Give the People Money: Ending African Poverty with a Basic Minimum Income

“In this new century, millions of people in the world’s poorest countries remain imprisoned, enslaved and in chains. They are trapped in the prison of poverty. It is time to set them free… Overcoming poverty is not a gesture of charity. It is the protection of a fundamental human right, the right to dignity and a decent life” – Nelson Mandela

In my first post I outlined what I see as the goal of development. Which is to give everyone ability to live their lives with dignity. Which means an adequate and improving quality of life, economic opportunity and security, physical security and good governance. The antithesis of this is poverty, and ending poverty is Africa’s core developmental challenge.

Poverty, as defined by Professors Lilian Chenwi and Danwood Chirwa is ‘a state in which a person is unable to live a long, healthy and creative life, nor to enjoy a decent life worthy of self-respect and respect of others’ [1]. The simpler definition is having to live on less than US$ 1.9 a day. According to the World Bank approximately 43% or 330 million African are living in poverty.

Poverty is hard, grinding and often degrading. It manifests its itself in hunger and malnutrition, poor health, lack of education, and social and political discrimination. Poverty is often self-perpetuating, with those born into it often remaining in it because of the lack of opportunities and resources. Poverty is insecure as those living in it are most likely to be victims of violence and conflict. Poverty is the worst and most degrading form of underdevelopment, consigning its victims to unnecessarily harsh lives and wasting their potential. If nothing else, then Africa’s development must be defined by how it pulls its people out of poverty and allows them lead fulfilling lives and reach and exceed their potential.

To end poverty, we have to empower the people living in it. Those living in poverty are not there by choice, it is an accident of birth and circumstance. They lack the resources and the opportunity to climb out of poverty. The solution is thus simple, to provide Africa’s most underserved citizens with these resources and opportunity and we can do that by giving them money. By ensuring that every person living in poverty has a Basic Minimum Income (BMI), which they can use as they see fit to improve their lives. There is growing evidence from Africa that this works. That a BMI not only enables people to improve their circumstances but also to invest in their futures and it has positive impacts on health, education and security. If Africa is serious about ending poverty, then we have to seriously consider the option of a BMI.

Basic Minimum Income – the concept and evidence

The concept

A BMI is a relatively simple idea. It is a cash transfer that gives everyone in society who needs it enough money to live on. A BMI aimed specifically at relieving poverty would have 4 key characteristics that separate it from traditional welfare programs:

  • all members of society living below the poverty line are eligible to receive it,
  • the BMI is unconditional, you do not have to work, or go for any training to receive it,
  • it is enough to cover the basic needs of those who receive it,
  • It is guaranteed for as long as they are under the poverty line.

At its core the BMI is about guaranteeing a minimum standard of living throughout society through cash transfers to all those who for whatever reason are below the poverty. By its nature it is not discriminatory as it is available to all, neither does it subject the poor to the humiliations and bureaucratic nightmares of means testing, forced job hunts or training that are the hallmarks of modern day welfare systems.

The evidence

A BMI or some variant has or is being tried in various places across Africa, most notably South Africa, Namibia and Kenya, and the results show that not only does a BMI reduce poverty it also has significant impacts on the health, education, security and quality of life of those who receive it.

In South Africa the Social Security Agency (SASSA) distributes what are called social grants. Which are cash payments given to the most vulnerable groups in society and there are seven types of grant that the agency gives out.

Research done on the impacts of the social grant system has shown a number of significant impacts. First that social grant system has been sufficient to lift many households out of poverty (page 37 of this study). Second, the research shows that the grants in particular the child support grants have been crucial in reducing poverty in women headed households and empowering them in their homes and communities. Furthermore, the child support grant has enabled parents to be more positively involved in their children’s education, such as reading to them and helping with school work and ensure that their children were properly nourished and received healthcare. UNICEF studies has further shown that the child support grant has had a positive impact on school attendance and healthcare as well as reducing risky adolescent behaviour such as unprotected sex, drug and alcohol abuse and criminal activity.

In Namibia, in 2008 they piloted one of the worlds first basic income projects called the Basic Income Grant (BIG) in the Otjivero settlement and Omitara town. Both of which were noted for high rates of poverty, insecurity and poor health. The grant was simple, each person would get a monthly unconditional cash grant of 100 Namibian dollars (about US$7). With the grants for those under 21 going to their primary care giver, which was usually their mother. The report on the impacts of BIG shows details its positive impacts which are notable not only for being positive but also for how many areas of people’s lives it impacted.

  • Severe poverty was reduced by 54% and food poverty was reduced by 56% in one year.
  • There was a 36.5% drop in crime in crime in the areas where BIG was trialled.
  • Just six months after BIG was introduced child malnutrition dropped by 52%.
  • Drop-out and non-attendance rates at schools went from 30-40% to 5% after the introduction of BIG as parents were now able to pay school fees.
  • In contradiction to the arguments that a basic income would discourage work employment actually rose by 9% after the introduction of BIG.
  • BIG also helped people start and grow their own small businesses, as the extra income was used by people to start and/or invest in their own businesses as well increasing demand in the area as people now had some money to spend.
  • BIG also allowed people to save and invest in their futures. 40% of those who received the grant saved it. 31% used some of the money to fix their homes, 9% invested in livestock and 11% paid back debts.

Unfortunately, in 2010 due to politics the program was ended and essentially forgotten. What stands out is that it was able to achieve so much in reducing poverty and improving living standards over such a short period of time.

