Push for Universal Basic Income in South Africa: An Economic Stimulus Strategy

The Social Policy Initiative (SPI) in South Africa has put forth a visionary proposal that could redefine the country's approach to economic growth and employment. In their groundbreaking position paper, "The Economics of Implementing UBI in South Africa," the SPI discusses the introduction of a universal basic income (UBI) as a means to drive economic stimulus rather than just a poverty alleviation tool.

According to the proposal, the UBI would start at R798 per month and incrementally rise to R1,804 over three years. This strategic rollout aims to set South Africa on a growth path towards SPI's Vision 2035, which imagines a nation with full employment and less than 5% unemployment.

The premise of the initiative is grounded in compelling economic data. The proposal indicates that a R1,500 monthly UBI could be 96% self-sustaining, meaning the investment circulates back into the economy with minimal net cost. The calculated gross expenditure for the three-year period would total R862.9 billion, covering both adult and child populations—the latter currently benefiting from a means-tested child support grant.

SPI researcher Duma Gqubule highlighted the urgent need for comprehensive policy changes to address the employment crisis in South Africa. With official unemployment figures at 7.8 million and an extended definition pushing that number closer to 12 million, the push for robust solutions has become more pressing. Around 7.2 million South Africans are income tax payers, a stark contrast to the 28 million currently dependent on various social grants.

The proposal does not exist in a vacuum; it aligns with global trends where direct cash assistance programs have shown success in different African countries, fostering well-being through financial empowerment. These findings suggest that providing people with the means and discretion to spend these funds could be beneficial.

The SPI paper extensively explores funding strategies to sustain the UBI initiative. Among the options are monetary finances from the Reserve Bank, surplus funds from the Public Investment Corporation (PIC), the Unemployment Insurance Fund (UIF), and foreign currency reserves. South Africa's economic structure, the paper suggests, requires some reconfiguration to free up these assets and rejuvenate the economy.

Tax policy is also part of the strategic plan; the SPI advocates against imposing new taxes on 99% of South Africans during the recovery period. However, they do propose tax increases on idle wealth and high earners, projected to raise over R140bn, which would contribute to the UBI without undermining economic recovery.

Gqubule asserts that the proposed financing mechanisms for UBI are manageable and would not compromise the nation's finances. He cites the UIF's ability to run down surplus during the COVID-19 pandemic without adverse effects as evidence for the feasibility of their UBI funding plan. Additionally, Gqubule criticizes the employment tax incentive as ineffective and advocates for its overhaul in favor of more direct employment strategies.

The SPI’s proposal illuminates a path towards economic rejuvenation through the UBI in South Africa, emphasizing both the potential for societal uplift and the practicality of funding such an ambitious project. As this policy initiative gains traction, it promises to trigger extensive discussions on the future of South Africa’s socio-economic landscape.