A universal basic income grant in South Africa is a national imperative:
The time for South Africa to implement a universal basic income grant is a macroeconomic imperative. A GDP rate of 0.4% and an overall unemployment rate of 42% — 71% among the youth — has been projected by the Social Policy Initiative nonprofit. That is almost 12 million jobs that need to be created.
It is just not feasible, given the failing economy. At the same time the country is facing new problems as a result of climate change and the global race to limit warming to 1.5°C by 2050 and reduce greenhouse gas emissions to zero as soon as possible. South Africa must find new economic and growth pathways that move away from coal, which has underpinned the country’s economy for decades. In addition, South Africa has vowed in its Just Transition Framework to ensure no one is left behind. The need to protect those already left behind is not only a constitutional obligation but an essential macroeconomic policy.
South Africa has a number of social insurance and social assistance vehicles to ensure income security for all. These include disability, child support and older person’s grants. Despite the high levels of poverty and unemployment, no assistance is provided to poor unemployed people of a working age. This is a result of the fragmented social security assistance architecture inherited from the apartheid government, which targeted a minority group and assumed full employment. This structure has over the years resulted in millions of South Africans of working age being excluded from government social assistance.
During the Covid-19 pandemic the country instituted a social relief of distress (SRD) grant, commonly known as the R350 grant, to reach the most vulnerable members of society, predominantly the unemployed and those in the informal sector. This came into effect in May 2020 after interventions from many in civil society, the National Economic Development and Labour Council community constituency, faith-based leaders and a group of economists who wrote an open letter to President Cyril Ramaphosa.
In the first quarter of 2023, 11.9 million people were unemployed; 71% were youth, 47.3% Africans and 51% African females. The graph below uses data from the department of social development to show the number of new applicants for the social relief of distress grants, return applicants, total applications and amount paid out for the month of July 2023. It is clear from the graph that demand for the SRD grant far outweighs the supply.
A universal basic income grant would ensure that some of this demand would be as an economic stimulus to restart the economy while playing a critical social role by meeting the demand for social security protection measures.
COVID 19 SRD (R350) Grant
The main arguments in favour of instituting a universal basic income grant contained in the Social Policy Initiative’s recent report is, first, that such a grant is the only feasible way to stimulate the economy to a respectable recovery rate of 4.3% to 5.6% per year. Second, a universal basic income grant will have multiplier effects as the 11.9 million unemployed South Africans will have incomes placed in their hands and can participate in the economy. The third argument for a universal grant is the fact that universal social security is a constitutional right contained in the Constitution and must be protected and advanced like any other right.
Einstein defined insanity as doing the same thing and expecting different results. South Africa has shied away from a universal basic income grant since it was recommended by the ministerially appointed Taylor Committee in 2002. Instead, the promise of creating jobs became popular discourse for the government and civil society. But our dire unemployment numbers call for something different.
Our economy has done a remarkable job of growing high levels of unemployment and inequality, trapping millions of people in poverty levels that will take at least two generations to get out of. Poverty and unemployment have become so rampant that having a formal education and work experience no longer creates immunity from unemployment.
A universal basic income grant is not a luxury, it’s a necessity. A study by the Social Policy Initiative on the R350 grant found that the recipients spent the money on productive activities such as starting businesses, reskilling and upskilling themselves and to recover from a sudden loss of income while grabbling to meet daily needs of bread and butter. Rather than asking how a universal grant will be financed, we should be asking if the country can afford not to have one.
Many studies have debunked the myth that social protection grants create a culture of dependency and loss of motivation and value for paid employment. In his capabilities approach, economist Amartya Sen outlined in detail the significance of individuals’ capacity to achieve the kind of lives they desire and have reason to value.
South Africa’s national elections are in 2024 and important questions to ask are:
- Has South Africa created an economically viable society where all people can live the lives they value and desire?
- Can a universal basic income grant play a catalytic role in revitalising a fragile social compact in South Africa?
- How long will 11.9 million South African continue to remain on the fringes of the economy?
- What number of unemployment levels do we need to reach as a country to get to the tipping point?
A universal basic income grant is not a linear answer to all of South Africa’s problems, but it is a necessary mechanism to insulate the country’s most vulnerable, to reduce the rising inequality and act as a catalyst for stimulating and creating a vibrant economy and ensuring the principles of a just transition are kept.
Nomahlubi Jakuja is a senior economic researcher at the Social Policy Initiative and Isobel Frye is the initiatives founder and executive director.
Higher education is fast losing its edge in South Africa’s labour market:
Education remains key to better labour market outcomes in the country, according to Statistics South Africa’s Labour Force Survey for the second quarter of 2023 released on 15 August.
Considering the destructive effects of apartheid’s “Bantu education,” which delivered substandard education to most citizens, a post-1994 consensus has prevailed in South Africa that education is a potent tool for bridging the gap between job seekers and available economic opportunities.
