Basic Income Grants won’t solve SA’s problems

Nicholas Woode-Smith, an author, economic historian and political analyst, is a contributing author for the Free Market Foundation.

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This article was first published on Business Day on
27 September 2022

Basic Income Grants won’t solve SA’s problems
Basic Income Grants (BIG) are the big new, old thing. While the idea of BIG has been toyed with since the 1990s, they are coming back in full force. Advocates insist that BIG will be a big cure for poverty and will ensure adequate standard of living for all South Africans.
South Africa’s current welfare plans assist only those in dire need. But BIG promises to aid in the redistribution of wealth across the board through giving all South Africans, regardless of need or merit, free money.
Sounds pretty utopian. That’s because it is. BIG is an expensive pipe dream that will in no way solve South Africa’s myriad problems. If anything, it will exacerbate them.
Existing welfare programmes, such as social grants, have helped many South Africans from falling into destitution, and they should be lauded for that fact. But welfare programmes are always a difficult thing to evaluate.
Often, governments and advocates measure the success of welfare by how many people it funds. But should we really be celebrating an increasing number of people becoming reliant on state handouts?
Grants are not sufficient for living a fulfilling and fruitful life. The goal of welfare should not be to aid as many people as possible and maintain them – but rather to ensure that they no longer need welfare. South Africa’s current welfare regime doesn’t accomplish this. It creates dependency on a tiny bit of money, while stringent labour regulations, low economic growth, and bad state policy, ensure that South Africans cannot get the jobs they so badly need and desire.
BIG will not solve this either. It’s unqualified redistribution of wealth only serves to shift wealth from producers to non-producers – while allowing a bureaucrat to scrape some cash off the top. Welfare isn’t meant to be a substantive source of wealth. It’s meant to be a stopgap to prevent our vulnerable from suffering or dying.
It doesn’t work as an economic stimulus. Any consumption generated by welfare means less consumption somewhere else in the economy as taxpayers tighten their belts to foot the bill.
BIG takes the problems of our welfare programmes and makes them universal. But on top of that, it is extortionate. We can’t fund the bare necessities in this country, so how can we afford to give every single person free cash?
BIG has gained a reputation for being a smarter form of welfare. But how is giving the undeserving and un-needing free money smart? Welfare, if it is to exist, should only be going to the poor. Those who need it to survive. Children, the elderly, the sick and the destitute. Not everyone.
South Africa does not need more handouts, but more opportunities. We need people to have the ability to enter the workforce and produce wealth for themselves that will far outweigh the unsustainable welfare they gain from BIG or current grants.
To accomplish this, we need to embrace a free market. The unemployed suffer under the brunt of unreasonable labour regulations and the dictates of a trade union regime that privileges their members over the unemployed of this country.
Introducing the Free Market Foundation’s proposed Job Seeker’s Exemption Certificate, which allows an unemployed individual to voluntarily exempt themselves from national labour laws, could go a long way to helping to assuage our unemployment crisis.
Better yet, abolish our draconian labour regulations entirely. Remove the minimum wage. Make it easier to hire and fire. Allow employees and employers to enter into voluntary contracts that reflect their actual individual desires and needs.
Remove racial quotas to eliminate needless and fruitless strains on businesses. Make it easier to start a business and remove the red tape. Privatise state assets and open them up to private competitors which can run them well, employing the deserving and producing more wealth. Abolish the current tender system and open up the system to all private competitors.
There is never a situation in South Africa where BIG is a good idea.
It is prohibitively expensive. So, the only way to afford it is for the taxpaying population to expand tremendously and produce a boatload of wealth. But at that point, BIG is no longer needed. It will just be a redundant black hole of tax money.
What South Africa needs is to produce more wealth – not redistribute the dwindling amount we already have. And to produce more wealth, we need people to get jobs, start businesses, and engage with the opportunities provided for them. And to achieve all that, we just need a true free market. It’s that simple.

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