Coalition for a Basic Income Grant

Submission to the Portfolio Committee on Social Development
On the Consolidated Report of the Committee of Inquiry into a
Comprehensive Social Security System for South Africa

4 June 2003


The Basic Income Grant Coalition is a national coalition of civil society organisations that have come together to call for the introduction of a national Basic Income Grant (BIG) to address the poverty crisis in South Africa. We welcome the Committee of Inquiry's robust endorsement of a BIG and applaud the detailed analysis of poverty and unemployment on which its recommendations are based. The Committee’s main findings are summarised in the conclusion to the report, reproduced in Appendix A. These reinforce our shared commitment to working with government to make the grant a reality so that all South Africans may live in dignity.

The members of the Coalition are:
Age-in-Action, AIDS Consortium, Alliance for Children's Entitlement to Social Security, Anglican Diocese of Johannesburg, Black Sash, Children's Institute, Church of the Province of South Africa, Community Law Centre (UWC), Congress of South African Trade Unions, Co-operative for Research and Education, Diakonia Council of Churches, Ecumenical Service for Socio-Economic Transformation, Foundation for Contemporary Research, Gender Advocacy Programme, Joining Hands Against Hunger, Joint Enrichment Programme, National Association of Democratic Lawyers Human Rights Research and Advocacy Project, Resources Aimed at Preventing Child Abuse and Neglect, Southern African Catholic Bishops' Conference, South African Council of Churches, South Africa New Economics Foundation, South African NGO Coalition, Treatment Action Campaign, Women on Farms Project, Young Christian Workers National Secretariat.

The members of the BIG Coalition have agreed on a platform for the introduction of a Basic Income Grant. The main thrust of the platform, which was launched in July 2001, is contained in Appendix B.

The BIG Coalition strongly supports the expeditious introduction of a Basic Income Grant, along the lines recommended by the Committee of Inquiry into a Comprehensive Social Security System for South Africa, as an essential and affordable mechanism to reduce poverty and increase social justice in South Africa. This submission examines the scope of the right to social security in terms of the South African Constitution and international law and assesses the duties incumbent on the state arising from that right. It then discusses the importance of the comprehensive social protection package proposed by the Committee, in which BIG forms the central pillar. Finally, it analyses a number of specific issues related to the implementation and financing of the BIG and responds to some of the objections and alternatives to the BIG that have been raised since the publication of the Committee’s report.


2.1 Relevant findings of the Committee of Inquiry

The following findings of the Committee are of particular relevance to the constitutional obligation to ensure universal access to social security:
Depending on the poverty line used, between 45 and 55% of South Africans (20 – 28 million people) are living in poverty;
Income distribution in South Africa is highly unequal;
Nearly one quarter (23.3%) of all children between the ages of one and six suffer stunting due to malnutrition;
High unemployment, including the massive net loss of formal sector jobs, and the growing shift towards so-called "atypical" work is exacerbating poverty;
The HIV/AIDS epidemic will deepen poverty and inequality;
The patchwork of social grants inherited from the apartheid era is unable to meet the challenge of stamping out extreme poverty, due in part to enormous gaps in coverage. Poor children over the age of nine and poor adults under the age of 60/65 have virtually no access to social grants. About 60% of the poor, or 11 million people, are not covered by the current social security system. As the Committee observed: "Half of the poor live in households that receive no social security benefits at all, and the rest remain poor in spite of the benefits they receive."
From a comprehensive social protection perspective, "the existing programme of social assistance grants is considerably high cost relative to its level of social effectiveness."

The Committee thus concludes that the current social security programmes "fail to satisfy the constitutional imperatives and thus make the state vulnerable to Constitutional Court challenges, and are clearly inadequate."

After reviewing extensive evidence, the Committee found that "one of the most effective means of reducing destitution and poverty is to provide some minimum support in the form of a social assistance grant." The major policy recommendation of the Committee is the introduction of a basic income grant. Its analysis indicates that such a grant "has the potential, more than any other possible social protection intervention, to reduce poverty and promote human development and sustainable livelihoods."

2.2 Constitutional and international law

Access to social assistance for those unable to support themselves and their dependants is a fundamental human right enshrined in the Bill of Rights of the Constitution. It is one of a number of socio-economic rights recognised by the Constitutional Court as critical to the transformation of our society:

There can be no doubt that human dignity, freedom and equality, the foundational values of our society, are denied to those who have no food, clothing or shelter. Affording socio-economic rights to all people therefore enables them to enjoy the other rights enshrined in Chapter 2 [the Bill of Rights]. The realisation of these rights is also key to the advancement of race and gender equality and the evolution of a society in which men and women are equally able to achieve their full potential.

Section 27(1) (c) of the Constitution entrenches "the right of everyone to have access to social security, including, if they are unable to support themselves and their dependants, appropriate social assistance." In terms of section 27(2) of the Constitution, "the state must take reasonable legislative and other measures, within its available resources, to achieve the progressive realisation" of this right and the other rights enshrined in s 27.

Furthermore, section 28(1) of the Constitution recognizes the particular rights of children under the age of 18. These include rights to "basic nutrition, shelter, basic health care services and social services." This imposes an additional burden on the state to prioritise the satisfaction of children’s social security needs.

Finally, in terms of section 7 (2) of the Constitution, the "state must respect, protect, promote and fulfil the rights in the Bill of Rights."

South Africa is also obliged by international law to give effect to the right to social security in terms of the Convention on the Rights of the Child, the Convention on the Elimination of All Forms of Discrimination against Women and the International Covenant on Economic, Social and Cultural Rights. The latter Covenant is the leading international human rights treaty protecting socio-economic rights. The right to social security is protected in articles 9 and article 11 of the Covenant, which gives everyone the right to an adequate standard of living. Although SA has not yet ratified this treaty, it has signalled its intention to do so. The Covenant has already become an important source of guidance to the interpretation of our constitutional provisions on socio-economic rights (as in the Grootboom case, discussed below).

