A basic income grant will transform the South African social security system

South Africa is considering a basic income grant (BIG) again. A basic income grant, particularly one that pays out generously above the minimum needed to live is likely to affect the entire social security system and all social policy profoundly.

Its design and features will have effects on family life, housing, education, health, migration and settlement patterns. Its economic effects will be difficult to predict, as this grant will enable individuals to spend on themselves, and thus generate “individualist” effects that may be surprising. It will enable individual investments in consumption, education, health and housing, and these will have many multipliers.

What is important is the level at which a BIG will be paid. The sheer size of this bill will necessarily affect all other grants in the social security system, and it is inconceivable that the current system of grants will be left alone upon its implementation. The idea of a universal basic income grant will overlap significantly with all the other grants and all other social policy measures. This then is an opportunity to reform the entire social policy system in South Africa.

Recent experiments in basic income (in Kenya, Finland and elsewhere) deliver it unconditionally. Basic income avoids the highly prescriptive rule-making characteristic of previous “workfare” systems that really are oppressive on the poor. Basic income systems, as a social policy means with some effects, all emphasise a generous amount. In South Africa, this has to be pitched one order of magnitude above the current old-age grant or the disability grant. Optimists believe people would rather invest this money in health, housing and education than squander it. Receiving a regular income furthermore allows downright rational future planning.

A sufficient income will lead to a number of sociologically interesting effects, but the most impactful would be in the economy. Retail and consumption, and hopefully small business, will benefit. It would spread spending and its multipliers could outperform state spending and in this regard, a BIG will be refreshing.

We need to gain as much advantage from the BIG as possible. A BIG will affect spending on other grants by sheer magnitudes of spending, but a BIG being universal will herald changes to the grants as a system, and this would have to be progressive as the right to have access to social security will certainly be affected. Nevertheless, a universal basic income grant would be paid to all who currently receive grants, and this creates opportunities for savings in administration costs, which will be significant. This allows us to increase the value of the grant and overall benefit from the system.

However, some have argued that this grant must be adopted in addition to the current system of grants. This will significantly dilute the value of the basic income grant, allow “double-dipping” by some, and create another layer of administration. The opportunity is great to pay this grant through a cost-effective system that could combine income tax on working taxpayers with electronic payment systems. It would have to be a universal payment system and recipients should, in turn, be able to pay anyone else. 

SASSA cards, for a long time, were accepted only by large retailers and this does not diversify the economy. A BIG that is implemented through a smart payment system can benefit economically important businesses like spaza shops and BBBEE-compliant businesses. We can ensure BIGs are spent on sectors – like emerging farmers or businesses – that have strategic value for the country. This would diversify the economy and strengthen socially important activities.

Retail, consumption and the informal sector will experience a boom. If all payments are electronic, all traders can be tracked and a conducive tax regime can be developed for the informal sector. Cultural life will now have the means to thrive and an explosion in culture, music, art, literature and media will certainly be seen. Sport will benefit and individuals will have the means to secure their own participation.

A universal basic income grant is a deep ideological shift towards individualism, and its material effects will lead to very deep social and cultural changes. Economically, it could really change the basic structure of the economy, and this would follow consumption and here, clear impacts on the Human Development Index will be seen.