MLONDI MDLULI: Why SA should follow Singapore’s example and not implement a BIG

The discussion on whether the basic income grant (BIG) should be implemented in SA is of great interest to me, especially since I am young. Should the BIG be implemented, its long-run effects will be heavily felt by my generation and those to come.

South Africans are well within their rights to be concerned and frustrated — even despondent — when considering the country’s high level of unemployment. The fact that the unemployment rate has been sharply increasing over the years is an indication that the government is incapable or unwilling to deal with the issue. The governing party is therefore resorting to implementing the BIG to try to make up for its failures.

I do not believe the implementation of a BIG will be an effective long-term solution to the poverty, inequality and unemployment experienced by many South Africans. The main reason I am arguing against its implementation is because it is unsustainable. SA is not in an appropriate fiscal position to offer a BIG. The country’s budget deficit has been constantly widening over the past decade. The reason for this is that the tax base has been dwindling, while government expenditure has been on the rise.

The pressure on revenue collection is mainly due to the high rate of unemployment and a significant shrinking personal income tax base. Therefore, the country cannot rely on taxes to fund the grant. A BIG will also deter foreign investment due to the threat of tax rate hikes to fund the grant. It will also lead to costly and disruptive economic shocks from which the country could struggle to emerge.

It is also important to highlight that the country’s debt to GDP ratio is very high. Last year the Treasury stated that national debt is projected to increase from 80.3% of GDP in 2020/2021 to 87.3% in 2023/2024. Therefore, the BIG cannot be funded through borrowing. Lastly, I argue against the BIG because it would reduce potentially productive citizens to state dependants. Not only would this strip people of their dignity, it would also consolidate the power of a corrupt government.

A growing economy and access to employment opportunities are crucial in ensuring that a nation progresses. A BIG will not grow the economy and will not improve the access to employment opportunities for South Africans.

The dignity of South Africans must be respected. The citizens of this country are hard workers. They do not need more handouts. What is needed is a government that will implement policies that boost economic growth and attract investment (both local and foreign) so that employment opportunities can be created. This can only be done by ensuring that SA is an entrepreneur-friendly country. This is vital considering the high unemployment rate in the country and that four out of every five young people are unemployed.

Successful black business people such as Richard Maponya laid the foundation. They became successful entrepreneurs and created job opportunities during the apartheid era, despite having access to limited resources. Having said this, it is crucial to ask why the post apartheid government has not enabled the emergence of more Maponyas. It is because the government does not care about investing in entrepreneurship, which could result in the creation of many jobs. Instead, it wants the citizens of the country to depend on the state for financial support. 

It vital for government to realise that young people are the future of the country. Therefore, it is important to ensure that they are well equipped with knowledge and skills that will enable them to be better suited for the labour market. One way of doing this is by fixing the county’s poor education system so that it can produce problem solvers and critical thinkers.

SA must follow the example that has been set by Singapore, which has developed rapidly since the 1970s. It did not implement policies such as a BIG to tackle poverty, inequality and unemployment. Singapore has been called the 20th century’s most successful development story. It has little land and no natural resources. But after independence in 1965 the former British colony was transformed into a major manufacturing and financial centre. It is a perfect example of how stable governance and entrepreneurial thinking can fuel a nation’s economic prosperity.

Singapore has succeeded because it implemented effective economic development policies to fight poverty, inequality and unemployment. It also implemented effective housing development policies and technology sector development policies, and it ensures that it runs a clean government.

Poverty, inequality and unemployment are complex socioeconomic issues, which cannot be solved by implementing attractive short-term policies such as the BIG that will have significant long-term effects. SA should follow the excellent example that has been set by Singapore, to successfully deal with poverty, inequality and unemployment.  

• Mdluli recently completed a master's degree in economics at the University of KwaZulu-Natal.