Dr Thami Mazwai: We have reached our limit – basic income grant will place SA in ICU

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A thought-provoking piece published in our premium section (sign up here) discussed the controversial basic income grant that is currently being touted in South Africa as a solution to mass unemployment and poverty. According to Joseph Cotterill, SA’s national treasury has already commissioned research on cash payments to relieve the country’s severe poverty. Many are concerned that this is a step in the wrong direction for the country. Speaking to the Financial Times, economist Thabi Leoka said his concern is that “whatever decision is made, it is a decision that will be made in perpetuity, when the budget can ill-afford it. In a country that is fiscally constrained, there are going to be trade-offs.” Below, Dr Thami Mazwai echoes these sentiments, noting that another grant will place the country in ICU. “The country needs to think out of the box on how to develop new and mass economic activity, as the Brazilians and Chinese did.” As the Financial Times reports, South Africa currently has one of the continent’s larger welfare schemes, with a massive 18 million people assisted by grants. – Jarryd Neves

By Dr Thami Mazwai*

The debate on the basic income grant (BIG) reopens an ongoing narrative in our country on the fight against poverty, unemployment and inequality (PUI). For the record, this PUI poses a monumental threat to our country – and we had a taste of it in July. We need to avoid a situation where the poor, more so the youth, have nothing to lose but their misery.

However, like it or not, BIG is an even more ominous threat. We are between the devil and deep blue. Should we go ahead with the BIG, touch wood, we will be handing our country to the international bankers who would then determine policy for us.

The policy will not be based on providing services to us, but on how the services can be provided in such a way that the country can repay the money it owes. We already have had a taste of downgrading. Why make it worse with the BIG?

Fortunately – and I say this with a huge sigh of relief – Finance Minister Enoch Godongwana is not sold on the idea of the BIG. Thank God for small mercies in an atmosphere where slogans are elevated to gospel.  

Godongwana has rightly asked the University of Cape Town to look at various alternatives. Perhaps he should have got all our universities to provide concept notes and the one with the best gets the business to dig deeper and provide alternatives. Then we will be in a position to have the best brains in our country suggest solutions. After all, we are subsidising these institutions.

One of the problems that the National Planning Commission (NPC) identified is that our national budgets have over the years been more consumption than production driven. This, unfortunately, has to come to an end. We cannot buy ourselves out of the crisis we are in (or build our country) with money we do not have.

The silly narrative we hear from some in the union movement is that, because of the corruption that in the immediate past many have been involved in, we cannot punish the innocent. Yes, corruption means money was abused. The point is that because of this abuse, we no longer have the funds we used to command. Thankfully, the wheels of justice are now turning (though slowly) and many who were part of this corruption are now getting their comeuppance. 

But we cannot now dig ourselves deeper into the hole and implement the BIG because of the corruption of the past? It just does not make sense. Already, StatsSA warns that South Africa’s gross loan debt stood at R2.2 trillion in 2016/17. This translates to about R40,000 per person. The debt has accumulated over the years as, for instance, the budget deficit in 2016/17 amounted to R156bn. In July we were then hit by the unrest and over R50bn is needed. This adds to the financial crisis that the country now faces.

Thus, the solution does not lie solely in grants, over and above the annual SASSA obligations and these must continue. I use the phrase “solely in grants” advisedly as will be seen much later. To get back to the point on grants, one must also make the point that several pieces of research reveal that the SASSA grants have a negative impact on entrepreneurship.

Again, let me stress, the current grant system must continue as it has lifted millions out of poverty. But we have now reached our limit and more grants will, as argued earlier, place our country in the ICU. We now need to create more wealth and taxpayers as even the current grants could be at risk.

Thus, the country needs to think out of the box on how to develop new and mass economic activity, as the Brazilians and Chinese did. This would be over and above of what is already being done, more so when one refers to the B4SA and the Government’s reconstruction and economic recovery strategies. 

Secondly, and to get back to my “solely in grants” statement, all it means is that people must not be given money when they did not work for it. Thus, if money can be found for the BIG, people must work or be made to engage in productive labour to qualify. 

Our economy grows when people work. For instance, the Expanded Public Works Programme (EPWP) can be fine-tuned to create entrepreneurs rather than dependents. The programme has developed a momentum and funds earmarked for BIG can be part of this programme but as I have said, with some radical improvements to the EPWP, something that experts from government and labour can do.

The most important argument against BIG is that numerous pieces of research have found that Black South Africans are haunted by the dependency and entitlement syndromes. While this is understandable in the light of the past, when we were denied what was due to us, these syndromes are now at crisis levels. I visit the Eastern Cape regularly and I find that in my village, fields are lying fallow when in the past they would be green.  People expect government to do this and that. It does not work.

Our politicians are themselves not doing us favour as, when they campaign, they promise everything to the voter. The BIG is also part of these promises. Thus, if BIG is implemented as the social grants are, our productivity levels will continue to be among the lowest in the world. According to the OECD, labour productivity in South Africa is at 20 USD per unit, the lowest of the 30 measured countries.

Thus, and in conclusion, the BIG must be a discussion of the past unless it is linked to people working for what they will get. Finish and klaar.

  • Dr Thami Mazwai is a researcher on small business and chairman of Mtiya Dynamics; a company that trains enterprises and suppliers in terms of the BEE codes.

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