How A UBI Can Save South Africa In The COVID-19 Era

South Africa is going through perhaps its most existentially threatening moment ever since the country was almost on the brink of civil war in 1993

How A UBI Can Save South Africa In The COVID-19 Era[Image: The Automation Engineer]

Balancing the economy and public health during the pandemic has been particularly challenging and, with lockdowns looking like they will not answer our problems, I believe that the answer is to implement a Universal Basic Income (UBI) to get us through this uniquely challenging COVID-19 crisis in South Africa


The country is going through perhaps its most existentially threatening moment ever since the country was on the brink of civil war in 1993. So, bearing in mind that we’re at a genuine make-or-break moment for our country (similar to the one when Chris Hani was assassinated), I want to implore every reader here to read this with an open mind. Channel your inner Madiba and remember that, no matter our differences in circumstance, opinion, race or gender, we’re all South Africans and we can no longer rely on the leaders we elect to do anything meaningful. So we have to come up with solutions and apply public pressure to survive. Literally.

Nobody has all the answers, and that includes myself, but there are creative ways to look at this, and I’d like to use you as a soundboard for  what I consider to be the “silver-bullet” – a universal basic income.

So let me be clear at this point, I’m not a policy-maker or any kind of specialist. I would consider myself more of a generalist with an unhealthy interest in politics that’s able to read fairly basic studies. And let this serve as a disclaimer, so that I can be honest with my readers: the implementation of a UBI in the context of South Africa and with our challenges during the COVID-19 pandemic requires thorough, thorough planning. Obviously, there are a number of questions that makes a UBI seem like an absolutely ridiculous policy. My intention is merely to dispel various myths and elaborate on how it would be perhaps the best thing that ever happened to our country – for everyone.

The context: A country in flames

If you had posed a hypothetical question to me, or probably any South African this time last year whether we felt like the ANC-led government would be able to withstand a global pandemic, you’d find very few people who would even justify that kind of question with an answer. We never stood a chance. Let’s be realistic, the ANC has done little more than run our country into the ground over the last quarter century and they have to answer for that. I will give the President credit for one thing: his name isn’t Jacob Zuma. There are nuanced ways to analyse his performance as our leader that can be discussed another day, but it would lead us away from the point that South Africa was on its knees before COVID-19, with unemployment figures breaking the 30% threshold in the first quarter of 2020. And, needless to say, with unemployment reaching its highest ever level at 30.8% in the third quarter, things are only getting worse. When all is said and done, forecasts are indicating that our annual GDP will have shrunk by 51% year-on-year.

As for the outbreak itself, we are now the 17th worst affected country in the world in terms of infections, with 1,011,871 cumulative cases recorded at the time of writing, and 27,071 deaths (16th). We are also far and away the hardest hit country on the African continent. And how has the government chosen to tackle the pandemic? Tiered Lockdowns. The regulations have been questionable on many occasions to say the least, but ultimately our country has been divided into two groups: Pro-lockdown and anti-lockdown.

The arguments, in my interpretation are this:

Pro-lockdowners believe that it is necessary to force people to stay home in order to contain the spread of the virus and save lives. They point to places like New Zealand, central Europe, Vietnam and China as examples of why lockdowns are the best solution to curtailing the spread of the virus and mitigating the effects of the pandemic.

Anti-lockdowners, on the other hand, believe forcing people to stay home is an infringement on people’s civil liberties such as freedom of movement and that preventing people from going to work (particularly low-skilled workers who have to be physically present to do their jobs and people who don’t have access to the Internet) will devastate the economy beyond repair. They point to the low-mortality rate of COVID-19 and argue that the financial impact of closing the economy will cost more lives than the virus would if we didn’t lock down. Some of them are anti-maskers, as well, and believe forcing them to wear masks is an infringement on their freedom, but they are in the minority (I hope). And in South Africa’s context of socioeconomic turmoil and the majority of our country’s appalling living conditions, the economic effects hit infinitely harder.

There are nuances to these arguments and people’s opinions are shifting all the time as the pandemic progresses, but these are broad strokes to describe the opposing camps. And this is where the UBI comes in.

What is a Universal Basic Income?

Investopedia defines Universal basic income (UBI) as “a government program in which every adult citizen receives a set amount of money on a regular basis. The goals of a basic income system are to alleviate poverty and replace other need-based social programs that potentially require greater bureaucratic involvement.”

The idea of a UBI dates back centuries and was supported by some of the most celebrated political figures of all time, such as America’s founding father, Thomas Paine, as well as Martin Luther King Jr.

