South Africa’s new Government of National Unity is the right time to implement UBI

South Africa has now announced its new Government of Unity following elections on the 29th May. These elections have been a celebration of South Africa’s democracy.

There is a clear mandate from the electorate to deliver on manifesto promises and we applaud the parties who committed to a Universal Basic Income (UBI).

A coalition of South Africa organisations including the Social Policy Initiative (SPI) has been advocating for a Universal Basic Income as a fiscal solution to increasing levels of inequality and poverty, by boosting the economy resulting in new jobs. SPI’s particular approach proposes a model which could achieve 96% self -financing due to the impact of the economic stimulus, if all the policies they recommend are implemented at sufficient scale. 

SPI’s January 2024 report The Economics of Implementing Universal Basic Income in South Africa lays out the details.  

ACTSA supports SPI’s view that any future South African government implementing this rights-based approach would fulfil the promise of the Constitution within three years by taking this transformative step, using the nation’s existing resources for those most disadvantaged by the colonial legacies of inequality and poverty in the country. A UBI is the only solution to deep-seated and gendered poverty which particularly affects Black women and children. 

SPI’s Executive Director Isobel Frye and Chair of the Board Sisa Njikelana explain more here: 

“South Africa has been facing an existential crisis far before the May 2024 elections. 12 million adults are unemployed; there is a youth unemployment rate of 69% for first time job entrants. The annual GDP rate of 0,9% is well below the population growth rate and 25% of South Africans live below the extreme poverty line. Black women bear the brunt of poverty, unemployment and low wages and yet carry the greatest burden of care-giving with no income support at all.

South Africa is an Upper Middle-Income country, with the highest inequality globally. A grand solution is required on a sufficient scale to correct the structural drivers of unemployment and poverty and inequality.

The Social Policy Initiative (SPI) has developed a model for Universal Basic Income that provides such a scaled economic stimulus. It does not require additional taxation. The monthly payment is indexed to the upper national poverty line of R1 500 (62 GBP) per month and so immediately ends poverty, meeting Sustainable Development Goals (SDG) commitments. 

Paid to everyone, it is clawed back through the tax system from income earners, abolishing the costly and demeaning need to prove poverty to qualify for means-tested benefits. The SPI’s econometric model demonstrates that the stimulus could increase GDP growth to 5,6% per annum and create 2 million jobs in the first three years. And the best part for the government is that this model is 96% self- financing. Without raising any tax rate, tax on additional consumption and additional economic activity, combined with basic reforms to industrial policies to optimally capture the multiplier of the state social security transfer will effectively cover the costs of the economic stimulus.

In addition to extreme levels of inequality and unemployment, the rate of gender-based violence and femicide in South Africa is a mockery of the principles, values and rights to liberation and dignity guaranteed in the Constitution. UBI will provide a small but guaranteed income that could break the cycle of violence that many children are raised in and provide a better future for all women.

The SPI model for a UBI demonstrates that real change and growth is possible today. The scale of the economic stimulus has to be correct in terms of universal reach and sufficient value. As a basis for a new social cohesion in a nation seeking unity in diversity, the SPI believes that UBI provides the blueprint.”

You can read the Social Policy Initiatives (SPI) January 2024 report The Economics of Implementing Universal Basic Income in South Africa here.