South Africa is undergoing its most significant political transition since the end of apartheid. On 29 May 2024, the African National Congress (ANC) lost its parliamentary majority, marking a pivotal moment in the nation’s history. This shift has set the stage for coalition negotiations and a reevaluation of policies, including the possibility of introducing a Universal Basic Income (UBI).
The ANC’s commitment to turning the Social Relief of Distress (SRD)into a UBI signals a potential transformation in how South Africa addresses poverty and economic inequality. If implemented, this would make South Africa the first country to adopt UBI as a nationwide policy.
The Current Social Relief System
The SRD grant, introduced during the COVID-19 pandemic, provides R370 monthly to unemployed adults whose income falls below the food poverty line. While this grant has been a lifeline for millions, it falls short in addressing the broader needs of South Africa’s vulnerable populations.
Challenges with the SRD Grant
- Insufficient Amounts: Current payments cover only half of what is needed to meet the food poverty line.
- Exclusion of Eligible Applicants: Issues with the digital application process and automated means-testing prevent many from accessing the grant.
- Administrative Gaps: A lack of reliable internet access for applicants and inefficiencies in the system hinder equitable distribution.
Despite these challenges, the grant has continued post-pandemic due to its critical role in alleviating poverty.
The Push for Universal Basic Income (UBI)
The ANC’s proposal to convert the COVID-19 relief grant into a Universal Basic Income (UBI) represents a bold step toward addressing inequality. UBI would provide regular financial support to all individuals aged 18–59, regardless of their employment status.
Potential Benefits of UBI
- Economic Growth: Research shows direct financial support increases spending in low-income households, stimulating economic activity.
- Poverty Alleviation: Regular payments could help address food insecurity and provide stability for vulnerable populations.
- Global Inspiration: UBI trials worldwide, such as in Kenya, have demonstrated improvements in recipients’ quality of life, including better diets, increased savings, and small business creation.
Global Lessons on Basic Income
1. Kenya
The GiveDirectly UBI trial showed recipients used funds for large purchases, improved their diets, and started businesses, underscoring the transformative potential of direct financial aid.
2. Spain
During the pandemic, Spain provided €1,015 monthly to 850,000 households as part of an anti-poverty scheme, demonstrating the impact of targeted financial support.
3. United States
The CARES Act offered $1,200 to adults earning less than $99,000 annually, boosting household stability during the pandemic.
4. United Kingdom
The UK distributed £100 billion in furlough and self-employment support but later faced criticism for ending increased universal credit payments, which led to a rise in extreme poverty.
Economic Arguments for UBI
Kelle Howson, a senior researcher at the Institute for Economic Justice (IEJ), emphasizes that 93% of SRD grant recipients use the funds primarily for food. This spending drives economic activity and supports local businesses.
However, experts argue that the SRD’s current structure limits its impact. Expanding it into a UBI could significantly enhance its effectiveness by providing more substantial and consistent support.
Challenges to Implementation
Funding UBI
- Introducing UBI would require substantial government resources, potentially leading to tax reforms or reallocating budget priorities.
- Critics question the feasibility of sustaining such a program long-term without compromising economic stability.
Administrative Improvements
- The IEJ and #PayTheGrants campaign highlight the need to overhaul the current digital application and verification systems to ensure equitable access.
- Without addressing existing systemic inefficiencies, expanding the program could perpetuate current gaps.
South Africa’s Unique Approach
Unlike many countries that scaled back social welfare post-pandemic, South Africa has maintained its COVID-19 relief grants. This decision reflects the government’s recognition of the grants’ critical role in preventing widespread unrest and addressing immediate needs.
South Africa’s political shift and the ANC’s proposed Universal Basic Income could redefine the nation’s approach to social welfare. While challenges remain, the potential benefits of UBI—ranging from poverty alleviation to economic growth—make it a compelling policy direction.
As coalition negotiations unfold, the fate of UBI and the expansion of social relief programs will depend on political consensus and the government’s ability to navigate fiscal and administrative hurdles.
If successful, South Africa could set a global precedent, demonstrating how targeted financial support can empower vulnerable populations and drive inclusive economic recovery.