What Difference Could It Make And Which Controversies Have Researchers And Commentators Assessed?
In the past months, there has been a lot going on in South Africa. Amid rising poverty and unemployment, discussions about a universal basic income (UBI), a 4-day-working week and polyjobbers have emerged at the scene, wherein small businesses have been struggling. As Andiswa Bata, Co-Head SME of FNB South Africa, told BusinessTech in July 2022, “‘The past few months haven’t been easy for small businesses as fuel increases have significantly increased the cost of transporting goods’”. Next to the latter fact, Bata underlined that load shedding led to both an increased expenditure on diesel generators and temporary business closures. With media voices having been critical of Cyril Ramaphosa amid July’s ‘Farmgate Scandal’, the president announced a ‘framework for social compact’ in his letter to fellow South Africans, which was specified to
“identif[y] priority actions to achieve higher levels of investment and growth, increase employment, unleash the dynamism of the private sector, protect the rights of workers, expand support for the unemployed and tackle extreme poverty”
Cyril Ramaphosa, 25th July 2022
Making the latter statement, Ramaphosa emphasized that the framework for social compact will orient itself after South Africa’s Economic Reconstruction and Recovery Plan, which has been said to highlight the centrality of (mass public) employment creation, structural reform, measures that help trigger growth, social protection and inclusion (i.e. through a thriving entrepreneurship sector). Whereas the latter suggestions; alongside the announcement that an increased cooperation between the government and civil society organizations (CSOs) could lead to more effective results when it comes to poverty alleviation, sound hopeful, it could certainly be criticized that the Ramaphosa administration has been at least a little hesitant, when it comes to implementing measures related to a UBI. In addition, the former President Thabo Mbeki criticized that the social compact framework had been announced already in February 2022 with the promise to boost South Africa’s economy within 100 days. As BusinessTech wrote in May 2022, the National Treasury has been exploring a UBI as a possible solution for South Africa, however, it is analyzing the measures needed to take a final decision with a view for financial responsibility. More recently, in July 2022, a study by Intellidex said the provision of a UBI and consequently rising taxes might actually drive up emigration from South Africa.
Despite Ramaphosa and Lindiwe Zulu, Social Development Minister, have thus emphasized their support for a UBI, there is still a lot of controversy going on, whereby doubts have been said to have been raised by business organizations in fear that rising taxes will derail South Africa’s economy. As Engineering News laid open, the business organizations Business Leadership South Africa (BLSA) and Business Unity South Africa (Busa) tasked researchers from Intellidex with the enquiry about the South African case of a UBI. Notably, it was not their only conclusion that taxes would need to be raised in order to realize a UBI. Alternative ways of approaching a UBI would be to cut into other expenditure or issue more debt, it may hence just be that financing an UBI through taxes is the most effective option. Irrespective of whether the latter options are feasible and how the UBI scenario would really play out in South Africa, the latter arguments have been a well-known part of the controversial UBI debate around the world.
Before exploring this debate further, the following data will reveal a little bit about South Africa’s background in terms of government debt and spending. Whereas government debt amounted to 67,4% of South Africa’s nominal GDP in March 2022 and for US$282,2 billion in May 2022, government expenditures largely flew into general public services (24%), education (20%), social protection (15%), health (11%), economic affairs (11%), other kinds of expenditures such as housing, defence, recreation & culture and environmental protection (9%) and public order (9%) in 2019/20. While this argument would have to be further explored in depth, it could possibly be remarked that a reallocation of expenditures may not be effective alone to change wide-ranging societal issues in South Africa. The effectiveness of any measures certainly has to be assessed in context and in alignment with the most recent concerns of South Africa’s population.