Even though I had heard about and have contemplated the concept of a UBI for pretty much my entire adult life, I really started giving a lot of attention to the idea at the end of 2018 when I started following Andrew Yang‘s presidential campaign in the Democratic Primaries for this year’s US Presidential elections. I highly recommend visiting his campaign website and the website for his continuing endeavours to move humanity forward. Yang’s campaign was launched as a response to the rise of automation in the United States, but he is now advocating for direct cash payments as COVID-19 relief (which I only just found out while researching this article) “If We Ask You to Stay Home, We Should Pay You So You Can” Yang says. Now bear in mind, Andrew Yang is a serial entrepreneur, very successful businessman and is very much a believer in capitalism. If you want to hear more about Yang’s presidential platform (which you absolutely should), his two hour interview on the Joe Rogan Experience is amazing to watch.

The problem, of course, is that no matter how compelling Yang’s argument may be, we don’t live in the USA. And even Yang’s platform was criticised because his UBI plan would have taken up half of the federal budget. And, realistically, the junk-status economy makes a UBI in South Africa impossible, especially in the COVID-19 era. I hear this. It’s the elephant in the room.

How a UBI can pull South Africa through COVID-19

UBI South Africa COVID-19

When it comes to the lockdown argument, we find ourselves in a catch-22 situation, where either lives or livelihoods will be lost. And in an incredibly unequal society like South Africa, where the vast majority of us barely scrape through the best of months under the worst of conditions.

If you pay people to stay home, they can – I’m not necessarily saying that they will, but it’s at least doable and boils down to our propensity to comply with the regulations. Selfish people will always exist in this world and you cannot control human nature. It does, however, make it possible to act in the interest of saving lives, which I truly believe most, if not all South Africans are in agreement about. We often like to think of each other as the proverbial evil boogeyman, but I prefer to place faith in the honesty of other people’s convictions – although, I’m certainly guilty of often falling into the “evil boogeyman” trap.

However, people criticise UBI for what seem like very obvious, self-evident reasons, based on the grounds of whether a UBI is unsustainable. All the evidence points to the contrary.

What about hyperinflation?

Hyperinflation is a myth that has been spread around the Internet by people who don’t have a fundamental grasp on economics to any meaningful extent. Some of them even claim it will ‘obviously’ cause runaway hyperinflation and the collapse of the economy. They argue that implementing a UBI would cause hyperinflation in two ways:

  1. Implementing a UBI program involves everyone being given money. All other things being equal, that means we’d have to increase the money supply, right? And having more money around will cause inflation, won’t it?
  2. This is the idea that inflation can be caused by an excessively high level of demand in the economy in general: demand-pull inflation.

The first misconception is grounded in the idea that a UBI would require an increase in the money supply. It involves giving the population ‘new’ or ‘extra’ money that they wouldn’t otherwise receive. 

This simply isn’t true. A UBI would fundamentally restructure the welfare system and tax structures. As is generally proposed in various UBI pilot programs the world over, most UBIs will replace various state welfare programs. So, instead of splitting money allocated for those programs, the money is used to fund the UBI and this reduces many administrative costs and inefficiencies in the system, with payments made directly to every adult citizen in the country. And instead of people queueing up to receive five or six different welfare payments, which requires them to produce various documentation (often fraudulent), the UBI eliminates those costs with a UBI being unconditional and requiring nothing more than a South African ID.

Beyond this, a UBI can also be used to replace tax allowances. Tax allowances allow people to earn a basic amount of income without paying income tax. But since Basic Income will give all citizens a basic amount to live on, these personal tax allowances won’t be necessary. In other words, the tax base of the South African population would broaden, which can be argued is the biggest problem in the country’s ability to collect adequate revenues to fund a UBI, and potentially even more policies. People will pay that tax money and then simply receive the money back as a UBI. Effectively, it’s the same money.

And the idea that inflation can be caused by an excessively high level of demand in the economy (demand-pull inflation) is similarly misguided. If firms can’t increase what they supply to meet increases in demand, this might lead to inflation. But there is no particular reason to believe that Basic Income will lead to the sorts of ‘excessive’ increases in demand that might cause such a problem. Rather, an increased demand will lead to firms being forced to increase supply, which would result in job creation and lower unemployment, further broadening the tax base. A UBI would be implemented instead of most other welfare payments and instead of personal tax allowances — not as well as — so people, on average won’t suddenly have lots of extra buying-power.

An increase in the money supply could cause inflation, but a UBI doesn’t necessarily require an increase in the money supply. Except for the influx of productivity in the economy brought about by the benefits of a UBI.

If you get a free income, why would you continue working?