But emerging trends suggest that this long-standing relationship might be undergoing a significant transformation, which, if left unaddressed, could reshape the country’s job market in unprecedented and sub-optimal ways.
Over the past few decades, a consistent pattern has held true in South Africa: people with higher levels of education have been more likely to secure gainful employment. But recent years have seen a significant shift. In 2000, 6% of the total labour force with advanced education in South Africa was unemployed — 33% for basic education and 31% for intermediate education. By 2022, advanced qualification unemployment surged to 15%, while basic and intermediate education unemployment climbed to 34% and 32%, respectively. Put simply, unemployment among South Africans with advanced qualifications is rapidly rising, leading to an eroding unemployment gap between this category and other categories.
The clear gap in unemployment rates between South Africans with basic and intermediate education levels also became less distinct in 2020 and 2021. An unexpected convergence emerged when both groups saw their unemployment rates rise from about 28% in about 2020 to roughly 33% in 2021.
This overall unemployment trend can be attributed to multiple factors: the 2008 financial crisis, pervasive state capture from 2009 onwards, and South Africa’s missed opportunities during global commodity booms because of flawed policies and weak macroeconomic conditions. The effect of Covid-19 also exacerbated unemployment in 2020, largely a result of ineffective policy responses.
For advanced qualifications, the issue predominantly arises from the proliferation of degrees that generate skills misaligned with the needs of a changing labour market and a struggling economy.
This shift in the landscape has far-reaching implications and forces us to confront the question: will advanced qualifications continue to wield the same influence they once did in shaping employment prospects in the foreseeable future?
If the pattern illustrated in the graph persists, a scenario in which there is minimal divergence in unemployment rates between those with tertiary education and other categories, South Africa could see a fundamental shift in the role of education in shaping labour market outcomes.
The disengagement of highly educated South Africans also has the potential to retard the nation’s long-term economic advancement, a critical concern given the demonstrated significance of education in South Africa’s economic growth. This also triggers a brain drain as skilled individuals seek opportunities elsewhere, leading to wealth outflows. Additionally, there is minimal foreign talent inflow because of the home affairs department’s capacity and administrative problems, along with insufficient incentives to attract scarce skills.
Closing the gap between investments in education (such as academic loans and bursaries) and economic growth is vital. Cultivating opportunities that leverage these investments empowers individuals to contribute to economic growth, creates a thriving labour force and increases government revenue through taxation.
Statistics for the first quarter of 2023 further highlight the urgency of the situation. With an unemployment rate of 32.9%, the country stands among the nations with the highest levels of unemployment, according to Stats SA.
What must be done
A fundamental solution lies in crafting a conducive investment environment. The formulation of investor-friendly policies, streamlined regulations, and efficient bureaucratic processes to attract both foreign direct investments and encourage the expansion of existing ventures is essential. This strategy can infuse the economy with fresh capital, foster innovation and create diverse job opportunities across sectors, ensuring that education and skills find immediate application in the country’s economic growth.
The first step toward an investment-centric approach involves tackling recurring electricity cuts, euphemistically known as “load-shedding,” which adversely affects the country’s economy. Beyond hampering business operations, this phenomenon casts a discouraging pall over prospective investors. Swift and effective action to mitigate load-shedding is imperative, because it would represent a key stride toward building investor confidence and ensuring the conducive environment necessary for sustainable economic growth.
Encouraging collaboration between educational institutions and industries can bridge the gap between theoretical knowledge and practical skills, enhancing the employability of graduates. This alliance between academia and the needs of the job market can ensure that students are equipped with relevant skills and experiences, making their transition into the workforce smoother and more effective.
Providing incentives for research and development (R&D) can also shape the country’s economic future. By encouraging innovation and the emergence of new industries, South Africa can generate new employment opportunities that cater to the changing demands of a globalised economy and its labour market. This approach to R&D can position the nation as a hub for cutting-edge technologies and solutions, attracting investments and creating high-quality jobs in thriving fields.
Strengthening the support system for small and medium-sized enterprises (SMEs) can equally have a positive effect on job creation and economic resilience. Empowering entrepreneurs and SMEs can stimulate local economies, diversify the labour market, and contribute to overall economic stability. These businesses are known for their ability to adapt quickly to changing market demands, making them instrumental in providing a diverse range of employment opportunities.
Last, implementing training programmes tailored to address specific job market demands can be a game-changer, particularly given the increasing need for digital and technological skills. By equipping individuals with in-demand skills, South Africa can address the needs of industries undergoing rapid transformation. These programmes can bridge the gap between education and employment, offering individuals access to meaningful careers while simultaneously fulfilling the demands of the labour market.
The need for labour-absorbing investment and growth in South Africa cannot be overemphasised. By embracing this diverse approach, South Africa can meet the demands of an evolving job market while harnessing education and skills to drive its economic growth.
Nnaemeka Ohamadike is a data analyst in the Governance Insights and Analytics programme at Good Governance Africa.
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