Advisory council split over support for basic income grant

The president’s economic advisers are at loggerheads over the implementation of a permanent social grant for those who fall outside the welfare net.

Divisions on the Presidential Economic Advisory Council — a think-tank of leading local and international economists, academics and experts that advises the president on economic policy — are spilling out into the open after President Cyril Ramaphosa asked them to advise him on the feasibility of implementing a basic income grant (BIG), ahead of his state of the nation address.

A group that includes economist Thabi Leoka and academics professor Haroon Bhorat, professor Imraan Valodia and Dr Kenneth Creamer prepared a briefing note that advised against making the R350 relief of distress grant permanent, arguing that “SA does not have fiscal space to incur additional annual spending on a new social grant”.

However, the Sunday Times has seen a second briefing note, which expresses a contrary view and recommends a raft of cash and non-cash support to deal with extreme levels of poverty.

The dissenting note, believed to have been supported by, among others, professor Fiona Tregenna of the University of Johannesburg’s department of economics; professor Vusi Gumede, a former director of the Thabo Mbeki African Leadership institute; economist and broadcaster Ayabonga Cawe; and professor Mzukisi Qobo, a commentator and academic, supports permanent grants for those living in abject poverty.

“Every South African should have a minimum level of income that is adequate to meet basic sustenance needs. This is a floor of the socioeconomic norm the country should commit to and put in place measures to achieve, rather than toning it down, especially in times of economic distress,” the note reads.  

The drafters say various research studies have shown that the child support grant increases labour force participation rates of women, and that part of the old age pension grant is spent on education in poor households, leading to higher school enrolment for girls.

They further argue that SA cannot wait for changes in the productive structure of the economy to bear fruit in terms of growth and mass employment creation because this will take time, and the state is not control of decisions by the private sector to invest in the economy and create jobs.

“The depth of poverty in South Africa is such that we cannot feasibly grow our way out of poverty in any reasonable timeline, with the current patterns of income distribution,” it reads.

Even when the economy was growing at 5%, the briefing note continues, the economy did not create mass employment. According to the drafters, even if the economy were to create more jobs, these would not benefit people living in extreme poverty who are largely rural based and have low levels of education and skills.

“This points to the complementary roles of social protection and mass employment creation: even with this mass employment creation, social protection would still be needed to address extreme poverty in particular.”  

The drafters recommend a comprehensive social policy package of cash and non-cash components. Apart from monthly cash grants, they propose providing bus and minibus transport vouchers for job seekers; free printing at post offices, as well as clothing and connectivity costs to be covered by the state.

A member of the council, speaking on condition of anonymity, said the briefing note warning that further grants are unaffordable does not reflect the views of all members on the contentious issue of the introduction of a BIG.

“There’s a contestation of ideas and different persuasions about the direction we should take. BIG is a sensitive issue and there is a divergence of views which comes out sharply,” said the member.

“Because there was a deadline, the group who don’t support additional social grants put their note out quickly. When the other group realised that their views had not been taken into account, they grumbled.”   

Ramaphosa has both views on his desk as he prepares the state of the nation address. The ANC and its alliance partners have been pressuring the government to make the R350 grant permanent and to gradually increase it in the face of deepening poverty and unemployment exacerbated by the Covid pandemic.

In a statement on Saturday, the presidency said it noted that a report of the advisory council had been leaked to the media to “allow for selective quotation from the document, often out of context, to support various agendas”.

“Members of the council hold a range of diverse and nuanced views, which have been presented to the president in various reports and meetings. The president values the diversity of views and insights,” it said.

Economist Duma Gqubule described the briefing note in support of curtailing grants  as "neoliberal fearmongering".