Real radical economic transformation is a basic grant for all
SA does need radical economic transformation. Growth is snail-paced and inequality is increasing. The fog of political patronage is debilitating investment and future generations are ill-equipped to thrive in a changing economic landscape. Old ideas are tearing us apart rather than binding us together.
SA and the world need a utopian unifying vision, radical ideas transformed into good policy and efficiently executed solutions. Together, we must close the inequality gap, lift people from poverty, set a base for economic growth and create a foundation for a coming society without jobs inevitably driven by technological advancements.
Radical economic transformation was a key theme of President Jacob Zuma’s chaotic 2017 state of the nation address. However, the ideas and interventions proposed were reactionary, vague and, at best, imply a transfer of wealth from the very rich to the relatively well-off. At worst, it would transpire as a transfer of wealth based on patronage. It is not clear how ordinary citizens would benefit.
What we need is real radical economic transformation underpinned by bold, clear ideas backed by evidence. Here is one such idea: a citizen dividend — a universal basic living income as a right for every South African.
Endemic poverty is alarming in SA. Together with growing income inequality, unemployment and underemployment, it means that economic growth and the existing social security system are not enough to reduce the poverty gap, uplift the destitute and achieve prosperity for the majority.
Statistics SA data from 2011 show more than 45% of South Africans are considered poor and more than 20% live below the food poverty line of R321 per month. More than 10-million people live in extreme poverty and go hungry.
While there have been great strides in tackling poverty through the increased provision of basic services such as water and electricity, the lack of basic income has undermined the ability of people to take up these social services. #FeesMustFall is an acute symptom of this income poverty.
Inequality levels are among the highest in the world. About 48% of South Africans aged 15-34 were unemployed in the third quarter of 2016. Thomas Piketty, Joseph Stiglitz and other economists have demonstrated that this is a shackle on economic growth and a firestarter for political instability.
Advanced technologies are powering the shift from post-industrialisation to post-work. The age of the machines has arrived and more work will be done by fewer people. Industrialists — black or white — won’t be creating jobs at scale. People who will still be able to participate in the labour market will increasingly be driven into the on-demand or gig economy.
The on-demand economy is one in which platform companies fulfil consumer demand on the basis of real-time access to goods and services. This model has created huge consumer value and helped global companies such as Uber and South African firms such as Domestly and Sweepsouth thrive.
The flip-side of the on-demand economy is the gig economy — the supply side that allows workers and freelancers to have several "gigs" that together make up full-time work. This can be empowering for people with sought-after skills and social capital, but for most people, the growth of the on-demand economy means the end of job security. For business, this means a decline in consumer spending power.
In growing recognition of this social challenge, the notion of a universal basic income or a monthly citizen dividend is being tabled in many countries.
Conversations are happening in the governments of India, Canada and the Netherlands. The Swiss recently had a referendum on the matter that proved unsuccessful. However, the Swiss are to revisit it, with most surveyed voters seeing it as a "policy for the future".
There is a universal basic income in Alaska and there are pilot programmes in the welfare state of Finland and the libertarian enclave of Silicon Valley.
Theoretically, a universal basic income would replace all other welfare grants and, in combination with various forms of taxation, provide an efficient means to distribute a social dividend in a manner that benefits those who need it most. This would result in a more efficient and caring state and an environment that allows both business and people to thrive.
In SA, the Taylor committee of inquiry into a comprehensive social security system was established in 2000 to consider the feasibility and desirability of a basic income grant.
In 2002, it suggested that such a grant be implemented and recommended work be done to implement it. The political momentum for this mechanism was lost in the transition from the Thabo Mbeki era to the Zuma era.
A universal basic income in SA, as envisaged at the time, meant a monthly "dividend" to every permanent resident of about R233 in 2017 (with a R100 baseline in 2001 that has been adjusted for inflation).
Even though R233 seems a small amount, it is meaningful. The Taylor committee showed that it may reduce the poverty gap by 74%, smash extreme poverty and lift 6.3-million people above the poverty line.
The basic income grant financing reference group noted that the amount was insufficient to discourage people from finding work or greater incomes, but the stable income would enable people to take the sort of risks inherent in job-seeking and entrepreneurship
It will give people choices and enable them to take up expanded social services, improve their nutritional levels, look for work and improve their lives. By removing the means test, gaps are filled in the existing social safety net and the transfer costs and leakages associated with administration are decreased drastically.
The basic income grant financing reference group noted that the amount was insufficient to discourage people from finding work or greater incomes, but the stable income would enable people to take the sort of risks inherent in job-seeking and entrepreneurship.
The added income would boost consumption and demand, particularly in rural economies. It could set the foundation for dealing with the coming pressures of joblessness driven by technology.
A universal basic income would enable the next generation to transition into the productive roles of the future that lie in creativity, innovation, relationships, caregiving, environmental care and civic and political engagement.
It may be time that a citizen dividend is put back on the table for SA. It is an idea with which the brightest minds and leaders should be engaging.
We need innovative thinking to solve the challenges of its funding, its affordability as well as its sustainability.
We can certainly do this only if we have a stable fiscal environment and a path to economic growth. There can be no room for corruption or incompetence in distribution.
A citizen dividend is real radical economic transformation, and a practical step towards the vision of economic freedom and equal opportunity. These are the ideas we must engage with to transform our present and protect our future.
• Raghubar is chairman of the Cape Innovation and Technology Initiative and a Yale Greenberg World Fellow