The social relief of distress grant, introduced as a temporary measure during the Covid lockdown, reached more than 7.5 million people in 2022. Photo: Delwyn Verasamy/M&G
The time for South Africa to implement a universal basic income grant is a macroeconomic imperative. A GDP rate of 0.4% and an overall unemployment rate of 42% — 71% among the youth — has been projected by the Social Policy Initiative nonprofit. That is almost 12 million jobs that need to be created.
It is just not feasible, given the failing economy. At the same time the country is facing new problems as a result of climate change and the global race to limit warming to 1.5°C by 2050 and reduce greenhouse gas emissions to zero as soon as possible. South Africa must find new economic and growth pathways that move away from coal, which has underpinned the country’s economy for decades. In addition, South Africa has vowed in its Just Transition Framework to ensure no one is left behind. The need to protect those already left behind is not only a constitutional obligation but an essential macroeconomic policy.
South Africa has a number of social insurance and social assistance vehicles to ensure income security for all. These include disability, child support and older person’s grants. Despite the high levels of poverty and unemployment, no assistance is provided to poor unemployed people of a working age. This is a result of the fragmented social security assistance architecture inherited from the apartheid government, which targeted a minority group and assumed full employment. This structure has over the years resulted in millions of South Africans of working age being excluded from government social assistance.
During the Covid-19 pandemic the country instituted a social relief of distress (SRD) grant, commonly known as the R350 grant, to reach the most vulnerable members of society, predominantly the unemployed and those in the informal sector. This came into effect in May 2020 after interventions from many in civil society, the National Economic Development and Labour Council community constituency, faith-based leaders and a group of economists who wrote an open letter to President Cyril Ramaphosa.
In the first quarter of 2023, 11.9 million people were unemployed; 71% were youth, 47.3% Africans and 51% African females. The graph below uses data from the department of social development to show the number of new applicants for the social relief of distress grants, return applicants, total applications and amount paid out for the month of July 2023. It is clear from the graph that demand for the SRD grant far outweighs the supply.
A universal basic income grant would ensure that some of this demand would be as an economic stimulus to restart the economy while playing a critical social role by meeting the demand for social security protection measures.
COVID 19 SRD (R350) Grant
The main arguments in favour of instituting a universal basic income grant contained in the Social Policy Initiative’s recent report is, first, that such a grant is the only feasible way to stimulate the economy to a respectable recovery rate of 4.3% to 5.6% per year. Second, a universal basic income grant will have multiplier effects as the 11.9 million unemployed South Africans will have incomes placed in their hands and can participate in the economy. The third argument for a universal grant is the fact that universal social security is a constitutional right contained in the Constitution and must be protected and advanced like any other right.
Einstein defined insanity as doing the same thing and expecting different results. South Africa has shied away from a universal basic income grant since it was recommended by the ministerially appointed Taylor Committee in 2002. Instead, the promise of creating jobs became popular discourse for the government and civil society. But our dire unemployment numbers call for something different.
Our economy has done a remarkable job of growing high levels of unemployment and inequality, trapping millions of people in poverty levels that will take at least two generations to get out of. Poverty and unemployment have become so rampant that having a formal education and work experience no longer creates immunity from unemployment.
A universal basic income grant is not a luxury, it’s a necessity. A study by the Social Policy Initiative on the R350 grant found that the recipients spent the money on productive activities such as starting businesses, reskilling and upskilling themselves and to recover from a sudden loss of income while grabbling to meet daily needs of bread and butter. Rather than asking how a universal grant will be financed, we should be asking if the country can afford not to have one.
Many studies have debunked the myth that social protection grants create a culture of dependency and loss of motivation and value for paid employment. In his capabilities approach, economist Amartya Sen outlined in detail the significance of individuals’ capacity to achieve the kind of lives they desire and have reason to value.
South Africa’s national elections are in 2024 and important questions to ask are:
- Has South Africa created an economically viable society where all people can live the lives they value and desire?
- Can a universal basic income grant play a catalytic role in revitalising a fragile social compact in South Africa?
- How long will 11.9 million South African continue to remain on the fringes of the economy?
- What number of unemployment levels do we need to reach as a country to get to the tipping point?
A universal basic income grant is not a linear answer to all of South Africa’s problems, but it is a necessary mechanism to insulate the country’s most vulnerable, to reduce the rising inequality and act as a catalyst for stimulating and creating a vibrant economy and ensuring the principles of a just transition are kept.
Nomahlubi Jakuja is a senior economic researcher at the Social Policy Initiative and Isobel Frye is the initiatives founder and executive director.