BIG ‘affordable’ despite economic downturn

Tujoromajo Kasuto

MICHAEL Samson, a Research Director at South Africa’s Economic Policy Research Institute (EPRI), says a universal (Basic Income Grant) BIG during an economic crisis is affordable because the cost depends on a number of factors, including the benefit size, how delivery interacts with other grants, and the financing approach.

According to him, the most important cost is the net cost after accounting for the tax system’s recovery.

He also points out that the overall tax burden is fully decided by the amount of money shifted from net payers to net receivers.

“Previous costing exercises suggest that the cost of a universal BIG would fall in a range of 1 to 4 percent of GDP. Namibia has additional tax capacity to cover the cost of the BIG,” noted Samson

The researcher further explained that in a nation such as that of Namibia, with high inequality tax measures can be used to achieve these goals such as capital gains taxes.

Samson said this during a press conference held by the Basic Income Grant (BIG) Coalition of Namibia this week.

Samson explained that a Basic Income Grant should be seen as a crucial tool for economic recovery, especially Namibia’s triple burden of widespread poverty, inequality and unemployment, thus he deems it necessary and affordable to implement universal BIG.

The Basic Income Grant Coalition has been calling for a universal monthly grant for all Namibians aged 18-65 of 500 Namibian dollars per month rather than an ineffective targeted approach

Samson contended that targeting always excludes many of the poorest and itself is an expensive and wasteful exercise for the government and people.

The grant was proposed as a national effort to reduce poverty, to which Samson notes that initial estimates indicate that a modest BIG can halve poverty and cut extreme poverty by two-thirds or more, as he says, the global response to the pandemic indicates that more universal social grants offer the most effective remedy.

While BIG has a specific social purpose of reducing poverty, it is also associated with economic growth impacts, making a crucial economic recovery element.

BIG can also stimulate the economy as it increases buying power allowing people to become consumers of locally produced basic goods.

This spillover occurs in the local economy through the rise in demand including a decline in poverty and a rise in employment.

130 international BIG case studies also found that the recipients of BIG were four times more interested in launching a new business than their counterparts who did not receive the grant

This comes as the government has decided to revive and convert the Food Bank and the Feeding Scheme for the Marginalised People into monthly cash payments, as the first step to phase in the Basic Income Grant.

The Ministry of Gender Equality, Poverty Eradication, and Social Welfare oversees the implementation the two food assistance programs, targeting the poor and most vulnerable people living in urban and rural areas, as well as the marginalised people states that the focus of the transition is on existing Food Bank and Special Feeding for the Marginalised beneficiaries for now.

The roll out to more beneficiaries will only take place should once there are adequate financial resources.

The program’s main goal is to increase food access to the targeted communities in order to contribute to the eradication of hunger and alleviation of extreme poverty in the country and to strengthen the existing in-kind social assistance programs of the Food Bank and Special Feeding for Marginalised people.

The Food Bank program is currently operational in 28 constituencies, serving 9,967 households across all fourteen regions. The appropriated budget for Food Bank food parcels for 2021/2022 financial year is N$61 million.

The Special Feeding for the Marginalised, on the other hand, currently has a total coverage of 29,004 households operating in 10 regions (Kavango East, Kavango West, Kunene, Omaheke, Ohangwena, Omusati, Oshana, Oshikoto, Otjozondjupa and Zambezi).

This program’s appropriated budget is N$50,575,000, for 2021/2022 financial year. The current Food Bank and the Special Feeding for the Marginalised is implemented in the form of food aid as opposed to food assistance.

While food aid help beneficiaries in the form of basic food items, food assistance involves the provision of support in the form of cash, making beneficiaries actors in the choice of food they need

Therefore, the Ministry says the cash transfer is efficient and cost-effective thus maximising the number of people reached, that is also known to have a multiplier effect on the local markets.

The ministry has not revealed exactly how much each recipient would receive.

 

By Observer