Picture: REUTERS/Mike Hutchings/File – Wind turbines produce renewable energy outside Caledon, South Africa, May 20, 2020. South Africa’s
By Isobel Frye
South Africa’s Just Transition agenda earned global approval at COP27 for being on deadline, but also for its depth and detail. Now the money deals have to be closed for the R1.5 trillion five year Just Energy Transition Investment Plan (JET IP), a plan that was released with hours to spare before the opening of COP27.
Despite the $8.5 billion financing secured in Egypt, there is still a significant shortfall of R700 billion after the totting up of what government hopes to borrow from domestic banks, domestic development finance institutions and the New Development Bank.
South Africa appears to have the most debt-averse Minister of Finance. He begrudges ordinary South Africans bread on their tables, saying the R350 grant is not affordable and yet the Presidential Climate Commission’s ambitious and costly plan last week got the thumbs up from his Cabinet. Are there two centres of power in government?
Another actor on this stage is Trevor Manuel, finance minister between 1996 to 2009. He rose to prominence during Apartheid in the Western Cape as a leader of the United Democratic Front, the movement that was united in its calls for equality and democratic rule, where the value of one person held as true as that of another, regardless of race and gender.
Since serving at the behest of government as the Minister of Finance, Manuel has also served with Rothschild Bank and is currently the chair of Old Mutual, a bastion of finance capital since 1845. He is also one of South Africa’s investment envoys.
Manuel vehemently opposed the call for a universal basic income grant on the release of the 2002 report of the Committee of Enquiry into a Comprehensive Social Security System (the Taylor Report).
His reason at the time, a time when South Africa had two successive years of a budget surplus, was that the country could not afford it 1994 brought formal democracy, but it did not bring equality. The well being, the welfare, of the majority of South Africans had been systematically attacked for generations, all too frequently enforced by the barrel of a gun or the threat of imprisonment. The resultant state of dispossession was not fixed by the abolition of Apartheid. But we had a Constitution that contained a Bill of Rights that promised to set about dismantling the violations and indignities of the past, promising healing and restitution. Guaranteeing equality and dignity and promising that the state would use all its resources to do so.
For this there clear was no quick fix. But the Constitution contained a number of directives, and global lessons abounded for how to avoid being sucked into the foolish hubris of post – colonial rulers studied and espoused by Franz Fanon or immiserated through adopting the savage neo-colonial demands of the international finance institution’s structural adjustment programmes.
One of the constitutional directives was to build an inclusive, universal social security, a guarantee of income security that combined contributory schemes for the employed with non contributory grants people who were not – children, pensioners and the unemployed. The Taylor Report of 2002 was a thoroughly researched roadmap for how to do that. The committee had people from the private sector and national Treasury, independent experts and representatives from departments of social development, health, transport and ancillary line departments as well as Alliance partners.
The unemployment rate in 2008 was 28.7 percent, or 5.9 million people. In 2022, the unemployment rate is 44.1 percent. That is 12.3 million adults who don’t have an income, condemned to be beggars in the country of their birth. They are effectively surplus to the functioning of this economy that according to Trevor Manuel’s recent riposte, can’t afford them.
But if the phased-in recommendations for a universal social security system built on the foundation of a universal basic income grant had been adopted as per the recommendations of the Taylor Report, if the leaders of the new democratic dispensation had been guided by the instructions of the constitution and had been mindful of the lessons of the international community, then people would have had a safety net when the global crisis of 2007 to 2008 and its repercussions hit South Africa.
Local demand would have continued, sustained by state distribution of incomes when the market failed. Economic multipliers would have raised incomes and revenue, creating effective employment multipliers. This would have reduced the trajectories of inequality, unemployment and poverty that continue to tighten their stranglehold today.
Currently South Africa needs to attract R700 billion to fund the shortfall of the JET IP. Word on the street is that the money could be found, depending on the willingness of the state to lessen some structural constraints, which invariably include reducing the rights of workers, reducing the tax rate of corporate profits and privatising state utilities at a knock-down price. And in this same week as this shortfall was announced, investment envoy Trevor Manuel goes viral saying that social grants are unaffordable and don’t even think of a universal basic income grant.
The definition of the Just Transition that we are seeking to finance for is as follows: “A just transition aims to achieve a quality life for all South Africans, in the context of increasing the ability to adapt to the adverse impacts of climate, fostering climate resilience, and reaching net-zero greenhouse gas emissions by 2050, in line with best available science. A just transition contributes to the goals of decent work for all, social inclusion, and the eradication of poverty.”.
In an international policy brief released last week, Social Protection in Climate Action, the authors argue that where people are concerned about losing their jobs and incomes, they will resist climate action. Contributing author SPI case-studied the need to provide coal miners in Mpumalanga with a permanent guaranteed income to lessen the impact of their inevitable retrenchments.
In June 2022 South Africa’s current debt to GDP was 70.1 percent. The debt to GDP ratio of Japan is approximately 234 percent. A decent universal basic income grant would add about another 3.5 percent to government debt. The returns would be immediately felt by the fiscus through VAT returns on people’s spending. Feeding people and growing jobs.
South Africa is rightly lauded for the development of its Just Transition framework, and the adaptation and mitigation plans are important for harnessing the country’s future growth potential.
But as National Treasury fights like hell against writing the R350 grant into the statue books, making good on the Constitution, the greatest promissory note, the groundswell amongst ordinary people and the ruling party’s cabinet for universal income support is heartening.
Public finance is a discipline that is meant to enable national priorities, but in South Africa the macro-economic framework is routinely invoked to block any distribution to the poor.
South Africa has done well on the Just Transition framework. As a leading South Africa’s policy makers have moved cleverly, securing global support for what will have to be done after all. But clever does not put food on the table. Universal social security does. Universal basic income security must be a bankable pillar of a just transition.
Frye is the Director of the Social Policy Initiative.