Two of these major concerns, which have also been well-known in the context of South Africa’s history, are poverty and income distribution. As the World Bank report ‘Inequality In Southern Africa: An Assessment Of The Southern African Customs Union’ argues, countries in the Southern African Customs Union (SACU) struggle with a variety of characteristic issues, which can be related to pre-income distribution (i.e. inequality of opportunity), primary income distribution (i.e. inequality of pre-tax income), secondary income distribution (i.e. inequality of after taxes and transfers) and tertiary income distribution (i.e. inequality after social services). In South Africa, both pre-income and primary income distribution have been identified as rampant issues by the World Bank. Based on the country’s Apartheid era as well as its legacy, wealth inequality and land distribution issues, South Africa has quite some work to do in order to promote inclusion – not solely through entrepreneurial activity, which possibly will keep throwing off more benefits for the already privileged, but also through public employment creation as it promised. Unless comprehensive public measures are taken to create public employment within the country’s start-up ecosystem, efforts which aim at creating equal (pre-)conditions in this system for all kinds of entrepreneurs will arguably have to be scaled up.
Arguably, networking efforts between the public and private sector become ever more important in the face of poverty, wealth inequality and unemployment. Such efforts could at least address some of the challenges, which the World Bank mentions in their report such as place-based disadvantages (i.e. can be combated by creating adequate energy and building infrastructure, offering public coworking places and supporting remote working), low intergenerational mobility (i.e. can be tackled through public employment creation in cooperation with private sector companies through the creation of inclusive workplaces), dominant role of educational attainment (i.e. could be tackled by obligating companies to offer training as an inclusive part of work and, if adequate, paying ‘trainees’ part of the UBI to allow companies to pay a slightly lower wage to trainees for a fixed period of time) and gender gaps in earnings (i.e. could be addressed if public-private employment within SA’s business scenes is created).
Whereas working on the latter challenges will also, in the long run, lead to addressing poverty in South Africa, a UBI essentially recognizes basic rights of South African citizens. As Hein Marais, Global Value Creation Leader at PwC, writes in his book ‘In the balance: The case for a universal basic income in South Africa and beyond’,
“[t]he pursuit of more jobs – and more decent jobs – is vital, but it cannot substitute for more far-reaching efforts to address these crises: by shifting to sustainable and just development paths, and by realising core social and economic rights that can assure everyone their social citizenship”
Hein Marais (2022) ‘In the balance: The case for a universal basic income in South Africa and beyond’
Similar to Marais, other authors emphasize that a UBI is a pathway towards freedom and security indirectly touching upon the fact that the latter values constitute some of the basic needs and rights irrespective of an individuals’ background and geographic location. Whereas a UBI is thus often portrayed as a ‘secure’ option respectively solution to inequality and poverty, Verena Löffler, research assistant at the Institute of Economic Education at the University of Münster, argues that this must not necessarily be the case, for instance, thinking of the implications of citizenship-based UBI on low-skilled migrants, refugees and foreigners in South Africa. Having little access to the labour market in a country, which currently battles with an unemployment rate of 34,5%. As Moyo and Botha argue, the Immigration Act of 2002 has led to the increased illegal immigration of low-skilled and semi-skilled workers from other SADC countries due to its restrictiveness. As an alternative to a citizenship-based UBI, Löffler suggests a residence-based UBI, however with some criticism for the feasibility of both. As the researcher emphasizes, a third possibility has been explored by Van Parijs and Vanderborght, who talk about a UBI based on fiscal residence.
What such a debate emphasizes at core is that there is a need to discuss who will be included to receive the benefit of a UBI should South Africa implement the latter over time. According to Marais, the Government actually strongly considered doing so and released a Green Paper to specify details before the National Treasury and business organizations, as mentioned before, took down its proposal with their criticism. More precisely, the Green Paper assessed the feasibility of an UBI worth R200 billion with a 10% income tax set at the food poverty line. Another proposal by the Department of Social Development spoke up for similar measures, which would benefit unemployed individuals from 18-59 and slowly increase to a fully-fledged UBI from initial support at the food poverty line. Whereas the latter proposals emphasized that an UBI would complement the country’s social system, Marais underlines that South Africa’s Tax Agency (SARS) would be much better suited to carry out support for an UBI than its Social Security Agency (SASSA).
