Combating poverty: South Africa’s BIG challenge

1. Combating poverty: South Africa’s BIG challenge HAROLD WOLPE FORUM LECTURE 15/2/03 Neil Coleman Neil@po.cosatu.org.za

2. Poverty and Social Security in South Africa • Severe poverty affects over half SA’s people, combined with gross income inequality. 22 million or 53% of our people live on average on less than R144 p/ month. There are 3.1 million workerless African households. 2 in 3 children live in poverty. • Poverty is deep-rooted and structural: our apartheid legacy and structure of the economy locks the majority into a poverty trap, which is reinforced by the current growth path.

3. Poverty and Social Security in South Africa • Social security is fragmented, & a modification of the apartheid SSS. • Taylor Comm found that it totally excludes the majority of poor people: “There is no income support for children between 7-18 years, adults between 18-59 years, (or) general household assistance where no-one is employed. Over 13 million live below the poverty line & have no access to social security… SA’s social security system is neither comprehensive nor adequate.”

4. Comprehensive Social Protection (CSP) • Structural character of poverty in SA requires holistic developmental response. No one magic bullet. • Taylor Comm proposals address this head on - concept of CSP. This is “broader than the traditional concept of social security, incorporating developmental strategies designed to ensure, collectively a minimum acceptable living standard for all citizens” (Taylor p40) • Taylor therefore proposes an integrated package to address 3 core areas of poverty: income poverty; services or ‘capability poverty; and asset poverty. This CSP package should be “a universal as possible package of income transfers, services & access provided in a non-work related manner & whose availability is not primarily dependent on an ability to pay” (Taylor p42)

5. Comprehensive Social Protection (CSP) Measures to address • Income poverty- minimum income throughout peoples life cycle- childhood, working age & old age. Core proposal is a BIG which “has the potential, more than any other possible social protection intervention, to reduce poverty & promote human development and sustainable livelihoods” & is ‘easier to roll out in the short term than ...(other) poverty programmes’(Taylor) • Capability/services poverty- the provision of basic services including lifeline water, electricity, free healthcare, education, affordable housing & transport. • Asset poverty- access to productive & income generating assets such as land & credit.

6. What is a Basic Income Grant? Idea whose time has come. In 2000 few knew about it. Today key issue on national agenda. Key elements of Coalition platform: • Universal coverage- from cradle to grave & no means test; • Expand the net- no individual should receive less in grants than before the intro of BIG; • Amount- no less that R100 p/ person p/month on introduction

7. What is a Basic Income Grant II? • Delivery mechanisms- payment should be facilitated through public financial instiutions; and registration through the Hanis system; • Financing- net cost about R24 billion. Less than recent income tax cuts. Over half the cost of the grant to be recovered progressively through tax system. Some would pay grant back. Others would subsidise payment to poor. Solidarity system. Remaining cost to be borne by fiscus.

8. Objections to the BIG • 1. “It will create dependency”. The opposite is true. BIG would assist people to break out of the poverty trap, & empower the poor. Everyone entitled to BIG as a right. Not a ‘disincentive to work’. Cf int. experience. • 2. ‘It is unaffordable’. Economists researching for Taylor found that there is fiscal space, & relatively low administration costs. In medium to long term dev.tal effects of BIG, leads to a progresive reduction of the fiscal burden.

9. Objections to the BIG II • 3. “It will be impossible to implement”. New technology which is available opens up enormous possibilities. Abolition of the means test radically simplifies administration; reduces corruption and bureaucratic interference; simplifies access particularly for the rural poor & the most vulnerable; and slashes the cost of administration. • Nevertheless are practical q.s which need addressing. Return to this in conclusion.

10. Imperatives for a BIG I The Constitutional Imperative • Section 27 entrenches everyone’s right to social security & s28 childrens rights; • Grootboom judgement sets out clear standards for realisation of socio-economic rights; • Huge gaps in existing SSS, which arbitrarily discriminate against majority falling through net. Q. able whether gov.t could survive a const. court challenge, despite CSG extension. • Even if succeeds, morality of discriminating against millions of poor cannot be defended.

11. Imperatives for a BIG II II Economic Imperative • Growth path remains skewed against the poor- redistribution to the rich, & poverty a tax on working people; • Stagnation of economy directly connected to marginalisation of the majority- see surveys on obstacles to investment; • Introduction of BIG an NB part of developmental strategy to mainstream poor, create economic stimulus, & promote LED. Direct redistributive transfer. Underpins RDP approach.

12. Imperatives for a BIG III III Social Imperative • As Taylor shows, advances in certain areas of delivery unsustainable given degree of poverty. Poverty strategy has to be holistic; • Improvement of Health (esp HIV) education and other social indicators requires elimination of worst forms of poverty. Similarly for meaningful employment strategy; • Crime, moral degeneration, and potential for major social instability can’t be addressed without this type of intervention.

13. Imperatives for a BIG IV IV Political Imperative • Political settlement not sustainable if not accompanied by an ‘economic settlement’. BIG would be an NB element of such a national agreement; • This will be the critical focus of the 2004 elections- critical test 10 years down the line; • Requires political vision & leadership to avoid jeapordising or reversing many NB gains made since 1994, or even a social implosion.

14. Will BIG alone resolve these issues? We accept that: • The BIG is not by itself a panacea for the crisis of poverty and inequality in SA; • It must be seen as an integral part of an overall development strategy; • It needs to be aligned with appropriate socio-economic strategies; • Comprehensive strategies to address poverty need to include: employment creation measures; a comprehensive social wage including BIG; Asset redistribution; access to affordable public services.

15. Developmental impact of BIG • As part of a broad development strategy, a Basic Income Grant would: • Empower the poor and help to break the poverty trap; • In particular empower women and other vulnerable sectors; • By providing everyone with a minimum level of income, totally eliminate the worst forms of poverty (destitution) and close the poverty gap by 75%; • Promote redistribution and equitable development; • Assist the poor in entering economic activity and pool resources; • Improve key social indicators and raise economic productivity;

16. Developmental impact of BIG II • As part of a broad development strategy, BIG would: • Boost economic demand and local development; • Assist in promoting employment; • Increase the bargaining power of the working poor, and assist in combating the worst forms of exploitation; • Assist in fighting HIV/Aids; • Promote family and economic stability; • Take forward the SA Constitution’s commitment to basic socio-economic rights for all.

17. Practical questions which need addressing If there is the political will to engage on BIG & Taylor practical q.s can be resolved jointly by government & civil society. To this end we have proposed a joint forum. Practical questions include: • How to phase in BIG & over what period; • Its relationship to the CSG; • Its relationship to other grants & poverty alleviation measures; • Systems of administration; • The details of financing & taxation, & appropriate cut-offs.

18. Retaining the Status Quo is not an option • Taylor correctly excluded option of retaining or finetuning existing system, as both unconstitutional and irresponsible. Further, that the social & economic cost of inaction were far greater than the financial costs of bold action.

19. Way Forward Require a combination of strategies to win broad social and governmental acceptance that approach proposed by Taylor Committee is correct: • Civil society leaders to drive engagement with government at top; • Engagement with ANC and in Alliance in run up to GDS • Agreement on approach to 2004 Elections; • Continued mobilisation of society; • Further serious academic work on issue; • Setting up of a gov.t/ civil society forum to engage on practical questions, including current initiatives such as social security agency.