As the Constitution is the supreme law of the land, all law, policies and programmes that affect people’s access to social security must be measured against its requirements. The Report of the Committee of Inquiry into a Comprehensive System of Social Security recognises this imperative by devoting a separate chapter to the constitutional framework for social security in South Africa.

2.3 Interpreting and applying the constitutional right of access to social security

The Grootboom case is currently the leading precedent guiding the interpretation of the Constitution’s socio-economic rights provisions. In assessing whether the State has fulfilled its positive obligations to realise socio-economic rights, the Court will evaluate the ‘reasonableness’ of the measures adopted by the state to give effect to the rights. The following principles are key elements of the reasonableness test:
The relevant programme must be a co-ordinated, comprehensive programme, which is capable of facilitating the realisation of the right in question;
The programme must include measures to provide immediate relief for those in desperate need and living in intolerable conditions or crisis situations. In other words, the State may not neglect to respond to immediate needs in favour of longer-term strategies.
The legislation, policies and programmes adopted must not only be reasonably formulated, they must also be reasonably implemented.
Access to the right should be progressively extended both to a larger number and to a wider range of people; legal, administrative, operational and financial hurdles should be examined and, where possible, lowered over time.
The availability of resources will be an important factor in assessing the reasonableness of the resources adopted by the State to realise socio-economic rights.

2.4 Assessing the Committee recommendations against constitutional standards

Applying the above principles listed in the Grootboom judgement to the findings of the Committee, it is evident that the BIG is the most effective and appropriate measure for fulfilling the right of access to social assistance.

2.4.1 "A co-ordinated and comprehensive programme"

The BIG represents a co-ordinated and comprehensive response to the current fragmented and inequitable system of social security. While expanding access to social insurance schemes (e.g., UIF, COIDA) and encouraging private savings (e.g., for retirement) are important components of a comprehensive social security system, factors such as high structural unemployment, the decline in formal sector employment and the deep levels of poverty in South Africa render these measures an inadequate response to the challenge of ensuring universal access to social security. In other words, they will not, on their own, be sufficient to ensure that all South Africans enjoy access to social security. Expanding access to social assistance must thus play a major role in a comprehensive social security strategy. As the Committee points out: "With full take-up of a Basic Income Grant, the number of poor South Africans excluded from the social security system is reduced to zero."

2.4.2 "Providing relief for people living in desperate need and living in intolerable conditions"

The BIG is designed to meet the basic subsistence needs of destitute groups. In its assessment of the impact of the BIG, the Committee concludes that the incidence of extreme poverty will be almost completely eliminated, and that the poverty gap will be reduced by 74%, as opposed to a mere 23% under the current grant system (or 37%, assuming full take-up of existing grants). Although it will be paid universally, the Committee notes that the grant could be recuperated from middle and upper income earners through the tax system – a plan supported by the Coalition. People living in poverty will thus be the ultimate beneficiaries of the grant.

The BIG will help to guarantee a minimum acceptable standard of living for all – a key aim of comprehensive social protection and a goal of the White Paper for Social Welfare of 1997, which promised that "all South Africans [should] have a minimum income, sufficient to meet basic subsistence needs, and should not have to live below minimum acceptable standards." From the point of view of South Africa’s international law obligations, it will assist in fulfilling the minimum core obligations imposed by the International Covenant on Economic, Social and Cultural Rights to ensure satisfaction of minimum essential levels of each of the Covenant rights.

The BIG will also benefit particularly vulnerable groups, such as women and children living in poverty. Child-specific grants are often assumed to be the most effective way of satisfying both this principle and the obligations in section 28(1) of the Constitution. However, this assumption overlooks the fact that entire households inevitably pool resources – including any grants earmarked for children. The BIG will generate far more benefits for children because it will substantially increase net household resources. Where possible, a child’s grant could be paid to his or her primary care-giver. As women are typically the primary care-givers for children, this will have the added benefit of increasing their control over household income and promoting a more equitable intra-household distribution of resources.

A number of difficult questions remain to be answered regarding the payment of grants, including how grants will be paid to child-headed households. It is therefore essential that consultative mechanisms are used to identify and address these issues. We return to this matter below.

2.4.3 "Reasonable implementation"

The design of the BIG means that it is able to meet the test of ‘reasonable implementation’ far more effectively than the current social grants system. The Committee points out that the current system does not meet its full potential because of the way it is structured. Some of the barriers to accessing social grants include means testing, rigid eligibility criteria contained in complex regulations and the high relative cost of applying for grants. According to Economic Policy Research Institute (EPRI) estimates, only 43% of eligible individuals actually succeed in obtaining the grants for which they are qualified. While the take-up rate for the state old age pension is relatively high, the take-up rate for the child support grant remains low, despite recent efforts by the Department and NGOs to facilitate registration.

In contrast, the BIG will eliminate the perverse incentives of means testing and other eligibility requirements and will thus reduce administrative complexity and costs. The main administrative requirement will be devising a reliable identification and verification system. Moreover, the Committee’s research lends support to the BIG Coalition’s proposal that the tax system be used to recover progressively a substantial portion of the cost of the grant. As the Committee notes, SARS "is one of the most capable arms of government", so use of the tax system will facilitate the efficient administration of the grant.

2.4.4 "Availability of resources"

The BIG will have a significant developmental impact. As the Committee observes:

By providing such a minimum level of income support people will be empowered to take the risks needed to break out of the poverty cycle. Rather than serving as a disincentive to engaging in higher return activities, such a minimum (and irrevocable) grant could encourage risk taking and self-reliance. Such an income grant could thus become a springboard for development.

