From the 'Your Money' newsletter, 27 February 2008.

Hi there...

South Africa’s economy is highly developed and technologically advanced. We are richly endowed with natural resources and great wealth exists plainly for everyone to see. As a whole, we are not poor.

And yet, unemployment, malnutrition and preventable disease are rife while sprawling slums encircle our swanky cities. We live in one of the most unequal societies that ever existed — a fact that this year’s budget won’t change much.

On my wish list for Budget 2009? Break the silence that existed this year regarding a Basic Income Grant!

A Basic Income Grant (BIG) would guarantee that all South Africans receive a small amount of money (theoretically enough to eke out a living) without a work requirement.

Before asking what this will cost, think for a moment what we (rich and poor alike) will gain. A report prepared for the Department of Social Development by the Committee of Inquiry into a Comprehensive System of Social Security for South Africa in 2002 concluded that a BIG of R100 per month would 'nearly completely eliminate' extreme poverty. The Economic Policy Research Unit argues that a BIG is 'the single most effective way of intervening in poverty’.

The suffering of millions of us will instantaneously be lessened without having to wait on fickle economic growth of which the benefits in a society like ours don’t always trickle down. What effect would a BIG have on crime, our health and education? How would it influence our morale, our conscience, to know that nobody is wallowing in intense poverty? How would it affect our confidence to know that the rights enshrined in our constitution are not merely lofty ideals?

It is obvious that our mass unemployment is a very deep seated feature of our socio-economic system and that relying only on growth to fight poverty is blind and uncaring. What's more, a BIG will reach the millions who currently slip through our porous social safety nets.

Except for the argument of costs that I’ll briefly deal with shortly, another argument frequently made against a BIG is a moral one. Why should one give people a free ride at the expense of those that work hard and pay taxes?

Well, much of the income we generate by working at our jobs comes from our inheritance of resources to which we have unequal access to. We have different opportunities in life because of, for example, how rich or poor our parents are or where we come from. We are all beneficiaries of a larger or lesser amount of ‘gifts’ like being born in a loving family with healthy parents. These ‘gifts’ impact on our ability to procure scarce resources, including getting a job that pays a living wage.

To some extent, we are all free riders. These ‘gifts’ are distributed unequally and those that are able to contribute to a BIG invariably received a disproportionate amount.

But, why no work requirement? Because the employed also receives a BIG people won’t be put off looking for work, especially where the pay is low and entails extra costs like transport. It would also make it easier for people to accept part-time work, because of the unconditional nature of a BIG.

Some people do very important work, providing some of the ‘gifts’ I referred to earlier without getting paid themselves. This work includes raising kids, voluntary work, household work, etc. By receiving a BIG people doing this work will also be compensated for the essential work they do.

Many people hold that, despite the obvious benefits, there simply isn’t enough money. I cannot accept this heartless argument. Our government spends lavishly on hi-tech weaponry when we’re at peace with everyone except ourselves. We’re building brand spanking new stadiums to host the biggest sporting event in human history. There is Gautrain, shopping malls in Soweto, gleaming BMWs alongside even shinier Mercs in packed parking lots, superstar DJs in mega clubs packed with Armani’d patrons...I can go on and on.

Maybe Trevor Manuel could raise VAT on non essential goods or impose a tax on excessive energy consumption (two flies with one swat!)? Mr Manuel and his team have proved themselves to be exceptional at what they do, so I’m sure they can find a way if they want to.

Please, Mr Manual, make Budget 2009 a truly compassionate one and break the silence that existed this year regarding a Basic Income Grant.

Until next week...

Kabous le Roux
Personal Finance Editor

“I am now convinced that the simplest approach will prove to be the most effective — the solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income.” – Martin Luther King Jr.

"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds." – Thomas Paine.

Kabous le Roux is iafrica.com's Personal Finance and Property Editor.