It would cost the government around N$14 billion annually to distribute the Basic Income Grant (BIG) to all citizens aged between 0 and 59 as a buffer against poverty and harsh economic realities.
The Economic and Social Justice Trust’s BIG coordinator Rinaani Musutua in an interview with this publication this week released the latest figures.
She said the total gross cost of the universal monthly BIG of N$500 per person for all citizens aged 0-59 would be N$14.363 billion annually, which is just 3% of the country’s gross domestic product.
“This is undoubtedly a substantial amount, but it is an investment in human development that will improve Namibian society at large in terms of reducing costs in other government programmes, e.g. health and the justice system,” Musutua said.
But there is a catch.
“The government will recover part of this expenditure almost immediately through value-added tax (VAT), as the recipients of the grant will use part of the money to purchase goods and services on which VAT is levied, which brings the net cost down to N$13.03 billion,” Musutua added.
Inequality
During the information-sharing session at New Era, she painted a glaring picture of wealth disparity in Namibia, a country considered among the most unequal in the world.
She said 1 763 individuals in Namibia have a combined wealth of N$440 billion.
Musutua believes the government can further reduce the net cost by clawing back the N$500 from those individuals, which will bring the cost down to roughly N$12 billion per year.
“The BIG’s investment in human development has been proven by empirical evidence from the Otjivero BIG pilot study and other international cases, such as in India and Brazil.
“These studies indicate that BIG will raise the income of all impoverished Namibians, reducing poverty, hunger, malnutrition, infant mortality, school dropouts, crime, etc., leading to a better Namibia and improving individuals’ ability to contribute to Namibia’s economy,” she added.
In turn, this will increase the affordability of the programme over time, further ensuring its long-term sustainability, the social justice advocate said.
“Despite Namibia’s current economic difficulties, a BIG scheme is an immediate reality and affordable, depending on the government’s willpower.
It will provide the much-needed economic stimulus and an effective anti-poverty measure that is currently needed in Namibia to pave the way for economic prosperity,” Musutua stated.
Illicit flows
She also indicated that Namibia loses N$10 billion to corruption and illicit financial flows, N$9.2 billion to debt interest and more than N$10 billion annually to illicit financial flows due to the extractive industry not paying its fair share of taxes.
If the noose is tightened on these loopholes, funds recuperated can be used to finance the BIG, she said, dismissing assertions by critics that there is no money to finance the universal grant.
“The country is not collecting enough revenue from the extractive sector due to possible illicit financial flows, tax evasion and avoidance practices. The 3% royalties paid by mining companies are way too low, compared to other mining jurisdictions such as South Africa, Canada and Australia. Export levies charged by the Namibian government are way too low, at less than 2% average for the 18 different mineral commodities it exports. The government can surely mobilise resources to increase fiscal space for BIG. Rural communities are often characterised by cash constraints, which trap them in subsistence farming or informal labour. A BIG relaxes this constraint,” she advanced.
BIG factor
As politicians burn the midnight oil crafting their manifestos ahead of November’s electoral showdown, their position on the much-talked-about grant is seen by some quarters as one of the chief vote-deciding factors.
Although some presidential candidates have ascertained complete support for BIG, the poverty eradication scheme may not be the panacea for Namibia’s woes.
Others have different ideas, some stating that the BIG should be turned into a youth unemployment grant.
“We principally support the basic income grant, but because of the current economic situation and the high general co-efficiency in which the country finds itself, we would rather support an unemployment grant for unemployed youth than give a basic grant to every person, everybody included,” said Popular Democratic Movement leader McHenry Venaani.
He believes the basic income grant should be turned into a youth unemployment grant to address and cushion youth unemployment, which is the highest at this point.
“Poverty eradication and our strategies shall be addressed in our manifesto in due course,” Venaani, the seasoned lawmaker, said.
Employment over BIG
In his response, Rally for Democracy and Progress (RDP) president Mike Kavekotora said he does not support the notion of fighting poverty through income grants.
“Poverty alleviation is purely and squarely a function of sustainable job-creation and economic growth. We see great growth potential in most of our primary sectors. In the fishing sector, we intend to cull and reduce the seal population over the next five years to one million, and consequently double the revenue from that sector. That will also translate into the creation of 40 000 sustainable jobs,” Kavekotora, an economist-turned-politician, said.
He added that value-addition in the country’s extractive industry will be a critical success factor to unleash the growth potential in that sector, which will result in an increased GDP and GNP.
That, he said, will be coupled with the Namibianisation of the mining sector by increasing Namibia's share in the mining sector to about 50%.
“RDP will capitalise on agriculture as it presents great potential for employment-creation and food security. We will stop all loopholes that have led to the prevalence of corruption in this country, ranging from inflated tenders, illicit financial flows, tax evasion and avoidance of jobs for comrades, favouritism, nepotism and the distribution of resources,” he asserted.
He said the RDP will strive to recover state money taken by individuals through fraudulent means.
“We will adopt economic diplomacy, and close all missions that do not add to Namibian prosperity. All the above will unleash resources to be utilised for social good,” Kavekotora stated.
Short-term
In an interview with New Era, Swanu presidential hopeful Evalistus Kaaronda said due to the high levels of poverty in the country, the oldest political party in the land has no choice but to support the BIG.
“Because of rampant poverty in the country, we have no choice but to support the idea of a basic income grant as an interim or short-term strategy. The longer-term strategy must focus on introducing an industrial policy as the overarching economic policy within which the country’s macro- and micro-economic policies will be set,” the revered unionist in his heydays, said.
“The key answer to poverty alleviation is not handouts through the basic income grant. Initiatives like the Harambee are short-term solutions, but the medium to-long-term plans must address the macroeconomic framework,” said Kaaronda.
He added, “We need an overarching economic policy within which you would set your monetary, fiscal or labour market policies. All of those things have to be set within an overarching macroeconomic policy.”
He noted that at the enterprise level, there is a need for a microeconomic policy that then integrates the same objectives at the macro level.