EDITORIAL: Lindiwe Zulu’s universal income grant is noble, but unaffordable
The Treasury is already facing a shortfall of about R300bn
Few people dispute that putting the economy back on a robust growth path, accompanied by labour policy that encourages companies to hire, is our best bet in getting millions of South Africans out of poverty, and working.
With the economy having barely grown in the past decade, more than 10-million people have been left scrambling for survival income. With the Covid-19 economic destruction set to crush output by double digits, some economists are predicting large-scale retrenchments that will push the unemployment rate to as high as 50%, which would be catastrophic. The 29% we entered the crisis with was disastrous enough.
SA’s unemployment rate has been a national emergency requiring everyone to pull together for a while, though there’s no sign of that happening, despite the urgency having become even more acute. Even if that wasn’t the case, any plans to either retool our job creation strategies or get the economy pumping would still not come in time for the millions who will be tipped into poverty this year.
In comes social development minister Lindiwe Zulu, who unexpectedly brought up a two-decade-old plan to introduce a universal basic income grant to support millions of unemployed. Given the forecast calamity on the horizon, it is good the plan is on the agenda. But she seems to have neglected to discuss it with her colleagues in the government.
The Treasury, which is already facing massive pressure on the budget due to the Covid-19 outbreak and lockdown, was as of this week unaware of such plans. This is the department one would expect to be on top of the research into the costing and implementation of such a plan.
It’s not difficult to imagine that a Treasury in fiscal consolidation mode would push back against any additional spending. It has already set aside R229bn to cover existing social grant programmes for pensioners as well as additional money to support vulnerable households during the lockdown, amounting to 16% of the revenue in the supplementary budget.
The R350 unemployment grant, which is part of the measures to provide a soft landing for vulnerable households during the current crisis, is due to expire in the next few months.
Assuming the scheme’s ultimate beneficiaries are an estimated 10-million people already out looking for jobs, plus an additional 7-million the Treasury forecast would be laid off this year, who will each be paid R1,270 — the upper band of the latest Stats SA poverty line that includes non-food expenses — it would cost the state at least R21bn a month, or about R252bn a year.
That is more than what Mboweni and his team at the Treasury want to cut out of the budget, whose expenditure is facing a shortfall of about R300bn, suggesting that the government would be left with little choice but to impose taxes on an already depleting base.
While we agree with Zulu’s sentiment that it is undeniably painful to see millions suffering, we strongly caution against putting in place an important and expensive policy with little to no research.
Have we tested the argument that giving more people the power to spend will create more economic growth? Is there a danger that the scheme will create a population of citizens reluctant to look for work? And, crucially, how will it be financed? These are some of the broad issues addressed in what Zulu calls “endless” studies on the scheme. Unfortunately, it’s impossible to come up with good policy outcomes without “endless” studies.
Just as the plan for national health insurance is a noble policy idea — that may not be affordable or technically feasible given the country’s challenges in running health institutions — a universal basic income grant could go a long way in addressing the material needs of those who may never find a job in the age of machine-automated work.
But it is difficult to see how it can actually get off the ground.
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