In Kenya a U.S. based charity called Give Directly which champions unconditional universal income cash transfers, trialled them in a village in Western Kenya between 2011 and 2012. With recipients receiving around US$ 274 over the course of the year, and the results are very similar to those in Namibia:

  • The transfers significantly reduced hunger, 30% overall and 42% for children.
  • The transfers enabled the recipients to invest in livestock and their own small businesses. With income from livestock increasing by 48% and income from self-employment increasing by 38%.
  • The transfers increased consumption and thus economic activity in the village.
  • The transfers led to increases in the psychological well-being of the recipients and their families.
  • Notably (again), despite the assertions of many critics the transfers did not increase spending on alcohol, tobacco or gambling.

The examples in South Africa, Namibia and Kenya show remarkably positive impacts not just in poverty reduction but in improving healthcare, education, the well-being of children, women’s empowerment, employment, security, small business start-ups and growth, and long-term savings and investment. Furthermore, the predictions that “they would just spend it on booze and gambling and entrench laziness” were also shown to wrong. These results show two things first that poverty is not a result of being lazy or bad, rather it is a result of being stuck in a poverty trap, where the lack of resources (namely money) prevents people from being able to live with dignity and plan for the future. Secondly, the impoverished are not stupid, given the resources and the opportunity they can and will make the right choices for them, their families and their communities.

How can we do this in Africa?

If the evidence shows that a BMI is an effective and empowering tool for poverty reduction in Africa the question then becomes, how can we do it? The usual response is that we can’t. That African nations do not have resources to fund such a program given the high levels of poverty on the continent and that governments have to invest in a number of areas such as infrastructure, education, healthcare, security etc. which over the medium to long-term will reduce poverty. My response to this is threefold, first, that poverty is an issue now and every single day for hundreds of millions of Africans. Secondly that short-term significant decreases in poverty will not increase economic growth but make it more sustainable over the long-term and third if we get creative we can find the money for BMI.

Finding the money

One idea for funding a BMI is called a negative income tax. The idea is that a progressive income tax system be implemented where people earning below a certain income threshold receive a payment from the government rather than paying tax to the government. This is offset by those who earn above the threshold who pay progressively higher taxes depending on their income. However, this requires a broad and deep income tax system which due to the lack of formal employment on the continent many African countries do not possess.

My personal preference is not to tax the income of Africans, but to tax the profits of those making money off of Africa, through more efficient and increased resource and foreign profit taxes. In a previous post I discussed how through reforming its tax systems, African countries could get more tax revenues from the extraction of natural resources and the profits made by foreign corporations in Africa. For too long Africans have not benefited from the wealth of their land that helps fuel the global economy and the profits made in Africa by global corporations are spirited away to the benefit of shareholders in New York or London. If African nations taxed those profits and resource extraction properly, much if not all of the money needed to fund a BMI could be found, governments would be able to continue to fund all the other things they use ordinary tax revenue for and the people of Africa would finally see the benefits of the fruit of their land. Furthermore, as the examples show a BMI would itself increase the tax revenue of governments. With disposable incomes people would be able to buy goods and services, save, invest and start businesses all of which are taxed by governments around the continent. And as people rise out of poverty, and their incomes grow and become more secure they can be gradually taken off the BMI, which would over time reduce the size of the payments that governments would have to make.

Africa will rise when we end poverty

The English writer Eli Khamarov once said that “poverty is like punishment for a crime you didn’t commit”. The hundreds of millions of Africans living in poverty are the victims of this cruelty, and through no fault of their own they have, as Nelson Mandela put it, been deprived of “a fundamental human right, the right to dignity and a decent life”. Since independence African leaders and policy makers have unfortunately made choices and implemented policies which have failed to break and, in some cases, caused and entrenched the cycle of poverty on the continent. However, Africa need not be defined by its poverty, Africa does not have to be the basket case of the world. There are still options and policies, like BMI, that our leaders and policy makers could make that could end poverty in Africa.

Some may ask, why this policy? East Asia and the West pursued the traditional poverty eradication path of industrialisation and this is what Africa is trying. However, there are two key issues of pursuing poverty eradication through economic growth and industrialisation. First, industrialisation takes time, even the quick industrialisation of East Asia took at least 3 decades. Secondly industrialisation is a painful and unequal process. In both East Asia and the West industrialisation has been accompanied by highly unequal distribution of wealth, terrible labour conditions and it hasn’t pulled everyone out of poverty, hence the need for social safety nets. And to this day there remains pockets of citizens in the worlds most industrialised economy who live in relative poverty. In addition, a BMI does not mean you must abandon a nations aspiration for industrialisation or socio-economic growth, rather I believe it would speed it up. It would help push people out of poverty now rather than in 30 years. It would ensure that no one is left behind by a changing economy. And importantly to the process of industrialisation would create a significant number of people with disposable income who will be able to buy locally produced goods and services.

The evidence shows that when empowered, when given the resources and the opportunity Africans living in poverty can and will rise. The solutions to the unfulfilled potential of our continent lies not in SDG’s, or debt fuelled infrastructure or the benevolence of the developed world, but in giving our people the tools to fulfil and surpass their own potential. To do that we must invest in them, we must address our central developmental challenge of poverty by ending it. To do so we have to be creative and brave. Exploring and implementing policies like a basic minimum income is a way to do so. Ending poverty in Africa will turbocharge economic and social growth, and it will also allow hundreds of millions of Africans to live lives of dignity, and if nothing else, that is development.

[1] The Protection of Economic, Social and Cultural Rights in Africa (2016), edited by Danwood Mzikenge Chirwa, Lilian Chenwi, p.12-13

Also published on Medium.