Can the basic income grant be dismissed as simply ‘a vote-catching ploy’?

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The ANC’s statement last week committing to instituting a basic income grant (BIG) resulted in commentary that this was merely an election ploy.

The announcement was undoubtedly designed to garner support from voters, but there are grounds for the view that it cannot be dismissed simply as an attempt “to pull a rabbit out of the hat” in the run-up to 29 May.

Like National Health Insurance (NHI), BIG has been on the government’s agenda for decades. The policy work on BIG can be traced back to 2002, with the publication of the Taylor Report on a comprehensive system of social security.

The timing of the statement was opportune. The following day, Statistics South Africa released its latest General Household Survey, which disclosed that social grants are the main source of income for 23% of the country’s households. According to survey, the percentage of households and persons who benefited from a social grant increased from 12.8% in 2003 to 30.9% in 2019 and rose sharply to 39.4% in 2023 because of the introduction of the Social Relief of Distress (SRD) grant.

As the statement noted, the ANC had already undertaken to institute BIG in its election manifesto, published in February. Furthermore, the 2024 Budget documents state that policy proposals around a universal grant are in the pipeline.

In its manifesto, the ANC said it will tackle the high cost of living by, inter alia, strengthening income support through existing social grants and use the SRD grant as a mechanism towards phasing in BIG. It will strengthen comprehensive social security by progressively implementing BIG by extending and improving the value and coverage of the SRD grant for the unemployed.

The party repeated these undertakings in last week’s statement, which emphasised that BIG should not be at the expense of other grants or spending on social services.

It committed to increasing the income threshold, so more people become eligible for the grant, and indexing the grant’s value to the Food Poverty Line (R760 per person a month), progressively moving towards the Upper Bound Poverty Line (R1 558 per person a month).

What appears to be new is the timeline: the party undertakes to finalise a comprehensive policy on BIG within two years of a new ANC administration.

Or is it new? The Budget’s Estimates of National Expenditure allocated funding for the Department of Social Development to develop a draft policy on income support for 18- to 59-year-olds that will be submitted to Cabinet for approval by March 2025. It also stated that a White Paper on social security is expected to be finalised over the current Medium-Term Expenditure Framework period, which is the next three fiscal years (2024/25 to 2026/27).

The ANC’s statement said BIG will be funded through “progressive mechanisms to ensure financial sustainability and equitable redistribution. We will explore options such as new progressive tax measures, including a social security tax, while maximising fiscal space by effectively using existing resources. The ANC is open to considering more diverse funding sources and faster movement towards universality.”

Could “new progressive tax measures” also include a wealth tax – a proposal the ANC re-floated in 2022 to fund BIG?

Read: By how much will taxes have to increase to pay for a basic income grant?

Green Paper mulls tax changes

The year before, the Department of Social Security published a “Green Paper on Comprehensive Social Security and Retirement Reforms”. The paper proposed establishing a National Social Security Fund to provide retirement, survivor, disability benefits, and unemployment benefits. It also proposed a universal income grant for the working-age (18 to 59) population.

The Green Paper was gazetted on 18 August 2021. Two weeks later, the Minister of Social Security withdraw it amid sharp criticism from organised business and labour.

Although the Green Paper was withdrawn, it provides insights into the government’s thinking around BIG.

“Microsimulation for universal income support at the level of the food poverty line suggest that the financial cost will be approximately R200 billion and will require a 10-percentage point increase on income taxes,” it said (emphasis added).

The paper also said: “To address the fiscal space concerns, consideration should be given to reconfigure the tax regime to promote equity while ensuring sustainability.”

The paper proposed that all dependent children, the disabled, the elderly and those of working age should be eligible for income support, regardless of their income or assets. This basic income will form part of a comprehensive social protection floor. “The additional expense to the fiscus could be phased in over time through changes to the structure and value of tax rebates, subsidies, and the possible introduction of additional tax.”

The financial fall-out from the lockdowns and the (supposedly temporary) SRD grant – recently increased to R370 a month – has increased the pressure on the government to institute a permanent BIG.

But BIG is not only on the agenda because of the SRD grant. As the Green Paper put it, the expectation that individuals who have no income but do not meet the means test criteria to receive social grants would derive their income primarily from selling their labour has proved to be ineffective “in the context of persistent, long-term, and structural unemployment”.

At its meeting on 28 February 2024, the Cabinet approved the publication of a revised Green Paper on comprehensive social security. But the revised paper has yet to be published.

Godongwana: not if but how

The Minister of Finance has said that BIG is coming – but how it will be funded is another matter.

