A week ago I was having a bad day. The caller asked: “Apart from bashing me from time to time … how are you doing?” Even after he added, “This is the president,” it took me a while to figure out who the caller was. “The president of what?” I asked myself.
President Cyril Ramaphosa is now thinking about his legacy. After the 2024 election the ANC will still be the largest party in parliament. But there is no guarantee that he will be the country’s next president. He said he had been involved in shaping three epoch-making policies.
He led the 1987 mineworker’s strike that forever changed conditions for workers who had been among the most underpaid in the economy. In 2002 he led the BEE commission, which paved the way for the current black economic empowerment policies. Though the project was later tainted by state capture and corruption, we provided definition of the concept, he said. Together with Andy Brown, I worked in his office at the time.
It was one of the most memorable periods of my life. Ramaphosa also led discussions about the national minimum wage, which has benefited millions of workers. Over the past week Ramaphosa has indicated that he is seriously thinking about biting the bullet and introducing a basic income grant (BIG) to replace the R350 a month social relief of distress (SRD) grant, which will come to an end in April 2024.
He told me he was reading papers from a recent workshop on the SRD grant and the presidential employment stimulus that the presidency and University of Cape Town (UCT) hosted, and wanted to see the work I had done on the BIG for the Social Policy Initiative.
In his letter to the nation last week Ramaphosa said social grants support economic growth from the bottom up and stimulate the economy. They increase spending in townships and rural areas and improve employment outcomes. He cited a University of Johannesburg study of informal traders, which found that the SRD grant stimulated customer spending and provided capital to buy stock.
A UCT study found that the grant increased the probability of recipients searching for jobs and gaining employment. In the National Council of Provinces, Ramaphosa said the government was looking at how to move beyond the SRD grant and was considering introducing a BIG. “Various options are being explored taking into account affordability, financing options and the efficacy in addressing poverty.”
The BIG is probably the most researched economic policy since 1994, with numerous reports and papers on how to implement it. After three years of doing such research, I have made three findings. First, the additional spending will stimulate the economy, increase investment and create jobs. If the primary objective is to grow the economy, the BIG should be as large as possible. We must not try to make it smaller because that would defeat the purpose of providing a significant boost to the economy.
Therefore, implementing a fully funded — or fiscally neutral — BIG is a dumb idea in a country that desperately needs stimulus. Second, the BIG must be implemented as part of a package that locks in the higher GDP growth rate beyond my proposed three-year implementation period. The package must include higher spending on infrastructure, industrial policies and public employment programmes. With a higher GDP growth rate the BIG is sustainable.
Third, nothing, let alone the BIG, is sustainable within the current macro-economic policy framework of austerity and low GDP growth. Austerity results in a dangerous downward spiral of budget cuts, which reduce GDP growth and increase the debt ratio. This is then used to justify more budget cuts.
The BIG could become Ramaphosa’s fourth epoch-making policy, a legacy that changes the lives of millions of South Africans and kick-starts an economic recovery after 14 years of no growth in GDP per capita.
• Gqubule is research associate at the Social Policy Initiative.
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