Articles for February 2022
The short and long of welfare solutions to South Africa’s pressing challenges
South Africa’s triple challenges of high unemployment, poverty, and inequality increasingly threaten to ignite social instability. Proposed solutions through job creation will take too long and remain inadequate under the current pace of economic reforms and resultant economic growth rates. Thus, pressure is mounting to introduce a universal basic income grant (BIG) as an immediate and permanent feature of welfare policy to relieve societal pain and avert potential social instability. But viewing this solution through the lens of South Africa’s population dynamics up to 2050, it is clear that welfare-type solutions such as a BIG will not self-sustain; they will collapse public finances and potentially result in a failed state over the long-term under low growth paths. Policy makers must resist the urge to score quick political wins that jeopardise the survival of the state over the long-term.
Basic income support is unavoidable, but making it work requires political courage
As government gears up to announce its programme for the next year, through the State of the Nation address and the Budget, it seems certain that some form of basic income support will be a central part of its agenda. The lockdown-induced shocks have added to the crisis of structural mass unemployment, and of poverty. There also seems to be broad consensus that basic income support is an essential part of our social compact. But the fiscal risks it poses to a fragile economy have not diminished, and government faces some hard trade-offs to ensure these risks are minimized and that other social spending is not compromised.