Universal income grant is not realistic now
05 February 2021 | Social Issues
A monthly universal grant of N$500 to citizens aged 19 to 59 amidst a rickety economy and Covid-19’s economic carnage in addition to high levels of spending on non-development items such as VIP protection, state wages and defence acquisitions, makes it an unrealistic wish at this stage.
Economists say that while a universal basic income grant (BIG) is not a bad idea, Namibia simply cannot afford it right now.
“Although such a grant will go a long way to alleviate the hardship faced by many and will also be a great economic stimulus, the time is not now,” economist Omu Kakujaha-Matundu says.
He pointed out that government finances are stretched to the limit, and the uncertainties around the duration of the pandemic and financial pressure to provide health care to citizens “make such a grant wishful thinking”.
“I think despite the economic hardships that the general population faces, we should put the basic income grant on the back-burner and concentrate on defeating the pandemic,” Kakujaha-Matundu noted.
IJG Securities research analyst Dylan van Wyk agreed that “a basic income grant of N$500 per person might be too expensive for the country to afford at this point”. He added that Namibia’s struggling economy and skewed spending focus has drained the coffers to the extent that increased social grants are not a possibility now.
“The annual budget should be viewed as the country’s list of priorities, and I feel that those priorities are not in order. The development budget is being neglected in favour of the public sector wage bill, which will impede economic growth in the long term.”
He added that “similarly VIP protection and defence procurement also take priority over more pressing issues such as housing,” adding that this despite government categorizing informal settlements as a humanitarian disaster.
An online petition, that has attracted close to 1 500 signatures in support, was launched five months ago and has drawn increasing support in recent weeks.
“The Covid-19 pandemic has made things worse for us. It has added to our burden of day-to-day struggle for survival. Many of us have lost our jobs due to the pandemic. Many Namibians are employed in the informal sector on which they desperately depend on as their only source of income,” the authors of the petition write.
BIG advocates argue that this scheme is affordable, if government shifts its current priorities and weeds out widespread corruption.
“It’s time that Namibia’s mining and fishing industries that make billions in profits pay their due share of taxes. Corruption, tax evasion and illicit financial flows result in the loss of billions of much needed income that government could use to finance BIG.”
The petition accuses government of failing to work on their promises to address poverty in Namibia. “Nothing but lip service.”
Rough calculations done by Van Wyk estimates that the total bill for a N$500 monthly grant could amount to roughly N$9 billion per annum, based on around 1.5 million eligible recipients. If limited to unemployed Namibians, he estimates that would cost taxpayers an estimated N$4 billion a year.
“In other words, this is quite a serious expense that will continue growing and once implemented would be difficult to roll back. A decision like this should be carefully considered.”
He emphasized that he supports a universal income grant, but cautioned that “for a country to afford these grants it needs to be in a fiscal position to be able to afford it, which relies on an efficient and prosperous economy as well as relatively high income tax.”
Van Wyk said that while a monthly income grant is unrealistic for now, “it is not an impossible goal over a ten to 20-year timeframe. This will require an immense amount of public pressure and political will to re-allocate resources.”
Moreover, “funding for this grant will rely on a strong and growing economy, a luxury we do not currently have, but could be achieved following serious reform”.
Kakujaha-Matundu added while there are good policy documents and frameworks that ostensibly address upliftment and poverty eradication, “without inspiring leadership from the top, and no consequences for non-performance, implementation of all those wonderful ideas that could lift thousands out of poverty is just empty talk”.
In January 2020 the UN Food and Agriculture Organisation (FAO) reported that “in Namibia, an estimated 430 000 people (18% of the total population) are currently experiencing severe acute food insecurity.”
The report noted that the most affected regions were Hardap, Kavango East, Khomas, Kunene, Ohangwena, Omaheke, Omusati, and Zambezi.
“Despite the ongoing humanitarian interventions provided by the government of Namibia, helping around 258 000 people, 18% of the country’s total population requires immediate humanitarian action.”
A 2008 pilot project at Otjivero and Omitara, where residents were given N$100 per person per month, according to some findings, disputed by some, showed a significant drop in child malnutrition, and reduced household poverty from 76% to 37%; school attendance increased, and there was a reduction in crime. Also, the added income improved access to medical services, and economic activities increased as residents used the funds to start small business.
Melanie Gaoes of the Namibia Rural Women’s Assembly in January told the BIG coalition that if approved, such a grant could be “a big game changer for Namibia at large”. She pointed out that especially women would benefit, and in turn their children, which could stop the vicious cycle of poverty many are trapped in now.
The BIG coalition website argues that a basic income grant for all Namibians in the specific age bracket will not only reduce poverty and inequality, but would redistribute income from the rich to the poor, “and so would make Namibia a more just and equal society”.
The coalition says such a grant would be possible through adjustments to income tax structures, a VAT increase, and a reprioritisation of the budget.