Cape Town - Amid increased calls for a Basic Income Grant (BIG), a new report by the Centre for Development and Enterprise (CDE) shows that a grant large enough to make a meaningful impact on poverty would actually slow economic growth and could lead to fiscal and financial crisis.
There has been much debate on the topic of implementing a BIG after government introduced the R350 Social Relief of Distress (SRD) grant.
Now the CDE’s report seeks to answer some of the burning questions that have arisen out of this debate through its new report, “Poverty and a Basic Income Grant: Six questions about a BIG”.
Some of the questions include why South Africa was thinking about a BIG now, what proponents of a BIG want, if South Africa’s current redistribution was enough, if it could afford a BIG, if a BIG would induce more rapid economic growth, and what alternatives exist for reducing poverty.
CDE executive director Ann Bernstein said the horrific levels of unemployment and poverty in South Africa, combined with slow economic and employment growth, explained the increased demands for a BIG, but the fact was, South Africa could not afford it.
“In this context, and with growing reports of child hunger, it’s not surprising that people want to see more spending on social grants. The reality, however, is that government’s finances are already unsustainable, and adding a large and permanent new spending programme will only make this worse,” Bernstein said.
The report argued that faster economic growth was essential to stabilise South Africa’s public finances, however spending money as if growth had already accelerated could tip the economy into financial crisis.
But Cosatu and human rights organisation Black Sash believe that notwithstanding the CDE report, the country desperately needs the BIG.
Cosatu parliamentary co-ordinator Matthew Parks said: “The question we must ask is if we can afford to leave 10 million unemployed persons with no source of income?
“The violence in KwaZulu-Natal and Gauteng last year showed the real dangers of leaving so many people without any source of income or sense of hope.”
Black Sash national advocacy manager Hoodah Abrahams-Fayker said: “International studies showed that BIG could reduce poverty and inequality more effectively than any other poverty-targeted government programme – it leads to better social cohesion, health, educational outcomes and even stimulates economic growth.”