It also has the potential to support economic growth and job creation thus increasing the overall resources available to South African society. Research conducted by EPRI indicates that a well-managed BIG is affordable and consistent with fiscal responsibility. The Committee of Inquiry also concluded that the implementation of a universal system of social assistance grants is both feasible and affordable. We deal with the fiscal impact of introducing a BIG in the penultimate section of our submission.

2.4.5 "Progressive realisation"

While the right of access to social security can be progressively realised, it is important to note that the Constitutional Court has held that a significant number of desperate people in need must be afforded relief in the short term. In addition, section 237 of the Constitution requires that all constitutional obligations must be performed diligently and without undue delay.

Abolition of the means test is an important element of extending the constitutional right to ‘a larger number and wider range of people’, a requirement of the Grootboom judgement in relation to progressive realization, as well as eliminating administrative and other hurdles to access.

We accept that a phased approach may be necessary in order to put in place the necessary institutional and administrative arrangements for implementing the BIG. However, this should be tied to a concrete plan of action for its speedy and effective implementation, including clear goals and benchmarks for measuring progress. The plan should be devised and implemented through a transparent process involving full participation from all stakeholders. This is also in line with the interpretation of "progressive realisation" in the UN Committee on Economic, Social and Cultural Rights, which has been endorsed by the Constitutional Court.

In order to ensure that the BIG fulfils its developmental potential, it should be implemented sooner rather than later. In the light of South Africa's constitutional and international law obligations to children, it is imperative that children's social security needs are prioritised. Taking into account the practical need to follow a phasing in approach when implementing the BIG, we endorse the recommendations of the South African Law Commission in its Discussion Paper on the Review of the Child Care Act to extend the child support grant to all children up to the age of 18 years and to abolish the means test. This is directly in line with the approach taken by the Committee. The decision to phase in the extension of the child-support grant to the age of 14 is a step in the right direction, however we believe that the phasing in process is extremely slow and that the grant could be extended to 14 immediately. Furthermore, by not extending the grant up to the age of 18, three million children remain in poverty without any access to social assistance and 2.5 million of those children remain in extreme poverty.


The Committee succinctly summarises the fragmented and partial nature of the social security system inherited from the apartheid era:

There is no income support programme for children between 7-18 years, adults between 18-59 years, and no general assistance for households where no-one is employed. Over 13 million people live below the poverty line and have no access to social security. As such SA’s social security system is neither comprehensive nor adequate.

In light of these shortcomings, the Committee rejects incremental and piecemeal reforms, proposing instead a comprehensive overhaul of the social security system through the introduction of a ‘Comprehensive Social Protection’ (CSP) package. This forms the bedrock and framework for all the proposals of the Committee, including the proposal for a basic income grant. The BIG Coalition welcomes this holistic approach.

Following the United Nations Commission on Social Development, the Committee adopts a definition of social protection designed to deal with the developmental challenges facing developing countries:

Comprehensive social protection for South Africa seeks to provide the basic means for all people living in the country to effectively participate and advance in social and economic life, and in turn to contribute to social and economic development.

Comprehensive social protection is broader than the traditional concept of social security, and incorporates developmental strategies designed to ensure, collectively, at least a minimum acceptable living standard for all citizens…

This definition of Comprehensive Social Protection motivates the Committee’s support for a comprehensive and integrated ‘package’ of social protection measures designed to stimulate development and raise the living standards of the majority of South Africans. The Committee argues that the need for a package is based on the understanding that certain basic requirements should be available to all and should not be allowed to be traded off against each other. "For example it is not acceptable to ask a poor parent to choose between attaining a certain level of household income or sending their children to school, though this is not an uncommon choice in reality."

The Committee also argues that a ‘package approach’ ensures that measures focused on reducing income, services and asset poverty are interlinked and complement each other. Everyone is thus guaranteed some cash support and a basic level of service delivery, without deficiencies in one area eroding benefits in another (e.g., no one would be prevented from securing adequate nutrition because available cash must be used to buy clean water). CSP is therefore designed to "better deliver on minimum acceptable living standard outcomes".

To achieve these objectives the Committee identifies four sets of interlinked and mutually reinforcing measures to address the crisis of poverty and inequality in our country:
Measures to address income poverty: These give people access to a minimum income ‘throughout their life cycle’, including childhood, working age and old age. At the core of these measures would be a universal income grant that ‘ensures that all South Africans have some income to mitigate or eradicate destitution and starvation’. The Committee points out that this basic income will have developmental spin-offs, enabling the poor to participate more effectively in the economy.
Measures to address capability or services poverty: The Committee calls for the provision of certain basic services necessary to ‘enable a person to live and function in society’. This includes the provision of lifeline water and electricity, free and adequate healthcare, free education, food security and affordable housing and transport.
Measures to address asset poverty: These are aimed at addressing the ‘key underlying structural basis of poverty and inequality’, and include income-generating assets, such as land, and social capital, such as community infrastructure.
Measures to address special needs: These focus on the unique needs of groups such as children or the disabled.

The Committee argues that the first three sets of measures are the core elements of the CSP platform that "should be available to all South Africans (including certain categories of non-citizens). In general these components need to be established as a universal-as-possible package of income transfers, services and access provided in a non-work related manner and whose availability is not primarily dependent on an ability to pay."

The Committee identifies a specific set of interventions, including the BIG, that should comprise the basic CSP package. These appear in Table 7 of the Committee Report, which is reproduced below. The Committee recommends that some of these measures be universally available, while others will only be available to those who meet certain eligibility criteria.

