16 Apr Covid-19 and the case for a citizens’ basic income grant in South Africa
by Vishwas Satgar
In the political chorus of South Africa’s rainbow nation we have often heard the refrain ‘we did not know apartheid was so bad’ or ‘we did not know apartheid had such an impact on black people’. This kind of brazen denialism is a prototype of contemporary ‘fake news’. But more poignantly, this is a disgusting defence of racialised privilege accrued through super-exploitation.
With Covid-19 and the lockdown there is no room for denial of how large parts of South African society suffer. High-income earners have gone online, fridges are stocked and uncertainty is mitigated by healthy bank balances. Low-income households are writhing with anxiety at job losses, are pushed into hunger by the suspension of income-generation opportunities, even in the informal economy, and informal settlements do not have stocked fridges.
We are a society marked by a racialised and gendered social class divide; a cruel society, even 26 years into post-apartheid democracy.
However, the irony of our situation is that we have had black rule in post-apartheid South Africa. The African National Congress (ANC) has led the post-apartheid order and it has nothing short of a strange commitment to black lives.
On the eve of lockdown, the Minister of Education, Angie Motshekga, on national television, trumpeted that “our people have coping mechanisms” thus implying all will be well. This “we know best” attitude gave South Africa a glimpse of the disconnect between the ruling party and lived realities. The reams of economic data on racialised and gendered inequality in South Africa speaks for itself as a counter to ruling party arrogance.
A few years ago we were told ANC cadres did not struggle to be poor. Due to their mythic role in a complex struggle, involving sacrifices by people from all walks of life, they deserved a post-apartheid dividend; we owed our liberators. And of course, they cashed in on this with rampant looting. It is time the mangled, hypocritical and tortured soul of the ANC-led alliance, which is there for all to see, gets a speedy send-off.
However, before then and just maybe somewhere in the Kafkaesque world of the ANC, driven by jostling self-serving factions, there is a residue of genuine concern for black lives and South Africa in general. Just maybe, in the decisive leadership being provided on Covid-19 and ostensibly out of concern for us all, it is capable of understanding that now is the time to give concrete expression to the living hope of the many. This of course does not mean authoritarian populism Malema-style, but rather there still might be an intellectual capacity to grasp the opportunities for strategic transformative change.
Covid-19 and the space for transformative change
While South Africa has been busy coming to terms with the shock of lockdown, two important developments have taken place.
First, the shift towards systemic state intervention to enhance the societal response to Covid-19. Despite the silo approach to governance and competition between Cabinet ministers to shine, and with strategy being about what your ministry can bring to the challenge, some important shifts in state practice are happening in the midst of incoherence and uneven capability.
Announcements by state armaments parastatals, Denel and Armscor, that they would be repurposing production for ventilators, sanitisers and even converting military vehicles into ambulances is a welcome shift from arms production in a time of crisis.
Such a breakthrough confirms the potential of repositioning these enterprises to also play a part in producing renewable energy technologies and public transport systems for the just transition to avert a 2ºC increase in planetary temperature and bring down South Africa’s carbon emissions.
In the midst of the global pandemic there is space to break with a one-size-fits-all approach in economic thinking so we can innovate, be bold and heterodox in how we deal with economic and climate challenges.
Minister of Human Settlements, Water and Sanitation, Lindiwe Sisulu, announced she would be commandeering all water resources in the country under the control of water boards, water associations and other mechanisms. Through ministerial control she effectively ensured water as a public good was now nationalised in terms of government control.
Minister Sisulu was also at pains to clarify that water used by the government would be compensated. In a water-constrained country, in which 62% of water resources are controlled by commercial farmers, this is a crucial move to ensure the water needs of citizens are met during Covid 19. Her rollout of 41,000 water tanks (only 17,631 had been delivered by 9 April) and commitment to use schools as sources of clean water for communities is a crucial crisis management intervention, but has to be tracked and monitored by communities. Many of these communities have been denied water due to mismanagement, corruption and failed ANC government leadership, including during South Africa’s drought.
Similar potential exists with integrating public and private health into a functional, affordable and citizen-driven system. But the leadership provided by the minister of health will determine the fate of our post-Covid-19 health care system.
Reframing the role of the state
Nonetheless, all these systemic shifts, actual or potential, are crucial to reframe the role of the state to allocate structural capacities and resources to meet societal needs. More can be done in post-Covid-19 conditions, given the struggles from below, to also ensure these changes bring workers and society into these processes. In other words, we shift from state provisioning to democratic provisioning including democratic public utilities.
But will these shifts endure as we confront the dramatic impacts of Covid-19, economic recession and climate crisis? Or will South Africa merely revert to a financialised market-centred script that has benefited a few corporations and a few wealthy individuals? The battle lines are being drawn right now as we grapple with our post-Covid-19 future. Despite the outcome, what is clear is that the arguments for climate emergency measures have just been strengthened in the midst of the pandemic.
