Universal Basic Income

Universal Basic Income in South Africa

time for an official pilot?

by Jan Bezuidenhout

 

My first formal employment, outside of odd jobs as a student, was on a small business development project in Mozambique. The development attaché at the South African High Commission, whom I reported to, raised concerns about the funds spent by development aid agencies on their own staff’s salaries. “You could hand that money to people on the street and it will have a better developmental impact.”

Now, 20 years later, Universal Basic Income continues to be a major discussion topic. For many there is also a fear that it may take away funds from other forms of state sponsored social support.

Supporters of UBI come from a wide variety of ideological perspectives. From a socialist perspective it may free up time for people to pursue their dreams, based on their own talent and potential, without being constrained by class or the financial strength of their personal support network. Capitalists argue that it could stimulate growth and consumer spending. For others, not necessarily ideologically bound, it provides for a safety net that can mitigate possible major job losses due to automation in the work place.

Several UBI pilot programmes have been implemented, most recently on a national scale in Finland. But even if valuable lessons can be drawn for South Africa from the current “first world” pilot programmes, it would make sense to also look to examples closer to home.

An experiment with UBI was conducted for two years (from January 2008 to December 2009) in the community of Otjivero-Omitara in Namibia. According to the Namibian Basic Income Grant Coalition, it had the following impact:

• significantly reduced child malnutrition and increased school attendance;
• increased the community's income significantly above the actual amount from the grants as it allowed citizens to partake in more productive economic activities;
• even with the restriction that only residents of the village for over a year since the pilot's start could benefit from the grant, there was a significant migration towards Otjivero-Omitara – this despite the fact that the migrants wouldn't receive the grant; and
• overall crime rates fell by 42% - specifically stock theft, which fell by 43% and other theft by nearly 20%.

Several possible negative outcomes are mentioned by others:

• it may remove the incentive for people to work, which is the classical argument against a social welfare state;
• as mentioned it may divert funds away from other forms of social welfare – UBI can’t cure addiction, family violence or lack of skills and could divert funds from the poor to wealthy as everyone receives it; and
• it is just too expensive.

If we provided the 33.2 million South Africans aged 20 and older with R1,000 a month, it would be equal to approximately 63% of annual government expenditure in 2015/2016. The social grants spend for that year had been approximately 13%.

UBI in South Africa is clearly too expensive to even consider as a policy option in the short term. If the amount is dropped further it becomes less than what some of the social grants currently provides and would in effect take away from the poor.

A study commissioned by the Roosevelt Institute in the United States used three different interventions, with two different funding models, and simulated the macro-economic effects. The funding models and impacts per intervention (after 8 years) are summarised below.

 

 

According to the above simulation, in the United States, it seems clear that debt funding is the better of the two options. A combination of debt funding and increased taxes were not part of the simulation, the assumption was that it would move between no effect and the most positive outcome in relation to the amount of debt or tax funding.

Evaluating the macro-economic effects alone to inform policy is not sufficient. Important economic forecasts and models may be established, but the matter warrants further in-depth analysis.

 

The Millennium Project State of the Future version 19.0 (Jerome C. Glenn, Elizabeth Florescu, and The Millennium Project Team) in Chapter 4 provides Global Work/Technology Scenarios 2050. One of the scenarios highlights the following: “The security of receiving a constant income allowed people to think about and plan their future with less anxiety. People did not have to rush into a mistake.”

 

The 2050 Global Work/Technology Scenarios have a comprehensive narrative of how the application of UBI may unfold up to the year 2050. It seems to be in agreement that it only becomes financially feasible during the 2030’s.

The scenarios may not have sufficient narratives to assist with policy development in our own South African and continental context. Without the application of advanced futures research techniques, such as detailed, well written scenarios informed by environmental scanning and analysis of our own context, it would be unwise to make even medium term policy decisions.

 

Two birds with one stone?

As futures researchers, we don’t only forecast and write about the future. We should also contribute to ideal and realisable futures. We also know that how you do something, is as important as what you do. So UBI, even if it is only feasible in the medium to long term future, may be piloted on a smaller scale so we can pick up some lessons in the meantime.

Piloting UBI in either a specific community or amongst a sample of a cross section of South African society may also be a possible solution to raise some of the funds required for UBI. If it can accomplish what it is made out to be by its supporters, the proof, as well as a contribution to fund a further roll-out, may be achieved.

 

Jan Bezuidenhout

Senior Manager | Africa, India & Middle East (AIM) | Advisory Services

Ernst & Young Advisory Services (Pty) Ltd

Read more about the author and his view on being a futurist.

 

References

 

Glenn, Jerome C., Florescu, Elizabeth, and The Millennium Project  Team. The Millennium Project State of the Future version 19.0 Chapter 4: Global Work/Technology Scenarios 2050, November 2017.

McFarland, Kate. South African businessman Johann Rupert calls for basic income, found at http://basicincome.org/news/2017/06/18265/ accessed on 2 November, 2017.

Michalis Nikiforos, Marshall Steinbaum, and Gennaro Zezza. Modeling the Macroeconomic Effects of a Universal Basic Income, Roosevelt Institute, August 2017.

Namibian Basic Income Grant Coalition, Pilot Project, http://www.bignam.org/BIG_pilot.html accessed on 23 November 2017.

STATS SA, Infographic on South African government expenditure 2015/2016. http://www.statssa.gov.za/wp-content/uploads/2017/11/Infographic_v01.jpg accessed on 18 December 2017.

UNDESA, World Population Prospects 2017. https://esa.un.org/unpd/wpp/ accessed on 23 November 2017.

 

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