Table 7
Comprehensive social protection package and components



Key components

Income poverty

Universal (a)

  • Basic Income Grant
    Child support grant
    Maintained state Old Age grant

Capability poverty

Universal/ Eligibility criteria (b)

  • Free and adequate publicly-provided healthcare
    Free primary and secondary education
    Free water and sanitation (lifeline)
    Free electricity (lifeline)
    Accessible and affordable public transport
    Access to affordable and adequate housing
    Access to jobs and skills training

Asset poverty

Universal/ Eligibility criteria (c)

  • Access to productive and income-generating assets such as land and credit
    Access to social assets such as community infrastructure

Special needs

Eligibility (d) criteria

  • Reformed disability grant, foster care grant, child dependence grant

Social insurance

Eligibility (e)

  • Cover for old age, survivors', disability, unemployment, and health needs

The Committee emphasises that decisive interventions to address income poverty can make a major impact in the short to medium term: "Income poverty measures are easier to roll out in the short term than more infrastructural and institutional intensive ‘capabilities’ and ‘asset’ poverty programmes." It is therefore critical to expedite such interventions.

The BIG Coalition wholeheartedly supports the overarching approach on Comprehensive Social Protection adopted by the Committee as being appropriate to the challenges confronting our country, particularly in relation to the crisis of poverty and inequality. We agree that measures taken to address income poverty will be most effective if they are linked to efforts to combat other forms of poverty. It is in this context that our detailed comments on the proposals relating to the Basic Income Grant need to be situated.


4.1 A phased approach to implementation

The Committee identifies three options in relation to addressing income poverty. These are:
Option 1- maintain the status quo;
Option 2- immediate implementation of comprehensive social protection;
Option 3- phased implementation of comprehensive social protection.

The Committee rejects Option 1 on the grounds that such an approach would be unconstitutional, that inadequate social protection will inter alia contribute to social instability, and that the country will ultimately have to bear the costs of not acting.

The Committee takes the view that Option 2 is not immediately feasible on the basis that time is required to set up the necessary institutional arrangements to implement comprehensive social protection.

It therefore proposes Option 3 – that comprehensive social protection is implemented in distinct phases. Specifically in relation to BIG, the Committee recommends that it be implemented progressively in two phases. The first phase, 2002 to 2004, would rationalise and dramatically extend the existing system of grants, giving priority to "the most vulnerable, namely children up to the age of 18". In this phase the Committee proposes inter alia establishing a universal Child Support Grant for children under 18, as a key stepping stone for the introduction of a comprehensive BIG, or ‘solidarity grant’. Beginning in 2005/2006, an income support grant would then be extended to all South Africans.

The BIG Coalition acknowledges that substantial groundwork must be done before a BIG can be effectively implemented. Provided that there is a clear commitment to the introduction of a BIG, complete with viable deadlines, we would support a phased approach. If South Africa is to meet its Millennium Development Goals of eradicating absolute poverty by 2015, the BIG must be put in place early enough to allow any major delivery bottlenecks to be resolved in time. A more detailed implementation plan should therefore identify clear interim targets to ensure this timetable can be met.

4.2 Extension of grants to children in the first phase

Read with other sections of the report, the Recommendations in Chapter 5 clearly suggest that the intention of the Committee is to introduce a universal child support grant to children under the age of 18, during this first phase.

Nevertheless, the section of the Committee’s report dealing with Phase One lacks some precision. It calls on government to "simplify and eliminate the means test" – it is not clear for which grants the Committee wants to remove the means test (e.g., the Child Support Grant) and for which it wants to simplify the means test (e.g., the Old Age Pension). This has invited various interpretations of the Committee’s intent, and together with other vague statements in the Report, created unnecessary ambiguity. However, the report states unequivocally: "The Committee believes that the most efficient, developmentally most effective and fairest way forward is to abolish all means tests and to cover the costs through increases in tax."

The Committee rightly recognises the need to prioritise the social protection of children, but there are choices that must be made about how income support grants are extended to children. It is important for Cabinet to keep in mind the state's constitutional and international obligations when it decides on the exact nature of the implementation strategy, the timeframes and the amount of resources that will be allocated to ensuring that all children can access the grants in the short to medium term, particularly within the period proposed for the first phase.

In March, the Department of Social Development reported that 3.6 million children under the age of seven were eligible for the Child Support Grant (CSG). The extension of the CSG to seven- and eight-year-olds from this year has increased the Department's overall target by 930,000 children. To date, roughly 2.7 million children have been registered – a shortfall of 1.8 million. More important, the Department's targets are based not on estimates of the total number of children under the age of nine living in poverty, but rather on the number of poor children that the Department believes it has the capacity to reach. The actual number of children under nine in need may be more than 1 million larger than the current target, depending on the poverty line used.

Given the Committee’s findings with regard to poverty and the gross inadequacy of the current social security system, the state will need to greatly improve the uptake of the child support grant – well beyond its original targets – in order to avoid a constitutional challenge and to fulfil the country's obligations in terms of the Convention on the Rights of the Child. If this goal is to be achieved, far more resources must be allocated to ensuring that children can access the child support grant.

Furthermore, the government’s implementation strategy will determine the likely improvement in the take up rate. Retaining the means test and gradually increasing the age limitation would complicate administration and unnecessarily impede both take-up and delivery. Research has shown that the means test frequently prevents the poorest and most vulnerable households from accessing social grants. It is a tragic irony that the very mechanism that is meant to "target" grants to poor communities actually denies benefits to the most needy. This approach could even give rise to constitutional challenges based on unfair discrimination. On the other hand, abolishing the means test and making the grant available to all children under 18, as is proposed by the Committee, would be the most effective way of reaching all children in need.

The BIG Coalition therefore strongly endorses the universal extension of the CSG in the first phase to all children under 18, with effect from 2004. Moreover, we believe that this approach is entirely consistent with the logic of the Committee’s report, given its repeated emphasis on the role of means testing in preventing the neediest households from accessing social grants.

