Editorial

…..editorial 2 February 2021……

Parliament awaits Mr BIG’s plan…..

Since July, President Ramaphosa has been promoting the concept of a Basic Income Grant (BIG), a theme that has been raised in many an ANC conference over the years.  Like all economic debate at these talk shops, most of the ideas put forward develop into clouds of smoke.

The President has different ideas about a BIG, however.

Breadline stuff

Nobody, it seems, before Covid struck, had really much idea of what income support was all about other than the people who really needed it.   What is counted out by SASSA every month in the form of social relief is somewhat boring to many. The process always seems to be going wrong and there are much more exciting things to read about.

Nevertheless, for a developing country, South Africa has a relatively well-established social welfare system.  A comparatively major proportion of the country’s social spending goes towards cash grants. Compared to the rest of Africa, the programme is quite advanced.

The cold facts

Grants are provided in the form of child support grants, older person’s grants, disability grants, grants-in-aid, care dependency grants, war veteran grants and more recently, foster child grants. Applicants for social grants must be South African citizens, permanent residents, or refugees and currently living in South Africa.  More than 18 million social grants are paid monthly.

Added to these regular payments but from a separate budget there is now the six-month R350 Covid allowance, presently under review.

 Going forward

Following the President Ramaphosa interview , Bloomberg reported that it had learnt from its own sources that the ANC was considering a plan to pay a R500 monthly grant to all those aged  between19 and 59.

The conditions for this were not at all clear, they said, other than extensive public debate was to be involved. Bloomberg mused that if grants were “universal”, such a plan would cost the state R197.8bn. a year. Clearly the President was taking ownership.

Scaling down

Black Sash have put a reasoned document before Cabinet suggesting a BIG of R1,500 a month for starters.   Zwelinzima Vavi, the leader of SAFTU, responded to the Ramaphosa interview by saying, “A BIG has to be the first step towards the series of social-systemic reforms that our country desperately needs.”

Vavi noted that US Democrats in the hotly contested state of Georgia promised as a voting platform to provide a $2,000 cheque to each US adult in the state to counter joblessness. “By all accounts”, observed Vavi, “this was the main reason for the Democrats winning by a margin in a state which was traditionally Republican and thus tipping the balance to win a Congress majority.”

Social income support is going to be one of three main platforms of President Biden’s plan to improve the US economy, Vavi noted.

“This is spending so that the right people benefit and then putting it back so everybody benefits”, Vavi said, “and it’s not just another form of socialism, its good sense.”

Half-hearted

In South Africa most agree that the current social security system, although better than many other countries, is totally inadequate to deal with the social crisis being faced at the moment.  Treasury’s inability to maintain even inflationary increases onto what in reality is only a payment to the aged and caregivers indicates how far down the list this issue is as a priority.

Opines Vavi,  “The inadequacy of all this with so many poor not even having the basics of life is bound to lead to some sort of social explosion in the near future. It’s a ticking time bomb”, he said, “and Parliament has to take it away from the small committees and deal with things properly .”

 Kicking the can along

In theory, and what is coming out from the mixed messages, is that any substantial platform of welfare support can be used not only as a social injection of funding, but as pure purchasing power added to the economy.

The kick to the economy should equate roughly equal to the amount of investment.  That is the idea, providing it is not made too costly through incompetent disbursement and inflated overheads.  And also, providing that state vultures and masquerading suppliers don’t have a dip.

Say the protagonists of this economic theory, in principle what goes in has to come out, or roughly so. There also have to be stringent conditions that any pay-out is to the person, by a person, and in cash.

Where is the money 

With the Reserve Bank admitting now that there is some possibility of using a partial allocation of the R1.93 trillion of PIC put on hold for the moment, we strongly suspect that with a freeing up of immediate debt Parliament is to hear of such a proposal. This might be part of the March Budget, with the news that a draft Money Bill is being developed along the lines of a BIG and eventually to be published for comment.

To know that such a plan is on track would no doubt help Minister Mboweni when he goes into the IMF offices for a loan, the IMF having stated that the income gap in South Africa is untenable.

Too hot to handle

Two things are now happening at the same time.  Like the two planets, Jupiter and Saturn, that melded together visually in the night sky giving the impression of being one despite being 730 million kilometres apart, the two events of the Covid 19 economic downturn and unemployment/hunger are the two most explosive issues this country has to face.  These two monsters are doubling in speed to create fusion and the crisis is with us.