Let me try this again. Assuming a likely 60% uptake, implementing a basic income grant (BIG) will cost: R144bn at the food poverty line of R585 a month; R206bn at the lower poverty line of R840; and R311bn at the upper poverty line of R1,268, according to the Institute for Economic Justice (IEJ). The BIG should be phased in over three years at the three poverty lines so there is an ongoing stimulus to the economy that is not exhausted after one year.
Since a national budget does not operate like a household budget, we cannot have a static accounting analysis of the grant. A dynamic economic analysis must take into account fiscal multipliers — the additional GDP generated by each rand of new spending. In a recent book, World Bank economist Ugo Gentilini and others say these multipliers range from 0.8 to 2.52. The grant will generate tax revenues that would not have happened without it.
The short-term net cost, or hit to the fiscus, could be 50% of the gross cost: R72bn, R103bn and R155bn at the three poverty lines respectively. According to Economics 101, you should not tax the majority of the people during a recession or fragile recovery. The additional spending from the grant must remain in the economy to provide a stimulus.
There are three options. The first is to let the deficit increase. If the BIG had been implemented in 2021 the deficit would have increased by 0.9 of a percentage point to 82.8% of GDP from a projected 81.9%, using a static analysis that does not take into account the additional GDP generated by the grant. With a dynamic analysis the debt ratio would fall, as happened in Brazil after it implemented Auxilio Emegencial in 2020, which paid $106 (R1,553) a month to 68.2-million people at a cost of $52bn (R762bn).
The second is to use the government’s cash resources. In March, the government had cash of R296bn. The excess cash for the 2021/2022 fiscal year will be more than R100bn, according to most forecasts.
The third is to use a combination of cash and debt. Let us have a referendum on the BIG. The majority of South Africans will vote for this option.
About three weeks ago the new finance minister, Enoch Godongwana, told me he supported a BIG that would provide a stimulus to the economy. “We must get Treasury to support it,” he said. He sent me an IEJ report. I sent him a report I wrote that outlines 11 options to end austerity. Two weeks ago I spent two hours with social development minister Lindiwe Zulu, who was so passionate about the grant it was clear that she wanted it to be her legacy. I was convinced it was only a matter of time before the government implemented a BIG.
After reading the Sunday Times this weekend I am now not so sure. Godongwana essentially told the newspaper the BIG was a white liberal plan to keep every kid in perpetual dependency, that it did not address fundamental issues affecting youth unemployment. This is rich coming from a government that has failed to grow the economy and create jobs. Since December 2008 the economy has created only 226,000 jobs. I reject the false binary between grants and jobs. We must do both. The grant will grow the economy and create jobs.
We have a humanitarian crisis in SA: 10-million people went hungry during April and May 2021, according to the National Income Dynamics Coronavirus Rapid Mobile Survey. The expanded public works programme has a budget of R3bn a year over the next three years. This will enable it to create about 500,000 full-time equivalent jobs a year. The programme must be restructured to create full-time jobs. Its budget must be increased 20 times so it can make a real contribution to tackling the jobs crisis.
• Gqubule is founding director at the Centre for Economic Development and Transformation.
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