Free money? South Africa floats universal basic income for all

South Africa is facing the most dramatic political shift since the end of apartheid after the African National Congress lost its majority in the general election of 29 May. Weeks of difficult negotiations between the ANC and its rivals on how best to form a governing coalition are expected.

One commitment that unites most parties – including the incumbent ANC and its biggest rival, the Democratic Alliance – is to maintain or increase income support for adults, which includes monthly Covid payments to the poorest households.

Related: ‘It helps with my stress’: US basic income project shows signs of success

But the ANC has gone one step further. A week before the election, it released a statement deepening its commitment to finalising a policy to transform the state’s Covid grant into a universal basic income (UBI) within two years of forming a new administration. If implemented, this would make South Africa the first country in the world to work towards a policy of paying all people between the ages of 18 and 59 a regular grant, with no condition to be seeking work.

At the moment, South Africa’s Social Relief of Distress grant (SRD) is paid to people who have less money entering their account each month than the individual food poverty line – or the minimum needed to afford food with enough calories to survive.

The ANC has committed to expanding eligibility to all adults by progressively increasing the means-test threshold. At present, the means-testing is based on the 2021 poverty line, which has increased, but the means-test threshold has not, meaning some people in food poverty do not qualify.

The idea of a basic income for all people regardless of age, class or employability has long been discussed as a way to tackle inequality. Elon Musk touted it as the solution to robots taking human jobs. Martin Luther King wrote about it as the answer to widespread poverty. A policy that captured the public imagination during the pandemic, when governments around the world paid or subsidised wages, could finally become reality.

“When you put money into the hands of the poorest households it lifts the whole economy,” says Kelle Howson, a senior researcher from the Johannesburg-based Institute for Economic Justice (IEJ), which is part of a coalition of civil society organisations calling for a basic income grant in South Africa.

Ninety-three per cent of recipients spend SRD payments on food. Meanwhile, research from a large UBI study in Kenya by GiveDirectly found that recipients used the money to save up for large purchases, improve their diet and start their own businesses.

Despite these benefits, the idea of a basic income was largely the stuff of political debate and fantasy until Covid. During the pandemic, many governments issued emergency grants and income support to replace employment in a way that would previously have been politically impossible.

Spain implemented an anti-poverty payment of €1,015 (£900) a month to 850,000 households, while the Coronavirus Aid, Relief and Economic Security Act in the US paid $1,200 to all adults earning less than $99,000 a year. In the UK, furlough and the self-employment support scheme distributed £100bn to those out of work and the self-employed, as well as raising universal credit payments by £20 between March 2020 and October 2021.

Afterwards, it was harder for governments to argue that a basic income was impossible to administer. But politics turned a sharp corner. Instead of expanding on these new social policies, many countries implemented austerity measures to address record government borrowing during the pandemic.

In the UK, the National Institute of Economic and Social Research found that maintaining the uplift in universal credit payments, which ended in 2021, would have limited the number of households in extreme poverty – defined as lacking essentials like food, shelter, heating, clothes and toiletries – to 1.5 million in 2022. Instead, destitution rocketed to 2 million.

South Africa was an exception: it maintained its Covid grants, despite broader austerity policies pushed through by the ANC. When the grants were stopped briefly, in April 2021, a summer of rioting followed, spurred by the imprisonment of Jacob Zuma. By August, the government had reinstated the payments.

But the system is far from perfect. The payments are just R370, the equivalent of about £16, or half the income needed to meet the extreme or “food” poverty line, and millions of people do not get the grant each month. The IEJ says the process is designed to be exclusionary. It is given digitally, in a country where not everyone has a computer and internet access, and uses automated means-testing systems that often exclude eligible people, the IEJ says.

Elizabeth Raiters is one of the many unemployed South Africans who regularly get declined. She works on the #PayTheGrants campaign, which joined the IEJ in filing court papers against the South African government in July 2023, challenging regulations excluding millions of people living in poverty from monthly payments.

The IEJ and #PayTheGrants are part of a coalition of civil society organisations demanding a basic income for workers on the minimum wage, since wages are so low. “People make out like it’s sunshine and rainbows in South Africa,” said Raiters. “But when you’re on the ground, working and assisting people, beneficiaries crying every day that their kids are hungry and they can’t access the grant – it’s really tough.”

Other trials of basic income payments have had positive results. In 2022, the Welsh government gave young people leaving care monthly payments of £1,600 for 2 years. Final results from the evaluation are not expected until 2027, to track the longer-term impact on the lives of recipients, but Jane Hutt, the minister for social justice, said in October that she had heard “fantastic feedback”.

In May, the Irish government published findings from a basic income scheme providing €550 a month for 2,000 artists. After the first year, participants said the payments had allowed them to recover from illness, turn down small jobs for more ambitious projects, spend more time with friends, pay for therapy and even feel more at home in Ireland. “I feel like I am home now, and welcome, and have the ability to make a difference with my practice,” one said.

Howson says their case for basic income hinges around the distribution of wealth in South Africa, where the top 0.1% (35,000 individuals) own almost a third of aggregate personal wealth, according to the UN. The IEJ has looked at a range of financing options to fund a basic income, including the introduction of a social security tax, a wealth tax or an increase in VAT revenue that results from additional consumption spending as a result of the grant.

“We know the resources do exist in South Africa to sustainably finance a grant in a way that increases economic growth,” Howson says. “It’s not an admission of defeat in the scale of poverty that other strategies haven’t worked. It’s a new developmental paradigm.”