Basic Income Grant Concerns Expose South Africa’s Developmental Dead End

Basic Income Grant Concerns Expose South Africa’s Developmental Dead End

Jaco Oelofsen | AIDC Staff Blog | 16 August, 2021

Response to “MAMOKETE LIJANE: Income grant looks doable now, but what about when mining loses its shine?”

In a recent article on BusinessDay, Mamokete Lijane argues that a permanent Basic Income Grant (BIG) is an expense South Africa cannot afford. Although surging commodity prices have given the Treasury an opportunity to bring in an emergency BIG without undermining budget austerity, Lijane argues that a permanent BIG would repeat the government’s past mistakes. In the 2000s, spectacular commodity prices fuelled growing government spending. When commodity prices collapsed in the early 2010s, the South African state was left without the tax revenues to back up their spending commitments – many of which would have been political suicide to renege on – leading us right into the trap of debt and finally, austerity.

In their support of the public’s clear need (and demand for) a permanent BIG, civil society and progressive economists have put forward plenty of credible proposals for funding a BIG. What undermines Linjane’s argument is the fact that most of these were developed before the present commodities boom, and are not reliant on its persistence. These proposals are convincing enough to show that a BIG is not only a necessary reform, but also one completely feasible within South Africa’s economic limitations. 

However, there is a political aspect to the concerns around the BIG’s affordability, which has not been often addressed. Lijane makes her argument from the perspective of the state, and the state’s reasoning has more limits than the purely economic ones accounted for in progressive proposals. Ever since the adoption of the Growth Employment and Redistribution plan in 1996, South Africa has been wed to a particular economic development path; where growth is tied to a globally integrated economy, a large private sector, disciplined government expenditure, and a steady supply of foreign investment attracted by the promise of good profitability ensured by our healthy supply of mineral resources, tax breaks, and low wages. 

This was a political commitment made not just to a specific strategy, but also to a certain understanding of how economic development works. This is where the difference between a necessary sacrifice and an unacceptable loss is defined. This is what allows the government to decide that the “decrease in investor confidence” makes tax increases off limits, while accepting the loss of quality public services caused by budget cuts as collateral damage. Once committed to these political-economic limitations, it may well be the case that the BIG is not affordable, because making it affordable would mean threatening our growth strategy in the long run.

However, what the government fails to reckon with is the fact that this growth strategy has been the biggest contributor to the economic stagnation that has created the need for a BIG in the first place. Globalisation, in conjunction with a programme of “trickle-down” economic empowerment that aimed to create a black capitalist class instead of undoing Apartheid’s economic structure, has led to South Africa’s deindustrialization and stagnation. Although this economic stagnation is often blamed on flawed implementation due to government corruption, the reality is that South Africa’s state corruption is ranked as somewhere around the global average, while our private sector is one of the most corrupt in the world. Further, the crisis of state corruption is itself embedded in the turn to outsourcing, commercialisation, tenders, and private-public partnerships which are all components of our economic growth strategy.

The failure to reckon with this is reflected in new Finance Minister Enoch Godongwana’s recent comments, where he slammed the concept of a BIG for “creating dependency”, instead arguing for programmes like job creation and the “development of skills” for the youth. The BIG is a demand arising from crisis – it is fundamentally a call to meet the basic needs of South Africans who have been failed by a flawed strategy of economic development. To hope that programmes of “skills development” could take us away from this crisis of basic needs is, under the present framework, to fundamentally misunderstand how deep the roots of this crisis are.

If the present economic framework is not capable of ensuring enough well-paid jobs to meet the needs of ordinary South Africans, then these needs will have to be met directly through something like a large BIG. If the present economic framework also does not allow us to meet these unmet needs directly, then it is absurd to argue that these needs should remain unmet until our economic framework somehow delivers what it has failed to. The political-economic argument that South Africa cannot ‘afford’ the BIG without endangering our growth path therefore may be true, but our conclusion can not be to choose loyalty to a neoliberal, investment driven, trickle-down growth strategy over the needs and demands of the precarious majority of South Affricans. 

The upshot of this argument is instead that the BIG, as necessary as it is, should not be a reform that stands alone. The calls for a BIG must be followed up with a call for economic restructuring; one aimed at low-carbon wage-led reindustrialisation, economic democratisation, and the reclaiming of the public sector as the heart of the economy.

Jaco Oelofsen is a researcher and educator at the Alternative Information Development Centre