A complicated process unfolds each year to produce a national Budget introduced with great fanfare by the minister of finance. The process involves all government entities motivating for a share of the pie, and requires political alignment to the priorities outlined by the President during his annual State of the Nation Address.
But what is ultimately delivered is a virtual carbon copy of the previous year’s Budget, with a few tweaks here and there – which is a virtual carbon copy of the years before that. Because it’s based on a template to fund the pattern and structure of government that is now considered the norm.
Thus, for example, the SAPS VIP Unit’s budget shows incremental annual growth. It grew by R26.3-million between the 2020/2021 and 2021/2022 financial years to reach R1.7-billion. We really could be getting better bang for these bucks.
It’s quite possible for South Africa to afford a R999 basic income grant. What it requires is migrating away from the old template to direct money to the nation’s most pressing needs.
With almost half the country unemployed, and roughly 15 million South Africans living in extreme poverty, it’s difficult to argue that putting sufficient money in citizens’ pockets to pay for their most basic need – food – shouldn’t be among our top priorities.
It’s not a charitable act but a constitutional and moral one. Section 27 of the Constitution demands that all should have the right to “sufficient food and water; and… social security, including, if they are unable to support themselves and their dependents, appropriate social assistance”.
The high rate of poverty in South Africa is a consequence of inherent unfairness in the economy that, despite 29 democratic years, to a large extent mirrors the historical exclusions of the past. Besides the immorality of it, it creates an environment of desperation and social instability.
Even if levels of economic growth and job creation vastly exceed the most optimistic projections over the next several years, the gross number of unemployed people will not be significantly reduced as it will be offset by population growth.
If the economy were to grow at 3% per annum over the next 15 years, the unemployment rate would begin to reduce, but the actual number of unemployed people would remain above eight million.
In other words, poverty is a problem that isn’t going to fade away. And we know that the cost of living doesn’t ever get any cheaper.
Question of affordability
Many South Africans agree in principle with the need for a basic income grant, but have legitimate concerns about affordability. Particularly given the costs of servicing government’s high level of debt.
The GOOD Party has been conducting research to determine an appropriate and affordable basic income grant for unemployed South Africans who don’t qualify for child grants, disability grants or pensions.
Presently, millions of South Africans receive a monthly Social Relief of Distress Grant of R350, which is hopelessly inadequate but does establish a foundation for a basic income grant.
We are saying that the monthly number should be R999.
Although this number is perilously close to the lower-bound poverty line of R945 per month (set by StatsSA last August), which is the amount people need to feed themselves, aiming higher than that will be difficult for the state to afford.
By our calculations the annual cost to the fiscus would be approximately R110-billion.
This is where budgetary principles come into play. Instead of carrying on last year’s spending pattern, the process should begin by setting revenue aside to cover the costs of the peoples’ basic needs. Then lower-priority items can be factored in, with the rest of the suit cut according to the cloth.
That’s the principle of what’s known as zero-based budgeting, and what lies at the heart of GOOD’s proposition that R999 a month will be a good deal for all South Africans.
The good news is that it can be done, without requiring further borrowing – and this is how we would do it:
We have identified at least R14-billion per annum of government spending that is structurally inefficient and represents a poor return on investment. Much of this saving can be made by merging ministries and departments.
Several existing social programmes funded by the state will be rendered redundant when “replaced” by a basic income grant. We’d halve the annual budget allocated to the South African Secret Service.
More than R5-billion will be saved by restructuring provincial legislatures, which cost a fortune but have little impact, and reducing the exorbitant allocations currently to premiers. The R11-billion a year spent on consultants can be dramatically reduced by professionalising the public service.
Potential revenue of R35-billion is identified through tax reforms. These include lowering the cap for the deductibility of retirement contributions which are presently over-generous to very wealthy individuals who are unfairly favoured by the state. Further tax measures to fund the grant include reforming the Employment Tax Initiative, and a small increase to corporate taxes. No changes to personal income tax are envisioned, nor the imposition of wealth tax.
R12-billion can be directed to the basic income grant from the Criminal Asset Recovery Account and the Mineral and Petroleum Resource Royalty, which were conceived to “compensate” society for losses of natural resources.
Another R10-billion comes from increasing VAT on luxury items, while expanding the list of zero-rated items.
The remaining R20-billion is recoverable by implementing reforms that any efficient and ethical government would, such as eradicating corruption and privatising dysfunctional and draining state-owned enterprises. The knock-on benefits to society and the public purse owing to an enhanced social welfare will also recover parts of the cost.
The costs of a basic income grant are far outweighed by the risk and costs of non-action, and the immorality and unconstitutionality of not intervening in the plague of poverty in a deeply unfair society. DM