At a normative level, the latter might appear logical and yet debatable. On the one hand, proposing that a UBI, respectively the values which it preserves (i.e. freedom, economic and everyday security etc.), constitutes a basic human right, carrying out its execution through the SARS might sound like a chance to further destigmatize unemployment and poverty. Rather than portraying it as a ‘social service’, it is seen as a financial contribution that every (‘made eligible’) individual is entitled to. In addition, tasking the SARS with the provision of an UBI makes a lot of sense based on Löffler’s argument that a third pathway to an UBI is based on fiscal residence. According to Toyin Cotties Adetiba, low-skilled workers contribute quite a little bit to South Africa’s GDP earning an income per capita, which makes up for 2,8% and according to findings of a working paper, which was established by the OECD and the ILO, foreign-born workers overall contribute a value of 5% to the country’s GDP.
On the other hand, distributing a UBI through the SASSA may, on a normative level, resonate with the more general idea that social welfare constitutes a human right irrespective of an individual’s occupation and employment status. As Marais reminds, on a continent with a negative real wage growth, the “crisis of paid work” is most apparent and we may need to remind ourselves and each other of the argument of David Harvey, that as capitalism proceeds to exist, it becomes less reliant on labour. Rather than being something which could contribute to stigmatization, a UBI may contribute to understanding that productivity and labour are not entrance tickets to a dignified life. In the South African context, it might be particularly problematic to pinpoint who qualifies for a possible UBI measure and who does not.
Whereas it could in theory be beneficial to establish a mechanism, through which the earnings of undocumented migrants are captured and through which they could receive equal support, which would resonate with the idea of a fiscal residence-based UBI, xenophobic sentiments in South Africa and a concern for the rights to privacy and security of the latter group may be a reasonable concern. However, making one of the most vulnerable groups ineligible for support through a UBI, would at least agitate the normative facade of a UBI. Another aspect, which might be particularly critical when it comes to trying to restore socio-economic equality through a UBI, may be that geographic differences play a huge role in accessing employment and other services in South Africa, which may prove that a UBI indeed has to be an additional social assistance tool. Alternatively, one would have to assess and discuss a relational UBI, which considers how government failures (i.e. to build an accessible infrastructure, ensure access to energy etc.) impact regional livelihoods, could make sense and be justified. While the latter arguments show that an UBI is not a tool to reach equality and discussions about regional differences might matter less in urbanized, Western societies, South Africa may be a special case and regional circumstances should be considered by policy-makers.
As Marais emphasizes, another aspect which deserves consideration of policy-makers is the fact that 34% of South Africa’s population is younger than 18 years with 29% being younger than 15 years. Regarding a UBI as an ‘alternative’ for unemployed people would not do this context justice except if parents would be compensated a respective amount of an UBI for their children up to a certain age. Thereby, determining an UBI age may however be a challenge as 24,9% of South Africa’s 15-24 year-olds constitute an active part of the country’s labour force in 2022 with child labour having been flagged a rampant issue by various commentators despite that South Africa has ratified the ILO Child Labour Conventions No. 138 and 182, the UN Convention on the Rights of the Child (CRC) and Optional Protocols as well as implemented a wide range of legislation at the domestic level over time.
At the 5th Global Conference on the Elimination of Child Labour, which was held in May 2022, the Durban Call to Action on the Elimination of Child Labour was released to remind of the urgency to stop child labour. As the call demonstrates, ending child labour in Africa has, among others, been suggested to go along with “facilitating increased access to finance and credit, including for smallholder farmers, particularly in Africa, to promote investment and innovation” (‘ending child labour in agriculture’) and “assisting […] Africa, in attaining long-term debt sustainability and enhancing [its] ability to sustainably finance programmes to eliminate child and forced labour through coordinated policies aimed at fostering debt […] relief”. As the latter arguments show, child labour as been regarded as a general consequence of poverty with children being tasked to work, when a family member gets sick etc. What a UBI can do here is certainly prevent that child labour becomes necessary, of course depending on its payout value as well as the questions whether an UBI will be relational and who will be eligible.
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