Researchers conversed with Maverick Citizen editor Mark Heywood during a webinar on Thursday about how feasible having a universal basic income (UBI) would be for South Africa.

Speakers suggested the long-term impact of a UBI would be economic inclusion and pulling the population out of poverty, among other benefits that could balance the most unequal society in the world. They also acknowledged that a UBI was a “slippery and unstable concept” which was not a “magic bullet” to resolve South Africa’s “interwoven crises”. 

The wealthy might see a UBI as a burden because they would possibly pay more tax to fund it, but for many, it could be a means to meet basic needs.

Author and researcher Hein Marais defined the UBI as a regular monthly payment to all adults, without conditions or a means test. This was pertinent as South Africa has a high unemployment rate, and many of those who work are either in insecure employment or spend most of their income on transport to get to work.

Ultimately, said Marais, the decision on whether to implement a UBI was political.

“It is a political decision about what is affordable and what is not. In South Africa [we] have a couple of experiences in the past two decades where we were told repeatedly that certain interventions were unaffordable, and within a few years [they] had become affordable.  

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“The one was the expansion of social grants in the early to mid-2000s and the free HIV/Aids treatment. We were constantly told it was impossible. It wasn’t. Today, we have the largest treatment programme in the world and we pay for it ourselves, unlike many other countries in the world. So this political dimension is fundamentally important.

“Also, the need for the public at large to understand, participate in this debate, and hopefully come around in support for it in large enough numbers to [sway the] political intransigence that we are seeing at the moment,” Marais said. 

Read more in Daily Maverick: “Basic Income Grant — what it’s all about and what it could mean for South Africa”

Zimbali Mncube, a researcher at the Institute for Economic Justice, has detailed how the funds for the grant would be acquired, in a working paper that he co-authored with Kelle Howson.

“We’ve looked at many tax proposals to potentiate an intervention like your basic income grant. I will mention three: income taxes, consumption taxes, and wealth taxes,” said Mncube.

“A social security tax would be levied on the income of those who earn around R80,000 per month and upwards. At the rate of about 1.5% to 2.5%, depending on their tax bracket, that would allow a recoup of about R67-billion.”

He said consumption taxes “would be regressive” because they would cause low-income households to suffer in the context of rising food and energy prices. Rather impose a luxury tax, Mncube said, which “would be a VAT imposed on those who purchase luxury goods and it would be at 25% and this could raise about R8-billion to R9-billion”.

“Then lastly, the wealth tax. Studies that have been done on this show that a 1% tax rate for the top 1% of the wealthy could raise R43-billion.

“These are the ways that I think we need to consider when we are thinking about financing an intervention like a basic income grant. But, of course, they would require very careful sequencing as well as discussions with different stakeholders to manage the unintended consequences that they might have on revenue or even the intended beneficiaries,” said Mncube.

Researcher Kelle Howson said the unemployed could use a UBI to pay for transport, data and paperwork, which would help them when seeking employment. She said if the grant was too low, beneficiaries could end up in a “cyclical poverty trap”.

She said: “In low- and middle-income countries there isn’t a lot of support for the idea that social grants are spent on so-called temptation goods like alcohol and tobacco. There’s also evidence for this from South Africa. Assessment of the introduction of the SRD [Social Relief of Distress] grant showed that it was overwhelmingly spent on food, followed by electricity, and I think we can expect a similar outcome for a basic income grant.” DM/MC