Basic Income Grant Coalition

Submission to thePortfolio Committee on Social Development

on the Consolidated Report of the Committee of Inquiry into

a Comprehensive System of Social Security for South Africa

9 June 2003

Current Situation• 22 million or 53% of our people live, on average,

on less than R144 per month• 2 in 3 children live in poverty • 3.1 million workerless households (1999)• Expanded unemployment rate now tops 40%• Poverty and unemployment deep-rooted,

structural legacies of apartheid• Over 13 million living below the poverty line have

no access to social security.• No income support from age 9 to 59(w)/64(m)• One of the world’s most unequal societies

Legal Imperatives• Constitution

“Everyone has the right to have access to … social security, including, if they are unable to support themselves and their dependants, appropriate social assistance.”

• Covenant on Economic, Social and Cultural Rights

Guarantees the right to an adequate standard of living

• Grootboom tests– Coordinated and comprehensive programme– Provide relief for those living in desperate need– Reasonable implementation– Work within available resources– Progressive realisation

Policy Imperatives• White Paper on Social Welfare (1997)

“All South Africans [should] have a minimum income sufficient to meet basic needs and should not have to live below minimum acceptable standards”

• Presidential Jobs Summit (1998)

• Government commitments• Elimination of poverty and the establishment of a reasonable, widely

acceptable distribution of income.• Full employment, or if this proves not possible, an adequate mechanism

to deal with poverty.

2003 GDS - Recognition of role of social security measures to fight poverty• All parties commit to address take up and overcome obstacles to accessing

current grants• Discuss extension of social protection framework

Taylor Committee Report

• Structural character of poverty in SA requires holistic developmental response

• Proposes a Comprehensive Social Protection package to address:– Income poverty - BIG, SOAP, extended CSG– Capability poverty - Health care, education, water

and sanitation, electricity, public transport, housing, jobs and skills training

– Asset poverty – Land, credit and community infrastructure

– Special needs - Reformed disability, foster care, CDG– Social insurance

The Basic Income Grant• A core element of the CSP package proposed by Taylor Committee• Intended to address income poverty• Complements other interventions to address other forms of poverty – no

“magic bullet”• Defining characteristics

– Universal coverage from cradle to grave– R100 a month– Expand the net: no one receives less– Payment through public institutions– Financed through progressive taxation

Phased Implementation• Taylor Committee rejects

– status quo as unconstitutional– immediate implementation as unrealistic

• Calls for phased approach– PHASE 1: Immediate extension of CSG to 18 on a universal basis– PHASE 2: Roll out of universal BIG from 2005/06

• BIG Coalition supports phased approach (but intervening year necessitates slightly delayed timetable)

Preparatory Phase• Complete electronic Document Management

System and Automated Fingerprint Identification System to enable introduction of HANIS

• Extend Post Bank infrastructure, identify delivery agents and pilot payment mechanisms

• Education and training programmes for public and civil servants

• Stakeholders’ forum to identify and resolve other practical issues

Advantages and Impact• Eliminates destitution and alleviates

poverty• Encourages self-sufficiency

– Not means-tested– Enables households to take risks to move to

more sustainable livelihoods

• Stimulates consumption-led local economic growth and employment creation

• Enhances the efficiency of social investment in other areas

Common Objections 1• “A BIG will be impossible to deliver”

– New technology (e.g., the HANIS smart card) opens up enormous possibilities; commitment of financial sector to increasing access to bank accounts for poor

– Existing commitment to prioritising social grant delivery via HANIS

– Abolition of the means test simplifies administration and slashes delivery costs

– Extension of public sector and co-operative financial institutions

Common Objections 2• “A BIG will be unaffordable”

– Studies demonstrate the feasibility and affordability of financing BIG through progressive taxation

– Taylor research put net cost at R24 billion – same as tax cuts for past 2 yrs

– Increased prosperity, rising revenues and increased efficiency of social spending will decrease net costs to the state in the long term

Common Objections 3• “A BIG will create dependency”

– Very poor currently depend on working poor or grant beneficiaries

– BIG is not a dole and does not penalise people for seeking other sources of income

– Expecting people to find jobs not realistic in circumstances of long-term structural unemployment

– Concerns about irresponsible use misplaced given 90% of spending by poor households is on basic goods and services

Proposed Alternatives• Job creation via public works

– Important complement to a BIG as part of CSP– High administration costs, limited scale and structural nature of

unemployment = no substitute for a BIG

• “Workfare”– Experience suggests schemes drive down wages, discriminate against

vulnerable groups

• Food vouchers– Paternalistic– Means tested– Undermines self-reliance benefits of BIG– Cost of administration/ infrastructure

• “DA dole”– Complicated; sets up perverse incentives

Way forward• Future prosperity and stability depend on a

CSP package that can eradicate extreme poverty, reduce inequality and promote development within sustainable communities

• Coherent and visionary SP policy needed to establish a legislative agenda

• Taylor Report equivalent to a Green Paper

• Draft White Paper now needed to catalyse participatory national debate

Recommendations to PC• Endorse the Taylor findings as a first step of CSP

policy formation• Stakeholder forum with government to look at practical

concerns• Articulate need for coherent policy statement prior to

the tabling of CSP legislation• Call on government to expand national debate on CSP

by preparing a draft White Paper for public comment• Facilitate broad participation by holding hearings on

the draft White Paper• Urge the NCOP to assist by creating opportunities for

stakeholder participation at the provincial level

A Question of Priorities

“No political democracy can survive and flourish if the mass of our people remains in poverty, without land, without tangible prospects for a better life. Attacking poverty and deprivation must therefore be the first priority of our democratic Government.”

-- RDP, para 1.2.9