The idea of comprehensive social protection – and specifically a BIG – requires a new way of processing grants, one that is administratively less cumbersome. We must confront this challenge as quickly and as vigorously as possible to permit the design and implementation of an effective system. Further research and analysis is required to identify existing barriers to the delivery of the CSG and to eliminate these obstacles. The implementation of the extended CSG will provide valuable research and operational data that will lay the foundation for the introduction of the BIG to all adults and children in South Africa.

This will also be an opportunity to resolve financing issues. The extension of the CSG to all children under 18 should be accompanied by mechanisms to recover the grant from more affluent households through the tax system. This will not only enhance the affordability of the grant, it will also promote a more equitable distribution of income.

We submit that a period of three years is more than adequate as a preparatory phase and that a universal BIG should be in place by 2007 at the latest. We believe that this is the ultimately the best way of ensuring that children’s social security needs are reliably and sustainably prioritised.

4.3 Preparations for the phasing in of the BIG

Phase One must also be used to identify and address obstacles to the roll-out of the BIG so that government will be ready to launch the grant by 2007. The period 2003 –2006 must be used to put in place the institutional measures and processes necessary for the smooth administration of the BIG. This includes the registration of both adults and children, which is essential not only for social development but also for the efficient functioning of the Department of Home Affairs. Registration is a right of citizenship. The BIG Coalition is especially concerned by the lack of attention given to the fact that many South Africans, especially in poorer communities, do not have identity documents or birth certificates. Without identity documents, they cannot access many of the various components of the social security package; free water; education; grants etc. Well managed and resourced campaigns to register people, especially in rural areas, must be initiated as an urgent priority.

Money has been already allocated for universal voter registration, which requires potential voters to hold a current identity document. With minimal additional effort and expenditure, this could be the basis for a universal registration campaign, to include children and other non-voters. Such a drive would also assist Home Affairs to complete its electronic Documentation Management System (e-DMS) and Automated Fingerprint Identification System (AFIS). These two databases will make possible the new Home Affairs National Identification System (HANIS). This "smart card" based identification system is expected to offer the most cost-effective platform for the future administration and delivery of social grants.

During the initial phase, government will also need to extend its Post Bank infrastructure, and negotiate with other potential delivery agents to develop a reliable payment infrastructure. Education and training programmes will need to be developed and implemented to inform both civil servants and the general public about the grant, its administration and its responsible use. Existing inter-departmental forums -- such as the social cluster and the DG’s forum -- should identify aspects of implementation requiring interdepartmental co-operation and develop appropriate procedures to deal with these matters.

These processes can and must happen concurrently if we are to meet our commitments in terms of the United Nations Millennium Declaration to eradicate extreme poverty by 2015. It will take some time for the developmental impact of this programme to be felt, and there will inevitably be technical issues to resolve.

4.4 The Fiscal Impact

The Committee does not fully assess the fiscal impact of the BIG as it had no mandate to consider changes to the tax structure. However, a number of studies have demonstrated the feasibility and affordability of financing a BIG through progressive taxation. Research commissioned by the Committee, for instance, showed that the net cost of the BIG is less than R24 billion -- an amount roughly equal to the income tax cuts of the past two years. Fiscal impact analysis suggests that South Africa’s tax structure can afford the cost of the grant without undermining the country’s international competitiveness.

In evaluating the affordability of a BIG, it is important to distinguish between gross and net costs. Gross costs include the cost of grants paid to people who in turn repay it through higher taxes. The net cost is the amount of transfers to the poor and near poor that are actually retained for increased consumption by the grant recipients. With an estimated South African population in March 2001 of 44.9 million people, of which 8.4 million people are eligible for existing social security programmes, a basic income grant of R100 per month would result in a gross cost of R43.8 billion. Of this amount, R22.2 billion would go to households in the top three income quintiles (i.e., the wealthiest 60 percent of households). Adjustments to the income tax structure, for example, can reclaim most of these transfers without significantly affecting the vertical equity of the net tax burden. Adjusting the tax rates and income thresholds at lower income levels gradually recuperates the grant from middle and upper income earners. The value-added tax, in turn, recovers a significant portion of the expenditure associated with the net transfers. Micro-simulations of various tax adjustment options yield an average recuperation of R16.7 billion through the income tax, and R3.3 billion through the value added tax. As a result, the net cost of the BIG is estimated at R23.9 billion.

South Africa currently collects a relatively small percentage of national income through taxation. A survey recently published by EPRI found that, in comparison with other developing countries, South Africa collects up to seven percent of national income (or R70 billion) less than would be expected given the nation’s economic characteristics. This analysis corroborates the findings of research conducted by other institutions. South Africa ranks as the fifth most under-taxed developing country, using EPRI's tax capacity measure. Financing the BIG only requires a tax increase equal to about two percent of national income. This is clearly affordable.

Using the tax system to finance BIG raises a further consideration for a phased approach to implementation. When the BIG is introduced in the second phase (from 2006/2007), it will be necessary to extend access to all eligible people at once in order to justify the associated tax increases.

Comprehensive social security reform will generate both developmental growth and fiscal dividends, making the BIG increasingly affordable in the long term. Growth has two effects on the fiscal impact of the BIG. First, it raises overall national income, and thus expands the capacity of the economy to support fiscal expenditure. Second, as lower income households realise the benefits of the BIG and begin to improve their living standards and income levels, they will be able to keep less and less of the BIG. This lowers the overall net cost of the grant over time. The fiscal dividend results from the BIG's capacity to promote more efficient delivery of social services. Higher living standards raise the efficiency of the educational system, reducing the repeat rate and thus economising on educational resources. Improved nutrition raises lifetime health levels, reducing the strain on the public health system. The medium-to-long term impact of the BIG is likely to reduce the cost pressure on several social sectors, resulting in a reduction in the net fiscal impact of the grant.

