James Ferguson, published in 2015, as having helped form her convictions about social welfare. She has also been inspired by the books of anthropologist Prof Tania Murray Li of the University of Toronto, Canada.

Jooste is also a strong supporter of the views of Prof Guy Standing, academic and author on social justice, who has been most influential in describing a “new class” of people: the Precariat, sometimes referred to as “surplus” populations – the rapidly growing class of people who are simply “not needed” by the system anymore, with automation among the causes.

She says she has been in contact with Prof Standing, who is willing to oversee the pilot study, or rather, randomised controlled studies where the “empowerment grant” will be tested on two rural towns in the Western Cape, with the results compared over two years.

Standing is also co-founder of the Basic Income Earth Network (BIEN) with a mission to “offer education to the wider public about… basic income as idea, institution, and public policy practice”. BIEN organises public conferences around the world on an annual basis “in which empirical research and new ideas are disseminated and discussed”.

Jooste says the empowerment grant can be funded by setting an objective measure such as the Statistics SA Food Poverty Line.

“To phase in an empowerment grant, approximately R47bn a year is needed. “It can be funded without being a tax on the worker: first, by eliciting an annual saving of R5bn (less than 1% of total government expenditure).” This, she says, would be a temporary solution “but it does start the process”. Financing over the longer term is a subject for elaboration in a future Noseweek report.

Jooste says her proposal is currently being discussed in the DA.

In recent years there has been a surge of interest in the idea of basic income grant (BIG) as a right. The World Bank estimates that in 2014 cash transfer programmes of various types reached 720 million people in 130 developing countries.

In Africa, 40 African countries are now implementing some form of grant system. In India, the finance ministers of the states of Jammu and Kashmir announced in January 2017 their intention to phase in a basic income. It is also being considered on a national level.

In 2016 the government of Mexico City committed to looking into the introduction of a BIG.

This followed an earlier recommendation by the UN Economic Commission for Latin America and the Caribbean encouraging member states to do so.

These developments follow pilots and analyses of cash transfer programmes globally. A BIG pilot programme has been under way in Finland. Other pilots are planned in various Dutch municipalities, the Canadian province of Ontario, the US state of California, as well as in Kenya and Uganda. There are prominent politicians in England, Scotland, New Zealand, Taiwan and South Korea, among others, who favour a basic income grant.

Share this article:

Reader's comments

Like to add your own comment ? Please click here to subscribe - OR -
 
Submitted by : Piglet on 2018-06-27 09:47:47
This lady exemplifies Steven Covey's basic requirement for getting something done. Knowing what to do how to do it and why. As in the three legged stool if one is missing it falls over. In today's amateur society how often do you wonder if politicians know what they are doing, how to do it and why. Jooste stands out as a rare professional in a sea of amateurs.

Disclaimer

While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither the authors nor the publishers of this website bear any responsibility for the consequences of any actions based on the information contained therein.