President Cyril Ramaphosa has a year to decide whether to implement a basic income grant (BIG). In the 2022 budget, finance minister Enoch Godongwana will extend the grant at an annual cost of R40bn. The government will then have to make a final decision before the 2023 budget.
As former public protector Thuli Madonsela says: “Ultimately it will depend on whether the president only listens to libertarian orthodox economists or also listens to development economists and common sense.”
Two weeks ago I was part of a group of civil society organisations that met Ramaphosa and his ministers of finance and social development. The collective presented the alternative Keynesian view that drew on the work of about 12 research reports that explain how to implement a BIG.
The progressive view is that the BIG will have a stimulatory effect on the economy since the recipients of the grant will not hide it under their mattresses, as political analyst Tessa Dooms says. It will stimulate local economies in Soweto, Thembisa, Umlazi and the Cape Flats.
We must distinguish between gross and net costs and recognise that the take-up of the grant will be far less than 100%. After four years the take-up of the child support grant was 25%. My version of the BIG — in a forthcoming paper for the Studies in Poverty & Inequality Institute — is that it should also be extended to children.
The grant should be phased in over three years at the three poverty lines of R624, R890 and R1,335 a month. I outline eight scenarios with different assumptions. Assuming a 60% uptake under one scenario, the grant will cost R360bn over three years.
At this point we must all calm down and look at the facts. This is equivalent to only 1.8% of GDP over three years. The stimulus effect would contain the public debt ratio. After three years it would be 77%, the same as it would be without the BIG. Also, about two thirds of the outlay would eventually go back to government, taking into account VAT receipts, a clawback from 7-million taxpayers and higher tax revenues due to the stimulus effect. The BIG has a self-financing element.
Last week the “libertarian orthodox” economists within the presidential economic advisory council leaked a report that cherry-picked the views of some authors of a September 2021 submission to Ramaphosa. It seemed a desperate attempt to influence the public and president in the face of a crumbling case against the BIG. The findings were so extreme it was immediately obvious that it was impossible for 18 economists to have agreed on such a position.
At a dinner party hosted by gender activist Fatima Shabodien on the day of the first leak to discuss the campaign for a BIG, an insider said there was already infighting on the panel and a witch hunt to find out who leaked the report. At the weekend the presidency released a statement that reprimanded the leakers. There was a second leak by the “development economists” within the panel who did not want to be associated with the extreme findings of the first leaked report.
The second leaked document revealed the ideological leanings of the panel’s members. There were 11 people in the “libertarian orthodox” camp and four in the “development economics” one. Global celebrity economists Mariana Mazzucato and Dani Rodrik did not sign either report. Mazzucato has said basic income is a way to enable everyone to create value in the first place.
In another context, Nigerian author Chimamanda Ngozi Adichie talked about the danger of a single narrative. In SA, there is a single “libertarian orthodox” narrative that dominates all economic debates, including in the president’s council. Ramaphosa must also listen to the development economists — the Keynesian views on the grant. He must release all of the panel’s submissions to the public.
• Gqubule is founding director at the Centre for Economic Development & Transformation.
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