The BIG represents a substantial commitment of fiscal resources. However, a well-managed programme is affordable and consistent with fiscal responsibility. South Africa’s tax structure has the potential to finance the entire cost of the programme without recourse to deficit spending. The long-term growth implications of the developmental impact further support macroeconomic stability and fiscal affordability.


In the period since the publication of the Committee of Inquiry’s Report, critics of the BIG have articulated three main objections to the grant:
The grant is unaffordable – Those who argue that the grant is unaffordable often confuse the gross and net costs of the grant. Although the nominal cost of providing R100 per month to all in South Africa is likely to be in excess of R50 billion, much of this outlay will be almost immediately recovered from more affluent recipients through taxation. In contrast, the net cost of the grant – the additional fiscal burden on the state – is expected to be about R24 billion. This is considerably less than the amount of revenue foregone in tax cuts: the cumulative effect of tax breaks over the last 5 years is substantially more than the amount required to finance the BIG on an annual basis. We have already dealt with the fiscal impact of the grant above.
The grant is undeliverable – Some critics claim that there are insurmountable technical and logistical obstacles to the delivery of a universal grant. However, the existing grant administration system demonstrates that the government is capable of establishing and operating a national distribution system, and the abolition of means testing will enormously simplify delivery. The impending introduction of new "smart" identity cards will provide an additional delivery channel that appears to be well-suited to the provision of a universal grant. Indeed, the government is already making plans to use the cards to deliver social grants. Although a number of important issues related to delivery require further investigation and discussion, these are not insurmountable provided there is sufficient political will to resolve them.
The grant will foster dependency – This has become one of the most common and persistent objections to the BIG. In fact, it seems to encapsulate a number of distinct concerns that must be disentangled and addressed separately. The remainder of this section examines this argument in greater depth.

5.1 Unpacking "dependency" objections

The objection that the BIG will encourage dependency is usually based on one of three main types of concerns (or a combination thereof):

Reliance on Others

Some critics are afraid that the grant will make people reliant on others, rather than on their own resources. But this ignores the fact that we all rely on others. Those who are fortunate enough to be employed rely on their employers and those who are unemployed rely on their employed relatives. For how long would most of us be able to avoid poverty if we were to lose our source of income?

It is poverty – lack of independent access to income and assets – that makes people reliant on others. Poverty is the most inescapable form of dependence. If this is the concern, a Basic Income Grant can only decrease dependency.

As the Committee of Inquiry’s report points out, in our current system the destitute typically rely on family members, friends and neighbours who are frequently poor themselves. In a society where there is massive wealth and massive inequality, it would make more sense for very rich to transfer resources to the very poor so that they are able to engage in economic activity, thereby lessening their dependence. Achieving this requires state intervention. A BIG, financed via progressive tax rates, would redistribute wealth and alter the ties of dependence that currently shackle the working poor.

Furthermore, there is evidence to suggest that a Basic Income Grant would make the poor more self-reliant in other ways. Research has found that success in job seeking is strongly correlated with income: as income rises, people are more likely to look for work and more likely to find it. Even a small stable income enables poor households to take the sort of risks inherent in job seeking and entrepreneurship.

Moral Hazards

Often, concerns about dependency are premised on the notion that a grant will encourage immoral or economically undesirable behaviour. This objection has several variants. Sometimes the fear is that a grant will make people lazy. If people can survive on grants, what incentive is there for them to work or to contribute to the economy of the country in any other way? This has been a persistent criticism of welfare programmes in the industrial North.

But there are two crucial differences between a BIG and these type of "dole" schemes. First, welfare schemes in rich countries have been able to give people comparatively large grants, allowing beneficiaries to maintain an acceptable, if not comfortable, standard of living without working. Second, dole schemes are typically means-tested. Applicants are only eligible to receive benefits if their income from other sources is below a certain amount. If you know that you are going to lose your dole payment if you manage to find work or start a successful enterprise, why bother? A dole also invites fraud; if you do get additional income, you have a strong incentive to try to hide the fact from the state to avoid losing your grant.

This is why the Taylor Committee did not propose a dole. Instead, it recommended a universal income support grant, noting that the level at which the grant is set should be designed to avoid both of these problems. It should prevent those living in poverty from falling into destitution, but it should not be large enough to encourage people to forego other opportunities to earn income. Further, those finding work would not lose their right to a BIG. The Committee concluded that a grant of R100 a month would meet these criteria.

Another brand of "moral hazard" objection holds that grants rob people of the dignity that comes from working for one’s living. In this view, grants should only be available to the "deserving" poor: the very young, the very old, those with special needs and those who are temporarily out work (but have already demonstrated that they are not just lazy). Everyone else should "lift themselves up by their own bootstraps".

Implicit in this concern is the dubious assumption that grant recipients will choose not to work. That is unlikely, for reasons discussed above. Furthermore, this logic requires that jobs be available for anyone who wants one (as is largely true in the industrialised nations which have popularised this critique).

Like many developing nations, however, South Africa cannot promise anything near full employment. In September 2002, the official unemployment rate stood at 30,5% and the "expanded" unemployment rate, which includes discouraged job seekers who have given up trying to find work, was at 40,9%. The formal sector has shed jobs over the last five years. Even if some of the slack has been taken up by informal sector employment, the available evidence suggests that such jobs are considerably lower-paid and less secure and hence are not adequate substitutes for formal employment. The Committee of Inquiry concluded that South Africa faces a "labour surplus economy with a high skills’ deficit at the lower end".

In short, South Africa is unlikely to be able to offer jobs to all work seekers for some time to come. It is at best nonsensical, and at worst dishonest, to construct a social security system around the premise that all (or even the overwhelming majority of) able-bodied adults can find work. To do so is to condemn a significant minority to perpetual poverty. Will destitute people retain more dignity than poor families saved from malnutrition by a small grant?

