Basic income grant a ‘Molotov cocktail’ for SA – analyst

As the government mulls implementing the long-delayed basic income grant, a leading political analyst says it is a populist ANC policy that will exhaust state coffers and kill the future of the next generations.

Despite research showing the grant was feasible and an answer to poverty alleviation and would help to reduce the gap between the rich and the poor, political analyst Xolani Dube is adamant it’s another reckless use of state resources by the ANC to achieve political objectives.

That’s because it would be unsustainable for a country like South Africa, which was beset by ongoing economic stagnation. Dube, from Xubera Institute for Research and Development, called the idea a “Molotov cocktail” and a “recipe for disaster” for South Africa.

The debate around the basic income grant was reintroduced by Social Development Minister Lindiwe Zulu when she announced government was discussing the possibility of implementing the grant for the poor, targeting ages 18 to 59 years old. It would begin with the vulnerable youths aged 18 to 24 and the elderly between the ages of 50 and 59, before being progressive expanded to other age groups.

Zulu said the grant was a realisation of the government’s plan to implement broad social grant reforms. It was recommended following the state-commissioned Taylor Report of 2000. At the time, the Thabo Mbeki administration saw it as unaffordable because the state had insufficient reserves.

When the Taylor report was released, the country’s population was about 46 million compared to 59 million currently and there have been massive inflation increases since then. Calculated at R120 in 2003, experts estimated 2005 as the best time to implement the grant.

A group of four economists found the grants would help to close the gap between the poor and the rich, provide employment and facilitate economic growth. Their research showed the grant was affordable and could be funded from various sources within the tax system. They reached a consensus on the affordability and the social imperative of the grant and regarded it as a cornerstone of poverty alleviation and a basis of all social grants.

In their report, one of them, professor Peter le Roux, concluded that the grant was the “only feasible way in which to deal effectively with poverty and inequality in the short- to medium-term”.

The research was backed by another study undertaken by the Economic Policy Research Institute, which said it was feasible, affordable, and supportive of poverty reduction, economic growth and job creation. The grant would fortify the ability of the poor to manage risk while directly improving their livelihoods.

Studies in Poverty and Inequality Institute director Isobel Frye said the public funds were there, but that it was the political will by politicians that often hindered implementation. She agreed the basic income grant was feasible but the government must show the will to apply it. She said before the Covid-19 distress relief funding, the unemployed had no safety net. However, the R350 Covid-19 relief offered to the unemployed was still below the minimum poverty line for survival.

“Our primary market must be domestic, we need to build the consumption capacity. Food inflation skyrockets, we need to have a strong watchdog for food prices,” Frye said.

Another political analyst, Dr Ralph Mathekga questioned whether it was the right time to experiment with the grant with “our fiscus under such strain”.

“The ANC will be accused of playing populist politics to buy votes because they are doing it badly in government – and the accusation is not unfounded,” Mathekga said.

Dube challenged the ANC to be bold enough and revisit the ANC Freedom Charter’s economic clauses initiated by its forebearers, including the land issue.

“By implementing the grant, the ANC is postponing the total economic liberation of the country. They think that social grants are a solution. This grant is unsustainable in an economy that is dead like ours with a trillion rand deficit and going for a zero budget,” Dube said.

– ericn@citizen.co.za

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