Basic income grant immediately feasible
10 March 2021 | Labour
Supporters of a basic income grant (BIG) for Namibia say not only is its immediate implementation feasible but warn that without a BIG Namibia's current economic blues will likely worsen already worrying levels of poverty, crime and other crippling social issues.
“We must consider what the costs are for Namibia if a BIG is not introduced. This includes rising levels of poverty, inequality, unemployment and crime as well as general social tensions. Thus, it seems that despite and perhaps because of the dire economic circumstances, a national BIG would be a necessary intervention as part of a 'turn-around strategy', labour expert Herbert Jauch warns.
Rinaani Musutua of the BIG Coalition of Namibia and Jauch say while some have argued that the costs of implementing BIG relegate it to “wishful thinking”, there are many ways to finance a BIG realistically and under current conditions.
“There are many ways that Namibia could finance BIG. The first and most important thing to understand about the cost of BIG is that it is much less costly than it sounds. When considering the initial cost of BIG, one needs to understand that its net cost is substantially lower,” Musutua explained.
Calculated on a N$500 monthly grant to eligible Namibians aged 18 to 59, the real cost of a BIG scheme would total around N$4 billion annually, which equates to around 5.5% of the budget, Jauch and Musutua said.
This is based on around 1.14 million eligible recipients.
“Financially it seems possible with some shifts in the national budget as well as new measures, for example a resource tax and the establishment of a sovereign wealth fund to ensure that national resources benefit the public as a whole and not just a few individuals,” Jauch says.
Musutua adds that “despite Namibia's current economic difficulties, a BIG scheme could become an immediate reality and could be affordable depending on the government's political will.”
BIG would not only directly put food in the mouths of thousands of food insecure Namibians, but “will provide the much-needed economic stimulus and an effective anti-poverty measure.”
They say one way to recover BIG costs is through VAT as the recipients of the grant will use parts of the money to purchase goods and services on which VAT is levied.
“Thus around 10% of the BIG payments will be recovered though VAT,” Jauch explained.
Moreover, Musutua explains that “to effectively reduce inequality in Namibia, the most obvious options for government would be to raise income tax rates for high income earners as part of BIG funding.”
She notes that around 300 000 Namibians earn above the personal income tax threshold of N$50 000 a year, and while BIG will be paid to all of them, the money can be recovered through income tax adjustments.
“Also, higher income earners could be taxed slightly higher to achieve a redistributive effect in favour of low-income earners.”
Another recommendation by experts is to dedicate a portion of the SACU revenues to finance BIG, and to consider a natural resource dividend fund model by using mining and fishing taxation revenues as a financing tool.
Jauch pointed out that a BIG is likely to make interventions like the food bank and disaster relief measures superfluous.
Jauch and Musutua stress the benefits of implementing a BIG as soon as possible, as a critical measure to address cyclic poverty, food insecurity, and other social dilemmas the country has been grappling with for decades.
Jauch says the focus on implementing a BIG need to viewed not only on its cost, but its longer-term benefits.
“Reduced poverty, improved educational outcomes, better health standards, reduced crime levels, great social cohesion.”
They stressed that BIG would constitute a direct economic stimulus package by creating local demand for basic consumer goods and thus it would “be a counter-cyclical economic intervention to halt and possible reverse the economic downturn that has taken hold of Namibia and many other countries in the covid-era,” Jauch says.
Musutua concludes that BIG “is an investment in human development.
More than 50 million people in the Southern African region face food insecurity due to challenges brought by Covid-19, according to the Southern African Regional Vulnerability Committee in its Regional Vulnerability Assessment and Analysis (RVAA) Programme report.
According to the 2020 Global Report on Food Crises, released by the United Nations, 400 000 people in Namibia are estimated to be severely food insecure, while 800 000 were in a stressed food situation.
Musutua pointed to a July 2020 UNDP report that recommended the immediate introduction of temporary BIG schemes in the world's poorest countries, including those were poverty and hunger are rife and the pandemic had worsened their vulnerable incomes and living standards.