Finance capital is not standing back and is trying to shape a post-Covid 19 world. This relates to the second important development in this conjuncture.
On Friday 27 March, Moody’s followed two other credit rating agencies and downgraded South Africa’s sovereign debt rating to junk. This means the cost of borrowing for South Africa is on its way up and will increase financial stress. These credit-rating agencies are part of a globalised disciplinary complex protecting the interests of globalised finance and the Dollar-Wall Street regime. They do not care what the needs of countries are except to ensure return on capital. They are also dubious and certainly not the bastions of creditworthiness integrity, given they were giving triple-A ratings to Wall Street finance houses before the crash of 2008-2009.
South Africa has been in the grip of global finance for too long and has had to forego its democratic commitments to its people, to ensure the “sovereign interests” of global finance come first. Moody’s and credit rating agency downgrades have laid the basis for austerity macro-economic policy; cutbacks in state social spending and a further squeeze on the precariat coming out of Covid 19.
This will be disastrous. We have to break the grip of global finance on the South African economy now.
In the midst of the global pandemic there is space to break with a one-size-fits-all approach in economic thinking so we can innovate, be bold and heterodox in how we deal with economic and climate challenges. Liberal globalised capitalism and its finance-centred economic orthodoxy has been suspended in this crisis. Credit rating agencies, creditors and multi-lateral institutions and neoliberals in the state will want to bring it back from the dead after the pandemic. This is not going to be easy given the state of the world economy and the challenges facing the three main economic centres that drive global capitalism.
China, US and the Germany-led European Union
China is not going to lead the bounce-back of the global economy any time soon. It went into the Covid-19 crisis with high levels of debt in its financial system, property bubbles, declining trade with the US and even if it uses its surplus ($3-trillion) to launch an expansionary stimulus there is no external demand for Chinese manufacturing, at least for the next few months and possibly for the duration of the pandemic.
China will have to rethink its role as a globalised economy in this context. Also, dependencies built on China for essential medical goods, inputs and other critical manufactured goods are certainly going to be rethought by importing countries, given the prospects of more pandemics and climate shocks. It would be naïve to think a China-centred low-wage manufacturing world is returning after Covid-19.
The US is currently in turmoil and will be the worst impacted Western country by current trends. Trump will realise his wish of making the US great in everything, including Covid-19. On 7 April, the US had more infections (367,650 ) and already had more deaths (10,943 ) than 9/11 (about 3,000 at the Twin Towers).
The US spent trillions on the war on terror (according to Brown University’s Costs of War project almost $6.4-trillion), one of the longest wars in the modern world. Yet Trump and the ruling class are playing partisan games with the Covid-19 response and are merely willing to make modest concessions.
The trillion-dollar stimulus plan, while providing for $1,000 cash transfers to adults and $500 to children is an immediate relief measure, merely about $500 billion. A lot more will go to small business and mainly big business like airlines and shipping for bailouts.
Like 2007-2009, business is going to win again in terms of state support, affirming a neoliberal truism: the people are not too big to fail.
However, the US is still in the upswing of Covid-19 infections, unemployment is skyrocketing, a global recession has kicked in and climate shocks like wildfires in California are coming soon in the summer.
The US has already incurred massive costs due to climate crisis-induced tornadoes (including over Easter weekend in Louisiana) and hurricanes (Harvey cost $125-billion). A few more of these extreme weather events will certainly induce fiscal limits and also challenge the capacities of the US state, in the midst of dealing with Covid-19 or its aftermath.
Quantitative easing, the favourite monetary policy tool of the US state, from printing money to the Federal Reserve purchasing financial securities, is going to face limits with synchronised systemic crisis tendencies hitting at once. Moreover, Trump’s divisive politics also makes the US dollar and US government bonds risky as a safe haven. China might also, given worsening domestic economic constraints, cash in on US bonds to re-adjust its own economy.
Germany, the strongest economy in Europe, is also facing serious challenges. Already in 2019, it was experiencing a slump in economic growth. The steep drop in car exports has placed major stress on one of its leading manufacturing sectors. Massive layoffs of metal workers were instituted and have continued in the context of Covid-19. Retail and commercial industries are also facing massive contractions, bankruptcies and retrenchments.
The stimulus package of the Merkel government is inadequate and still heavily credit-driven, providing a debt-based lifeline to stressed enterprises. The European Union is facing closed borders and an ineffectual European Commission in terms of co-ordinated and effective fiscal policy. Unconventional economic tools, measures and responses are coming to the fore.
South Africa’s Covid-19 state managers have thrown existing fiscal resources, within key institutions, such as the IDC, Department of Agriculture and small business relief funds towards failing businesses. Tax relief and unemployment benefits ( a temporary employee relief scheme) have also kicked in with the UIF making R30-billion available. Just before lockdown the Climate Justice Charter process called for stronger mitigation measures such as a substantive basic income grant, together with the trade union federation Saftu. This has also been echoed by the C-19 People’s Coalition.
