Comment & Opinion

BIG or BUG?: Social Development Minister sows hope and confusion for the unemployed

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On Monday 13 July the Minister of Social Development, Lindiwe Zulu, unexpectedly let a BIG cat out of the bag when she announced that a Basic Income Grant (BIG) could be introduced for unemployed working age South Africans. The next day the Minister walked back from this announcement, clarifying that this is only an idea under discussion.

 

What is a Basic Income Grant and what is its history in South Africa?

The original ‘BIG’ idea was that every person in South Africa would receive a payment from the state of R100 every month. This was recommended by the Taylor Committee in its report on comprehensive social security back in 2002, and it provoked a heated debate. Although Zola Skweyiya, then Minister for Social Development, supported this proposal, then Minister of Finance Trevor Manuel did not – he famously claimed that a Basic Income Grant would “bankrupt” South Africa. The idea of a BIG has been revived and dismissed at various times since then, but it has been quiet in recent years – until Minister Zulu put it on the table again in the context of a post-COVID-19 response.

 

What is Minister Zulu actually proposing?

It is important to note that what Minister Zulu proposed is not a universal Basic Income Grant. She is talking about a social grant for unemployed adults. Only people aged 18 to 59 who are not working and have no access to UIF or social grants would be eligible. I suggest this should be called not a universal BIG, but a targeted ‘BUG’ or Basic Unemployment Grant.

This is not only a matter of terminology. It is important because a targeted BUG would cost much less than a universal BIG. Also because it would fill the biggest gap in South Africa’s social protection system, by providing vital income support to unemployed adults who do not have access to either social grants or social insurance.

The constitution affirms the right of everyone to “social security, including, if they are unable to support themselves and their dependants, appropriate social assistance” (Article 27(c)). South Africa’s social protection system partly realises this right, through social grants to non-working poor cohorts – e.g. children, older persons, persons with disability – and social insurance (notably UIF) for formally employed workers who pay contributions against periods when they are not employed.

But the UIF does not cover all workers and payouts are limited in value and duration. The introduction of the Temporary Employer/Employee Relief Scheme (TERS) and the Special Covid-19 Social Relief of Distress (SRD) grant, in response to the disruption to livelihoods created by COVID-19 lockdowns, highlighted this gap in the social safety net. But these are only temporary interventions. Minister Zulu’s proposal for a targeted BIG aims, in effect, to make it permanent.

 

Why is it controversial?

The debate between Zola Skweyiya and Trevor Manuel reflects two well-chewed bones of contention around the BIG and around social protection more broadly. There is a ‘social’ or moral argument around entitlement and dependency, and a ‘financial’ argument around cost and affordability.

 

The moral debate: is it the right thing to do?

The moral debate reflects two opposing views about poverty, and whether the poor are ‘deserving’ or ‘undeserving’ of financial support from the state. On the right, poor people are poor because they are lazy; giving them money for free only rewards them for being lazy; and it will create ‘dependency’ on the state. On the left, poor people are poor because apartheid systematically deprived them of productive assets, decent work opportunities and good education; the post-apartheid education system has failed them; and the economy is structurally unable to generate enough appropriate jobs.

The right-wing view can be easily dismissed as empirically invalid and morally bankrupt. There is no robust evidence that poor people, in South Africa or elsewhere, would prefer to live on paltry social grants rather than decently paid employment. It is also a self-serving position, propagated by neoliberal economists and others with privileged lifestyles who have no empathy for the unemployed men and women begging for work on street corners.

The left-of-centre view is underpinned by two radical but simple propositions. Santiago Levy, the Mexican economist and politician, has argued that the European social insurance model, that ties unemployment benefits to mandatory contributions deducted from wages or salaries, is inappropriate in contexts of high labour market informality. Levy and associates proposed a universal social insurance scheme, covering all workers, funded by other sources rather than a tax on labour.

The second argument for filling the gap in South Africa’s social protection system with a ‘Basic Unemployment Grant’ derives from James Ferguson’s book ‘Give a Man a Fish’. Drawing inspiration from the Freedom Charter, Ferguson argues that all South Africans are entitled to social payments from the state, not as welfare grants but as their “rightful share” of the nation’s wealth.

 

The financial debate: is it affordable?

This raises the second perennial challenge to any variant of a BIG: affordability. Some economists have already denounced Minister Zulu’s proposal, asserting – again, with no evidence – that South Africa cannot afford it.

The cost of any social grant depends on two figures: the number of beneficiaries and the amount they will be paid. According to Stats SA, there are currently about 7 million unemployed people in South Africa. If they received a BUG of R350 a month, equivalent to the COVID-19 SRD grant, this would cost R29bn a year. According to the Auditor-General, South Africa’s municipalities squandered R32bn on irregular spending last year. We also know that the government managed to mobilise R500bn for its response to COVID-19 – enough to fund this proposed BUG until 2037.

If R29bn seems too expensive, or if the payment is set at a more realistic level – closer to one of the national poverty lines – then the costs can be managed by rolling the BUG out over a period of time. Minister Zulu herself suggested that the youth (18-24) and older working-age persons (50-59) should be enrolled first, “then progressively expanding to other age groups”.

So funding the BUG is simply about policy priorities and political will. COVID-19 is a national disaster, and so is unemployment. Growing the economy and creating jobs is the ideal response, but more challenging now than ever. In the meantime, tightening up government spending and redirecting public resources towards supporting the unemployed is not only socially desirable, it should be a national priority.

Author: Stephen Devereux holds the SA/UK Bilateral Research Chair in Social Protection for Food Security.

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