Closely linked to concerns about laziness and merit, are fears that people will use a BIG irresponsibly, squandering it on alcohol, cigarettes and lottery tickets. Or that women will have unwanted children in order to collect more grant money. Contrary to the anecdotal evidence that often features in the media, research indicates that more than 90 per cent of the money spent by poor household goes to food, education and transportation. A study conducted by EPRI earlier this year of a small sample in Mount Frere found that households receiving a grant are also more likely to accumulate assets – long seen as an important factor in escaping poverty. Responsibility cannot be equated to income levels. There are irresponsible rich people. And there are irresponsible poor people. So there will inevitably be some abuse of grants, just as there is abuse of existing grants, but their numbers will be small. Even if sensational stories of misuse sell more newspapers, this should not become a rationale for withholding a BIG any more than it should be used to justify withdrawal of existing grants.


The final concern about dependency is more practical than ethical: What if poor households come to rely on the grant, but the state is unable to afford to continue providing it? What if the grant becomes an unsustainable drain on public resources?

In fact, the Committee of Inquiry found that the opposite is far more likely to occur – that a BIG would stimulate consumption-led economic growth, and expand the tax base. Since the bulk of consumer spending by poorer households tends to be on products of more labour-intensive industries, the Committee felt it reasonable to expect that increased spending would stimulate local economies and job creation. Expanding economic activity will translate into additional tax revenues. Also, as incomes increase, more and more households will rise above tax thresholds and begin contributing to general revenues. So the most likely scenario is that the net cost of the grant will diminish over time. In addition, the grant promises to reduce state costs by enhancing the efficiency of public spending in other areas such as health and education.

5.2 Proposed Alternatives to the BIG

Recognising the strong link between poverty and unemployment, some observers have proposed alternatives to the BIG that purport to answer some of the concerns cited above. Many who agree with the Taylor Committee’s analysis, argue that the proper way to deal with a decline in formal sector employment and the resulting increase in poverty is to create jobs. Since attempts to stimulate private sector job creation over the past five years have been so unproductive, they claim that the solution is to expand public works programmes.

The Committee Report makes two responses to this. First, it agrees that public works programmes are necessary and important. It endorses the proposal that as many jobs as possible be created through public works programmes. It applauds government skills training and "learnership" schemes. However, just as it argues that South Africa needs a comprehensive and integrated social protection package and that no one component of that package will be a "magic bullet" to solve poverty (even if some interventions will be easier to put in place and more effective than others), so it says that public works programmes alone will not be a solution for unemployment. The report notes the comparatively high administrative costs associated with public works programmes, which it estimates to be as much as 50 to 100 per cent of the value of the benefit transferred to participants in the such schemes. It recognises that tackling long-term structural unemployment requires changes to structures, and it will require a considerable period for those changes to percolate through the economy and the society.

The Committee also considered "workfare" models that link transfers to employment. It found that, in the United States, the transition to a workfare model has coincided with a deepening of poverty and inequality. Workfare has not created sustainable jobs, but it has succeeded in driving down wages at the low end of the labour market. This contributed to a decline in income for the poorest quintile of households from $10 000 in 1977 to $8 800 in 1999, as well as an increase in those living below the poverty line. Vulnerable groups – in this case women and African-American communities – have been especially hard hit by the change. The Committee concluded: "In a context of structural unemployment, as is the case in South Africa, such policies are unlikely to have any positive impacts." It also expressed a concern that the underlying assumption of a workfare scheme – that there are "undeserving" poor who should be denied access to state resources – ignored apartheid era manipulation of the labour market and could undermine state efforts to eliminate racially-coded prejudices.

The answer therefore is not to exclude the BIG, public works programmes or other important interventions, but to combine them in a mutually reinforcing package of the kind proposed in the RDP.

Finally, some observers have proposed food vouchers as an alternative to
cash grants. These would allow the state to restrict the use of benefits to certain basic commodities and would purportedly help to address concerns about irresponsible use. However, food voucher schemes are typically means-tested, with all of the attendant obstacles to take-up, administrative burdens and opportunities for corruption. Furthermore, even if we are not bothered by the paternalism associated with stipulating what the poor "should" consume, such restrictions seriously undermine the grant's potential to act as a catalyst to self-reliance and broad economic development.


The future stability and prosperity of our nation depends upon the formulation and implementation of a comprehensive social protection programme that can effectively eradicate extreme poverty, diminish economic inequality and lay the foundations for broad-based development within sustainable communities.

Such a package should not be cobbled together in a piecemeal fashion. It requires a systematic approach, beginning with the articulation of a visionary social protection policy that can guide and lend coherence to subsequent legislation.

The Committee of Inquiry's Report represents the first step in this process. It lays out the issues and proposes possible solutions in the same manner as a Green Paper. The Committee's recommendations should now be developed into a draft White Paper that can act as a catalyst to a national debate in which all stakeholders can participate fully. The emerging consensus should then be crystallised in a final White Paper.

This process is vital to the facilitation of popular participation in the formulation of public policy on social security. Moreover, a clear and comprehensive statement of policy is essential to enable Parliament to exercise effectively its constitutional oversight role.

We therefore urge the Portfolio Committee on Social Development to:
Endorse the findings and recommendations of the Committee of Inquiry's report as a first step in the process of policy formation on comprehensive social protection;
Articulate the need for a broad and coherent statement of social protection policy prior to the tabling of legislation intended to give effect to that policy;
Call on government to expand and extend the national debate on comprehensive social protection by preparing a draft White Paper for public comment;
Facilitate broad participation in that debate by convening public hearings on the draft White Paper; and
Urge the NCOP to assist by creating opportunities for stakeholders at the provincial level to take part in this debate.