UBI South Africa COVID-19

Because the monthly cost of supporting one person’s monthly needs in South Africa, according to Oxfam’s “Reward Work, Not Wealth” program’s report would be R6,460. That’s not a very impressive figure is it? You’d still be struggling… but you won’t be starving, so to speak. Nobody wants to live like that and human ambition stretches beyond that level of income. People will still work to supplement their incomes, but they won’t succumb to financial devastation if they lose their jobs, and they’d be more willing to take the risk of leaving their jobs and starting a business, which propagates wealth in the economy through job creation.

In countries that have run UBI pilot programs to varying degrees, including the United States, Switzerland, FinlandGermany, Canada, India, and even our neighbours, Namibia, there has been no empirical evidence showing a drop-off in the labour force participation rate.

The next frontier

Turn this thing around. COVID-19 has broken us. What have we got to lose at this point? Lean into the punches. The idea that we cannot afford a program like this or that it can destroy our economy. Any South African that’s lost their job at some point this year may not be able to get by, but could really use another R6,460*.

If we take the opportunity to run a UBI pilot program, nationally or on a smaller scale at first, while we’re locked down and our economy is in ashes – which would make so much more sense than spending billions on a vaccine that will only immunise 10% of the population and only lasts for a few months, or spending money on other failed relief packages – there certainly is an argument to be made that it can pull the most vulnerable of us away from the brink of starvation. It encourages people to stay home and keeps them afloat. But at the end of the day, this story isn’t even actually about COVID-19. It’s about the Fourth Industrial Revolution (4IR).

*Again, let me note that R6,460 is just Oxfam’s estimate. Creating a framework, calculating costs and drafting legislation are complicated processes. I don’t claim to have the answer, I just want to open a dialogue on the merits of a UBI.

4IR UBI South Africa COVID-19

4IR is coming… whether you like it or not.

Going back to the start of this article, remember that Andrew Yang ran a single-issue presidential campaign, which centred around what he called “the Freedom Dividend”? The Democratic Primaries took place and Yang had dropped out long before COVID-19 was a thing. He believed a UBI was necessary due to the rise of automation in the manufacturing and service industries. He placed particular emphasis on how truck-drivers all over America, a very substantial part of the population, are under threat due to the rise of self-driving trucks. And, as we progress through the Fourth Industrial Revolution, where we’ve already made staggering progress in Robotics Process Automation, Robo Calls, 3D-printing, 5G, and Artificial Intelligence  among other key technologies that will come to replace human labour in almost every industry, more and more jobs will start to disappear.

The common argument is that new jobs will replace the outdated jobs. But if you aren’t in IT or are planning on retiring sometime in the next ten years or so, your job is very much under threat. Everyone from accountants and lawyers to teachers and doctors will be replaced by emerging technologies and the wealthy elite will grow ever smaller, while the unemployed and impoverished will balloon to a point where we’ll lose control. We simply cannot compete with these machines on a physical or intellectual level. Everyone from Yang to tech mogul Elon Musk knows it’s happening and we really don’t have any solutions to this problem.

You may think that it will still take South Africa a while longer before the technology is as wide spread as it is in the United States. It’s a fair point. But look how seamlessly we’ve integrated cellphones, the Internet and social media into our lives. Do you really think there’s any way to stop this and keep human beings in the work force? There isn’t. And the only way we’re not all going to fall into or emerge the poverty trap that we so desperately fear and loathe is by implementing a UBI. The tech industry has been and will continue to grow at an astronomical rate. That includes the IT industry in South Africa. When our skills become irrelevant, should we just let everyone be poor?

Towards a more equitable future

By the end of this argument, I genuinely hope that you, my readers, have found my argument compelling enough to support a UBI in South Africa for COVID-19 relief and even beyond that. So, in these extraordinarily troubling times, I want to ask a favour of you all. Share this article. Share it everywhere and ask your friends to read and share. Let’s start a political conversation so that we can make a UBI happen. I have no question that it’s possible to pressure our government into making it happen. The conversation for a Universal Basic Income Grant (UBIG) has already begun, in fact, in parliament, as well as with the Studies in Poverty and Inequality Institute. It is, however, not being discussed in the media… anywhere really. So join me and get the conversation going by sharing this, using the #PaythePeople hashtag.

And from all of us at the Essential Millennial, may you all have a Happy New Year and hopefully 2021 will restore some sanity to the world!

KS


Further reading:

Oxfam’s ‘Reward Work, Not Wealth’ report: five salient points

Universal Basic Income in South Africa: Perspectives from Private Sector and Civil Society [Video]

Universal basic income and work

What Is Universal Basic Income (UBI)?

Division of Revenue Second Amendment Bill: SALGA Input & public hearings

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