A stimulating article posted in our premium section (sign up here) discussed the controversial Basic Income Subsidy which is currently being touted in South Africa as a solution to mass unemployment and poverty. According to Joseph Cotterill, SA’s national treasury has previously commissioned research into cash payments to alleviate the country’s extreme poverty. Many fear this is a step in the wrong direction for the country. Speaking to the Financial Times, economist Thabi Leoka said his concern was that “whatever decision is made, it is a decision that will be made in perpetuity, when the budget does not allow it. In a country with budgetary constraints, there are going to be compromises. Below, Dr Thami Mazwai echoes those sentiments, noting that another grant will put the country in intensive care. “The country must think outside the box to develop new and mass economic activity, as the Brazilians and the Chinese have done. As the Financial Times reports, South Africa currently has one of the largest social assistance schemes on the continent, with 18 million people assisted by grants. – Jarryd Neves
By Dr Thami Mazwai *
The debate on the basic income allowance (BIG) reopens an ongoing narrative in our country on the fight against poverty, unemployment and inequalities (PUI). For the record, this PUI represents a monumental threat to our country – and we got a taste of it in July. We must avoid a situation where the poor, especially the young, have nothing to lose but their misery.
However, like it or not, BIG is an even more worrying threat. We are between the devil and the deep blue. If we were to go ahead with the BIG, knock on the water, we would hand our country over to the international bankers who would then set the policy for us.
The policy will not be based on the provision of services, but on how the services can be provided so that the country can reimburse the money it owes. We have already tasted downgrading. Why make it worse with the BIG?
Fortunately – and I say this with a huge sigh of relief – Finance Minister Enoch Godongwana is not convinced by the idea of the BIG. Thank God for small mercies in an atmosphere where slogans are elevated to the rank of the gospel.
Godongwana rightly asked the University of Cape Town to study various alternatives. Maybe he should have asked all of our universities to provide concept notes and whichever has the best forces the company to dig deeper and come up with alternatives. We will then be able to ask the best minds in our country to come up with solutions. After all, we subsidize these institutions.
One of the problems identified by the National Planning Commission (CNP) is that our national budgets have over the years been more focused on consumption than production. This, unfortunately, must end. We cannot get out of the crisis we find ourselves in (or build our country) with money we don’t have.
The stupid story we hear from some in the labor movement is that due to the corruption that many have been involved in in the immediate past, we cannot punish the innocent. Yes, corruption means that the money has been abused. The point is, because of this abuse, we no longer have the funds that we used to order. Fortunately, the wheels of justice are now turning (albeit slowly) and many of those who were part of this corruption are now getting their places.
But can’t we now dig deeper into the hole and implement the OIG because of the corruption of the past? It just doesn’t make sense. Already, StatsSA warns that South Africa’s gross debt stood at 2.2 trillion rand in 2016/17. This translates to around R40,000 per person. Debt has accumulated over the years because, for example, the budget deficit in 2016/17 was R156 billion. In July we were then hit by the unrest and over 50 billion rand is needed. This is in addition to the financial crisis the country is currently facing.
Thus, the solution does not lie only in the subsidies, beyond the annual obligations of SASSA and these must continue. I use the expression “only in grants” wisely, as we will see much later. Coming back to the subject of grants, it should also be noted that several studies show that SASSA grants have a negative impact on entrepreneurship.
Once again, let me stress that the current system of subsidies must continue because it has lifted millions of people out of poverty. But we have now reached our limit and, as we argued earlier, more grants will put our country in intensive care. We now need to create more wealth and more taxpayers because even current subsidies could be threatened.
Thus, the country must think outside the box to develop new and mass economic activity, as the Brazilians and the Chinese have done. This would go beyond what has already been done, all the more so when one refers to the B4SA and the government’s reconstruction and economic recovery strategies.
Second, and going back to my “grant only” statement, all that means is don’t give people money when they haven’t worked for it. So, if money can be found for the BIG, people have to work or be required to engage in productive work to qualify.
Our economy thrives when people work. For example, the Expanded Public Works Program (EPWP) can be refined to create entrepreneurs rather than dependents. The program has gained momentum and the funds earmarked for BIG can be part of that program, but as I said, with some drastic improvements to the EPWP, what government and labor experts can do.
The most important argument against BIG is that a lot of research has shown that black South Africans are haunted by addiction and entitlement syndromes. While this is understandable in light of the past, when we were denied what we were owed, these syndromes are now at crisis levels. I visit the Eastern Cape regularly and find that in my village the fields are fallow when they used to be green. People expect the government to do this and that. It does not work.
Our politicians themselves are doing us a disservice because when they campaign they promise everything to the voter. The BIG is also part of these promises. So, if BIG is implemented as social grants are, our productivity levels will continue to be among the lowest in the world. According to the OECD, South Africa’s labor productivity is $ 20 per unit, the lowest of the 30 countries measured.
So, and in conclusion, the BIG must be a discussion of the past unless it is linked to people working for what they will get. Finish and klaar.
- Dr Thami Mazwai is a small business researcher and president of Mtiya Dynamics; a company that trains companies and suppliers to BEE codes.
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