The success of South Africa’s transition to democracy and the dismantling of apartheid will ultimately be judged by our capacity to address apartheid’s legacies of poverty, inequality and underdevelopment. As the Reconstruction and Development Programme observed: "No political democracy can survive and flourish if the mass of our people remains in poverty, without land, without tangible prospects for a better life. Attacking poverty and deprivation must therefore be the first priority of our democratic Government."

For this reason, the publication of the Committee of Inquiry's report represents one of the most significant events in the life of our nation since the first democratic elections in 1994. It marks a critical moment in the humanisation of South African society. Having completed much of the legislative reform necessary to ensure that all South Africans have the right to be free, we must now make certain that everyone has the means to be free. The appointment of the Committee demonstrated the government’s commitment to satisfying everyone’s constitutional right to social security, including appropriate social assistance.

The Committee has done an excellent job. It has commissioned extensive research, solicited the views of a wide range of stakeholders, and synthesised a desirable and attainable vision of a comprehensive social protection package that can weave a tighter and stronger social safety net for all South Africans. The BIG is the keystone of this package. It is the component that can be most expeditiously implemented and can most effectively combat abject poverty. The national debate on social security should now shift from whether we implement a Basic Income Grant to how we do so quickly, efficiently and in a manner that gives priority to children.

APPENDIX A: Transforming The Present – Protecting The Future

Report of the Committee of Inquiry into a Comprehensive System of Social Security for South Africa

Chapter 16: Conclusion

South Africa faces a continuing challenge of alleviating poverty and meeting basic needs. The Government has committed itself to reducing inequalities through providing basic services to poor households. Progress has been made in terms of delivering some of the services. Severe challenges remain, however. There is no income support programme for children between 7-18 years, adults between 18-59 years and no general assistance for households where no one is employed. Over13 million people live below the poverty line and have no access to social security. As such, South Africa’s social security system is neither comprehensive nor adequate.

The Committee has found that much of what we refer to as ‘social security’ derives from the European concept, which took as its basic assumption that social security would develop around formal sector employment. The reality is that in the developing world formal sector employment may never become the norm that it is in Europe. As a result, the Committee has found that the development paths of African economies, and third world countries in general, require a fresh look at social protection systems more appropriate to their environments and needs.

In this regard, the Committee has found that a lack of policy to address income poverty has been a constraining feature of South Africa’s socio-economic programmes. The Committee therefore recommends that an appropriate social security concept for South Africa must prioritise the needs of people without any incomes, with insufficient incomes or who are engaged in informal activities.

In addressing this gap, the Committee has formulated a comprehensive social protection system that enables the attainment of ‘positive-sum’ policy interventions, rather than narrow policy trade-offs between social and economic policy objectives. The Committee is of the view that by creating greater income security the poor, who are currently trapped in survivalist and low-income informal work, become empowered to risk pursuing higher-return activities that can break their cycle of poverty.

In addressing the full spectrum of social protection policy, the Committee paid considerable attention to matters concerning health, retirement, unemployment, children, disability, constitutional and legal requirements, and institutional and financial feasibility. Detailed research analysis has informed the Committee’s recommendations in these areas.

To address income poverty, and underpin the Comprehensive Social Protection framework as a whole, the Committee has recommended a comprehensive and integrated medium- to long-term framework for income support. The Committee is of the view that such a Comprehensive Social Protection framework would simultaneously address the constitutional and socio-economic imperatives through emphasising two aspects:
Ensuring that all citizens have a minimum acceptable standard of living through a social protection package, enabling them to participate and advance in social and economic life, thus reducing socio-economic constraints to sustainable growth in South Africa.
Providing people with their socio-economic rights, thus enabling them to enjoy their democratic rights. As such comprehensive social protection, by providing universal coverage, thus embeds an important form of social citizenship - and could be seen to form a central component of the democratic State’s "contract with the people". Finally, the Committee recommends that an implementation phase for the Comprehensive Social Protection framework be designed with officials from the various Social Cluster Departments, a core group of Committee members and two international experts.

APPENDIX B: History and Platform of the BIG Coalition

The idea of a universal social grant has been growing in popularity for a number of years. It was proposed by labour at the 1998 Presidential Job Summit and endorsed in one form or another by Black Sash the Anglican Church, ESSET, SANE and YCW by the end of 2000. The BIG Coalition was formed in June 2001 to co-ordinate the efforts of these groups, to develop a common platform, and to build popular support for the grant. The Coalition promotes consultation, research and the sharing of information on various aspects of a BIG. Its platform states:

"Poverty and inequality pose the greatest threat to South Africa’s young democracy. A bold initiative is urgently needed to confront this challenge. At least 22 million people in South Africa--well over half the population--live in abject poverty. On average, they survive on R144 per person per month."

A Basic Income Grant would provide rapid and sustained relief to all South Africans by:

providing everyone with a minimum level of income,
enabling the nation's poorest households to better meet their basic needs,
stimulating equitable economic development,
promoting family and community stability, and
affirming and supporting the inherent dignity of all.

The Basic Income Grant should be founded on the following fundamental principles:

Universal Coverage: It should be available to everyone, from cradle to grave, and should not be subject to a means test.

Relationship to existing grants: It should expand the social security net. No individual should receive less in social and assistance grants than before the introduction of the Basic Income Grant.

Amount: The grant should be no less than R100 per person per month on introduction and should be inflation indexed.

Delivery Mechanisms: Payments should be facilitated through Public Institutions. Using community Post Banks would have the additional benefit of enhancing community access to much-needed banking services.

Financing: A substantial portion of the cost of the grant should be recovered progressively through the tax system. This would demonstrate solidarity by all South Africans in efforts to eliminate poverty. The remaining cost should be borne by the fiscus. A range of new measures should be introduced to increase revenue so that the additional cost can be accommodated without squeezing out other social expenditure.