South Africa moves closer to basic income in wake of civil unrest

South Africa updates

South Africa is considering introducing a basic income grant after poverty and record joblessness helped inflame the nation’s worst post-apartheid violence.

More than 330 people died during a week of violence in July, which ended when troops were deployed on to the streets of its major cities. While the immediate cause of the unrest was the jailing of former president Jacob Zuma for contempt of court, it was exacerbated by poverty and the pandemic.

South Africa’s national treasury told lawmakers this month that it had commissioned research on cash payments to alleviate poverty. President Cyril Ramaphosa previously signalled that the ruling African National Congress could institute unconditional cash transfers in response to “the grinding poverty that we continue to see in our country”.

South Africa already has one of the continent’s largest welfare schemes, with about 18m people benefiting from monthly cash grants for old age, child support and disability. After a decade of stagnant growth and rising borrowing, South Africa’s public finances are already strained. With even relatively small food poverty payments for the jobless likely to cost billions of dollars a year, the impact of a basic income grant on South Africa’s junk-rated finances is likely to be severe, say analysts.

“My concern is that whatever decision is made, it is a decision that will be made in perpetuity, when the budget can ill-afford it,” said Thabi Leoka, an independent economist. “In a country that is fiscally constrained, there are going to be trade-offs.”

Looters make off with goods from a store in Soweto
Looters in Soweto. Rattled by July’s unrest, the government reinstated a temporary jobless grant of $23 a month © AP

Some other developing economies have introduced similar targeted cash grants, such as Brazil’s Bolsa Família programme or its more recent Renda Cidadã initiative. The poverty exposed by looting in July added to the calls for South Africa’s own version.

“There is a disassociation and hopelessness among millions of people in South Africa who don’t see that they have any place in the economy or any prospect of getting a job,” said Isobel Frye, director of South Africa’s Studies in Poverty and Inequality Institute. In an Afrobarometer survey released last month, almost half of those polled said that they would be “very willing” to give up elections for jobs, housing and security.

The most recent jobless figures underlined this despair. South Africa’s unemployment rate surged to 44 per cent in the second quarter, or more than 11m people, if it includes jobseekers who have given up looking for work. Because of the lasting and structural nature of much of this unemployment, a long-term jobless grant would become a permanent basic income for many in practice, say analysts.

Rattled by July’s looting, the government reinstated a temporary jobless grant of R350 ($23) a month. The South African treasury could opt to make the R350 grant permanent but civil society groups are pushing for larger monthly payments tied to different levels of poverty. Higher basic transfers could create a “new bottom-up source of demand” in deprived areas and increase value added tax revenue, said Frye.

But a basic income grant was also “only one part of a social wage”, said Peter Attard Montalto, head of capital markets at South Africa’s Intellidex research consultancy. “There is healthcare, education — you need to think in broader terms. What about access to transport and solving spatial inequality? These things are not easily solved with transfers.”

Still, parts of the ruling party remain reluctant to consider a basic income.

Before he became finance minister in an August cabinet reshuffle, Enoch Godongwana, a veteran head of ANC economic policymaking, said that there might be a place for a basic cash transfer, but that it “must not involve higher income than public employment programmes”.

“The finance minister is completely in line with the ANC ideology on this,” which wrongly fears “dependency” but cannot admit that decades after liberation, many might not ever find jobs, said Zamandlovu Ndlovu, an author and member of Third Republic, a civic non-governmental organisation.

Against that history, the battle over a basic income in South Africa had been “a long fight, which has been going for 20-plus years”, said Ndlovu. As a mirror of the ANC’s economic failures, she added, “it is the best reflection”.