As a Covid-19 relief measure, a grant for the unemployed is necessary, but not beyond, writes Mpumelelo Mkhabela.
At an African Peer Review Mechanism conference in 2005, First Lady Zanele Mbeki made a point which is relevant today in light renewed calls for the implementation of a basic income grant.
Among other things, she asked a question: what will happen the day the state runs out of money to pay the grant? At that time, South Africa was experiencing good economic growth rates. The budget was in surplus territory. Unemployment still was a problem, but not to the extent it is today.
The mood in the country was reasonably good. The previous year, President Thabo Mbeki had led the ANC to a two-thirds majority.
It was almost as if Zanele Mbeki could predict that economic growth would not last long and that public finances would return to the parlous state last seen during the dying days of apartheid. We are at that stage now.
Yet, some people are calling for a basic income grant for all. On the face of it, it sounds like the right call to make. After all, poverty, unemployment and inequality are at their records highs. Covid-19 has thrown many people into deep misery.
While short-term relief measures announced by the government, such as the R350 grant for the unemployment are welcome, it would be dangerous to make this a permanent arrangement post-Covid. A universal, permanent basic income grant would be an incorrect remedy for South Africa’s socio-economic ills for a number of reasons.
Entrenching dependency on a bankrupt, incompetent and corrupt state would be a recipe for disaster. Zanele Mbeki never offered the answer to the question she posed about what would happen the day the state ran out of funds to pay grants. But one could imagine the consequences of restlessness among the beneficiaries.
That period could come when the government would have exhausted all avenues, including borrowing. One cannot rule out the possibility of a populist uprising or the temptation for politicians to rush to the South African Reserve Bank’s minting machines. Some have already started urging: print! print!
The tragedy of a declining economy and the failure of leadership, even when the rest of the world was growing prior the outbreak of Covid-19, meant that the state was not able to raise enough revenue. The only economic activity – we must really consider classifying it as such since it has been thoroughly normalised – is corruption.
If all economic indicators were to be properly evaluated, with corruption thrown into the mix, chances are that the corruption graph would shoot above all else, at least in terms of the rate of increase over time and negative effects on the entire economy.
The state cannot collect money to spend on social services, let along grants, in a declining economy. The point the government should be emphasising now, if there was a semblance of honesty in the higher echelons, is that state coffers are empty. Tito Mboweni, the finance minister, tries to explain this all the time albeit using diplomatic language like "we are no longer as rich as we were in the past".
The state gets by through loans, the interest payment of which are skyrocketing so fast that they are the fastest growing expenditure item of the national budget. Economists should begin to work out which of the two – interest payment on loans and the value of corruption, with its negative multiplier effect – are the highest.
The finding will no doubt provide some interesting perspective about the government’s real priorities. We already know, through the Auditor General’s reports, that in the last five years alone government spent R4.16 billion on something it cannot show. "Effectively money lost," says the AG’s report.
Nobody was arrested for the loss of this kind of money which is almost equivalent to what we are borrowing now from the African Development Bank.
The reasons for the loss, according to the AG are government’s poor decision making, neglect and inefficiencies. This figure excludes billions of rands spent irregularly and most likely corruptly.
South Africans of working age would like to wake up in the morning to "earn" a living. They would like to enjoy the freedom, however limited, of spending that which they have earned through their sweat or application of their talents.
The government must create an enabling regulatory environment where job opportunities could be created for people to work, gain experience and establish mechanisms to elevate themselves.
One of the things we hardly debate in South Africa is the desired "character" of a citizen we want to create. If we are to have a competitive economy, we have to have competitive citizens – skilled and hardworking – and not unwittingly induced into dependency of any sort.
The state has the legal power to make this happen. It’s unrivalled lever of power is the education system, inclusive of the curriculum and its manner of delivery, which it controls directly in the case of public education institutions. The government also regulates private institutions.
Compulsory education must be enforced. The training must find a delicate balance between imparting of useful skill, nurturing of talent and shaping the character of a responsible citizen who would be willing to internalise civic duties like voting and participating in constructive community initiatives.
Universal basic income grant
Every year, we hear of millions of children who "disappear" from the education system. We have not heard of tracing mechanism to bring them back. But suddenly they should get a grant.
Government policy must focus on getting citizens, particularly those from disadvantaged backgrounds, to break out from disadvantage. Instead of debating whether or not the government should implement a universal basic income grant, let’s debate how we can create a universal basic income job.
Before the government can consider a basic income grant, it should also make sure that all positions in government are filled and that no hospital, primary health care centre or school is short of general workers, cleaners, security personnel and support staff.
Before social grants become part of the popular lobbying like expropriation of land without compensation, the government must make sure that it has approved all private sector business licence applications that have the potential to create jobs.
The government must cut down irregular and fruitless expenditure in all state entities to zero and thereafter decide if it won’t have resources to initiate job-creation projects that could, among other things, improve the country’s infrastructure stock and get people to work.
Lastly, before basic income grant become policy, the salaries of politicians at all levels and civil servants must be linked to economic growth and job creation in the whole country. The fortunes of those in power must be linked to the fortunes – and misfortunes – of the rest of society.
And before you know it, there will be no need for a basic income grant. We will be at full employment.
- Mpumelelo Mkhabela is a former parliamentary correspondent, editor of the Sowetan and political analyst.
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