Workshop on the Basic Income Grant Presented to the Select Committee on Social Services By the Basic Income Grant Coalition 25 June 2002

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Workshop on the Basic Income GrantPresented to
the Select Committee on Social ServicesBy the
Basic Income Grant Coalition25 June 2002
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There will be universal access to an integrated
and sustainable social security system. Every
South African should have a minimum income,
sufficient to meet basic subsistence needs, and
should not have to live below minimum acceptable
standards. The social security system will also
work intersectorally to alleviate
poverty.1 1 Chapter 7, Paragraph 27 of the
White Paper for Social Welfare, 1997.
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Principles of the BIG Coalition

• Universal Coverage from cradle to grave and not
  subjected to a means test
• Relationship to existing grants No one should
  receive less in social assistance grants than
  before the intro of a BIG
• Amount No less than R100 per person per month
• Delivery Mechanisms
• Financing

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Members of the Coalition

• Age-in-Action, AIDS Consortium, Alliance for
  Childrens Entitlement to Social Security,
  Anglican Diocese of Johannesburg, Black Sash,
  Child Health Policy Institute, Congress of South
  African Trade Unions, Co-operative for Research
  and Education, Development Resources Centre,
  Diakonia Council of Churches., ESSET, Gender
  Advocacy Programme, Community Law Centre (UWC),
  Southern African Catholic Bishops Conference,
  South African Council of Churches, South Africa
  New Economics Foundation (SANE), South African
  NGO Coalition (SANGOCO), Treatment Action
  Campaign, Young Christian Workers National
  Secretariat

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The Social, Economic and
Administrative Impact of a Basic Income Grant

25 June 2002
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Overview

• Social impact how effective would a basic income
  grant be in addressing poverty and severe
  destitution?
• Economic impact how will the basic income grant
  affect growth, development and job creation? Can
  the economic afford it?
• Administrative impact is the basic income grant
  administratively feasible? How can government
  overcome the capacity constraints?

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Measuring the social impact

• Use household surveys and micro-simulation models
  to evaluate the poverty impact
• Poverty headcount--how many people are freed from
  poverty?
• Poverty gap--how much does the policy reduce the
  gap between the incomes of the poor and the
  poverty line?

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The social impact of the BIG
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The BIG is developmental and supports economic
growth

• The governments HRD strategy identifies how
  poverty and inequality undermine human capital
  development and thus constrain higher incomes
  the poor are trapped by their poverty
• The Basic Income Grant provides income security,
  promoting productive risk-taking and helping to
  break that trap
• The grant supports improved nutrition, health,
  education and productivity

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Poverty is a tax on workers--the Basic Income
Grant reduces that tax and supports both higher
wages and job creation
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The macro-economic impact supports investment and
growth

• The governments MTBPS recognises that a more
  equal distribution of wealth favours higher rates
  of growth.
• Providing all South Africans with an economic
  stake improves social stability and reinforces
  the foundations for more investment and economic
  growth
• Shifting spending power to the poor stimulates
  job-creating economic activity

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The cost of the BIG

• Using a micro-simulation model, the gross cost of
  the BIG identified by the terms of reference of
  the Committee of Enquiry is calculated to be R46
  billion
• Using taxpayer data provided by SARS, the
  analysis identified adjustments to tax rates that
  recovered R22 billion
• The net cost of the grant is R24 billion
• The net cost is equal to the actual amount of
  resources transferred to the poor

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South Africas tax revenue is relatively low by
international standards
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South Africas tax revenue is relatively low
compared to countries with comparable income
levels
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The Fiscal Impact

• Tax effort analysis demonstrates that South
  Africa can raise taxes by five percent of
  national income without undermining international
  competitiveness
• The basic income grant only requires an increase
  in taxes of two percent of national income
• The positive growth and development effects
  improve the affordability of the grant in the
  medium-to-long run

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The Administrative Impact

• Research documents the source of administrative
  failure in the delivery of existing social
  security programmes--
• lack of bureaucratic commitment
• bureaucratic intensity of the means test and
  other administrative requirements
• The Basic Income Grant requires substantially
  less administrative resources
• rights based
• no means test
• targeting through the tax system (SARS)

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The governments strategy on administrative
capacity

• In April, the government adopted the
  Microeconomic Reform Strategy, which has among
  its aims the improvement of government
  administrative capacity for social delivery
• The government has made eradicating poverty a
  priority, most recently in President Mbekis
  state-of-the-nation address (2002)
• Addressing corruption--the transparency property
  of a Basic Income Grant
• Delivery mechanisms
• Implementation strategy

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Conclusions

• The Basic Income Grant is the most effective
  policy option for eliminating destitution and
  reducing poverty.
• Effective social security reform is developmental
  and affordable, generating a positive growth
  impact that promotes job creation while improving
  the effectiveness of social delivery and long
  term sustainability.
• The administrative requirements of the grant are
  substantially more manageable than those for
  existing social programmes. The governments
  current strategy aims to further improve
  bureaucratic capacity for social delivery.

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Administration of the Basic Income Grant
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Key Requirements for Successful Social Assistance

• Good physical, administrative and information
  infrastructure
• Avoid complicated means test which acts as a
  barrier to entry
• Keep possibilities for corruption as low as
  possible

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Current Constraints in the Administration of
Grants

• Lack of awareness about grants currently
  available and the procedures involved in
  accessing them
• Insufficient pay points lack of adequate
  infrastructure at pay points
• Delays in the processing of applications
• Money lenders
• Internal corruption

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Current Plans for Improvements in Delivery

• Social Development Department
• The norms and standards project
• SOCPEN replacement
• Public Service Admin Dept.
• Service Delivery Innovation Policy
• GCIS
• Multi-Purpose Community Centres
• Public Service Commission
• Citizens Forums for Service Delivery Improvement

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Home Affairs National Identification System
(HANIS)

• Automated Fingerprint Identification System
  (AFIS)
• ID card
• Integration of AFIS, ID and population register
• Smart card onto which various applications can be
  loaded
• Social grants have been prioritised

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Payment System

• Smart card/chip system - debit card/telephone
  card - many initiatives underway including HANIS
  and reserve bank
• Post Office Bank
• Financial Institutions
• Tax system

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Preparations for Implementation

• Concurrent programmes
• Put in place institutional measures and processes
• Registration campaign for adults and children
• Extension of post bank infrastructure and
  negotiations with other delivery agents
• Education and Training Programmes
• targetting civil servants and the public

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Further preparations

• Using existing intedepartmental forums for
  co-ordination
• Social Cluster
• DGs Forum
• Departments involved inService Delivery