In a post-Budget interview with the SABC in March, Enoch Godongwana said: “The debate is not about whether we should have a basic income grant; the question is how are we going to fund it.”

Godongwana said: “There’s a basic income grant, there’s NHI, there’s comprehensive social security, there’s a whole range of packages. So, what we need to be doing […] is to say how do all of these pieces fit together into a comprehensive social security package.”

He said the three components of comprehensive social security are social assistance, social insurance, and active labour market policies, which need to be pulled together.

“The Department of Social Development placed into the agenda the notion of a comprehensive social security for South Africa. As part of that package, we’ve got to check how do we deal with these three elements I’ve outlined: social assistance, social insurance, active labour market policies […] There are lot of social security funds which all over the place: the Road Accident Fund, the UIF […] There’s a lot of them, the social grants, and everything. We’ve got to think carefully, how do we integrate all of these things?”

Asked about the affordability of BIG, Godongwana said it “depends on how we’re going to manage all of these things into an integrated whole. If that’s the case, we can.”

Pressed further about whether the government could afford to implement these proposals given the current financial constraints, he said they will be phased in based on the ability of the economy to afford them.

National Treasury plans to allocate R266.21bn to social grants in the 2024/25 fiscal year, amounting to 3.6% of GDP. The SRD grant was allocated R33.6bn in the 2024/25 Budget, with provisional allocations of R35.2bn and R36.8bn for the 2025/26 and 2026/27 financial years.

The 2024 Budget Review said the 2023 Medium-Term Budget Policy Statement proposed that the fiscal framework provide for funding for the SRD grant for 2024/25. “Any extension of the grant, or any replacement thereof, needs to be funded by a new revenue source or reprioritisation of other spending items. Government is still discussing options for a replacement grant and the balance between policy options to support higher employment.”

ANC can rely on other parties for implementation

Even if the ANC loses its majority in this week’s elections, it could muster support from other parties to implement BIG.

On 15 May, the Universal Basic Income Coalition (UBIC) released its Universal Basic Income Policy Election Scorecard, which compares where political parties stand on BIG, based on their election manifestos.

UBIC comprises 14 organisations that support BIG. The Coalition scored 19 political parties based on whether they met, partially met, or failed to meet the 12 criteria it set.

“Out of the 19 parties we analysed in our scorecard, 10 have committed to expanding the social protection floor and five have committed to a basic income grant or a universal basic income. Collective voter support for parties advancing basic income is estimated at over 50%,” UBIC said in a statement.

The first criterion was that a party must have officially committed to expanding either the coverage or value (or both) of social assistance. Meeting this criterion fully was a prerequisite for a party to receive any other points on the scorecard. Parties that fell at this hurdle were graded “F”.

The ANC, Action SA, and GOOD each fully met eight of the criteria, receiving an “A” from UBIC.

The United Democratic Movement (UDM) fully met six criteria and partially met five, receiving a “B”.

The EFF fully met four criteria and partially met four, earning a “C plus”. MK fully met three and partially met two, earning a “C”.

The DA was a graded a “D plus”, fully meeting two criteria and partially meeting five. The IFP got a “D”, fully meeting three criteria and partially meeting two.

The parties that failed to meet the first criterion were the ACDP, African Independent Congress, African Transformation Movement, Build One South Africa (led by Mmusi Maimane), COPE, Freedom Front Plus, PAC, Patriotic Alliance, and RISE Mzansi.

UBIC said the ANC’s statement of 22 May on BIG was partly in response to the election scorecard.

“In producing the scorecard, UBIC reached out to all major parties. Several responded with further clarity on their policies, including the ANC,” it said. “Of the other parties that responded to UBIC, both the UDM and GOOD also adopted additional policies or statements affirming their commitment to UBIG [universal basic income grant], and, in GOOD’s case, the removal of unfair barriers to access to social grants.”

The other 11 criteria on which parties were scored are:

  • There must be transparent targets and timeframes for implementation.
  • The grant must be universal for anyone aged 18 to 59 years.
  • The grant must be of adequate value – at least the value of the Food Poverty Line.
  • It must build on the SRD grant.
  • It must be available to everyone living in poverty.
  • It must not be conditional on recipients demonstrating ongoing behaviours, such as particular consumption patterns or job-seeking activities.
  • It must not be funded through regressive taxation, such as increasing value-added tax, or by taking away funds from other programmes that directly benefit low-income households.
  • It must be paid to individuals, not households.
  • It must not have “unfair exclusions” or “barriers to access”, such as a means test.
  • There must be measures to protect the privacy of beneficiaries’ data.
  • The party must undertake to retain other social grants alongside BIG and ensure the Child Support Grant is pegged at, at minimum, the same value as BIG.