Many economists and academics have questioned the lack of stronger mitigation measures and have also called for a citizens basic income grant (BIG) to be considered in the context of lockdown.
What will South Africa be like if a substantive BIG is implemented now?
If South Africa implements a substantive basic income grant during the pandemic, a cash transfer to all citizens of R4,500 per person, per month, and subject to progressive taxation if your income exceeds R20,000 per month (currently South Africa has about 7.6 million taxpayers), these are its implications.
- Providing a means to address hunger – about 14 million people went to bed hungry in South Africa in 2019 and we can assume this increased with the suspension of livelihoods when lockdown kicked in. In rural areas, 80% of 700,000 farm workers (plus their families — about 2.5 million people) experience hunger, given the exploitative wages earned (the minimum wage is R18.68 per hour). About nine million children receive a nutritious meal during school, but under lockdown this has been compromised in various parts of the country.
- Provide a cushion for unemployment – before South Africa’s lockdown, and based on the narrow definition of unemployment, 5.9 million were unemployed. It is estimated that between 900,000 and three million more workers will lose their jobs due to the lockdown. According to the International Labour Organisation, due to digital technologies, global value chains and other structural factors, unemployment is very likely to go up on a global scale in the foreseeable future. For South Africa, the much-vaunted Fourth Industrial Revolution is certainly a strategy to displace labour.
- Handwashing and sanitation will be enabled – about 1.4 million people living in informal settlements do not have access to water in their homes or yards. Almost three million (of 19 million) in rural areas lack access to a reliable supply of water.
- End precarity — 2.6 million in the informal sector (and about 60,000-90,000 waste reclaimers, who save municipalities about R750-million a year in landfill costs) and an additional one million domestic workers, are all precarious without benefits including unemployment benefits.
- Increase the redistributive bargaining power of labour – by ending dependence on low-wage work. The fragmentation of labour unions has weakened their institutional power to ensure higher wages and non-wage benefits. This was reflected in the minimum wage secured of (R20.76 per hour) R3,653. Other categories without powerful union densities or unions earn less, such as domestic workers (R15.57 per hour) and public works programmes (R11.42 per hour). A higher wage floor based on a BIG of R4,500 and with workers having pooled household income, gives labour greater bargaining power.
- Increase household income and fiscal stimulus — South Africa has 18 million very poor households (about nine million in rural areas) that have five members with a total monthly income of R2,600. Many of these households are highly indebted. Social grants mitigate this situation for 17.6 million beneficiaries but not all these households have grant recipients. Moreover, the child-support grant (R445 per month covers 12.5 million children), old-age grant (R1,860, or older than 75, R1,870, covers 3.5 million people) and the disability grant (R1,860 covers just more than one million people) are just not keeping pace with increasing living costs. A family of four needs at least R2,500 per month just to cover food staples. Competing needs for transport and now sanitisers and soaps place immense pressure on such limited resources. More income in households will also have impacts on aggregate demand and kick-start the economy.
- Fiscal consolidation – currently the state spends R162.9-billion (2018/2019) on social grants. This is meant to go up to R202.9-billion in 2021/22. The Unemployment Insurance Fund, even after allocating its R30-billion for Covid-19, has R160-billion in investments. A BIG can also be funded through a wealth tax based on income, inheritance and land, as well as a progressive carbon tax on wealthy consumers and carbon-intensive industries. All of these resources can be consolidated together with all grants into one consolidated BIG budget, effectively laying the basis for a “post-work” society.
- Institutional rollout — to all South Africans through consolidating biometric information contained in Sassa, SARS, the Home Affairs department (based on identity document data) and from banks. In this regard, either Sassa and/or the Post Office could be crucial mechanisms to achieve the disbursement, including digitally.
Time has come to build an emancipatory future
South Africa cannot continue a lockdown and confront this pandemic without stronger mitigation measures like a BIG. In the midst of Covid-19, Spain is the first country to commit to rolling out a BIG as a response to the crisis and this will be a democratic systemic reform that will persist beyond the pandemic.
The BIG has a history that goes back to the Enlightenment. In the 2oth century, many experiments and forms of BIG interventions have been tried since the 1970s in the US, Canada, Kenya, Namibia and Finland. Each of these trials were based on specific parameters: target groups, social objectives and levels of income.
All the research shows positive outcomes when assessing the social efficacy for the BIG. This has ranged from more investments in human development, less stress, lower health costs, greater labour market leverage for workers and less food vulnerability. In the context of the climate crisis and deep just transition the BIG is an absolutely necessary democratic system reform to enable the ecological restructuring of our society without harming those least responsible for the problem.
If South Africa does not embrace the BIG in the context of Covid-19, together with other public goods, this will be a serious historical mistake and a missed opportunity for a more emancipated future.
This article was first published on the Daily Maverick website on 16 April 2020.