Forward Steps
Minimum Guarantees for Every Human Being
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Here is the executive summary of a report on a "basic income grant" project in Namibia. For a great illustrated article on this topic, see what Der Spiegel had to say: A New Approach -- How a Basic Income Program Saved a Namibian Village. |
In January 2008, the Basic Income Grant (BIG) pilot project commenced in the Otjivero-Omitara area, about 100 kilometres east of Windhoek. All residents below the age of 60 years receive a Basic Income Grant of N$100 per person per month, without any conditions being attached. The grant is being given to every person registered as living there in July 2007, whatever their social and economic status.
This BIG pilot project is designed and implemented by the Namibian Basic Income Grant Coalition (established in 2004) and is the first universal cash-transfer pilot project in the world. The BIG Coalition aims to practically pilot the Namibian Government's NAMTAX recommendation of a BIG for Namibia. Thus the BIG Coalition regards this project as the first step towards a BIG for all. The BIG Coalition consists of four big umbrella bodies in Namibia, namely, Council of Churches (CCN), the Namibian Union of Namibian Workers (NUNW), the Namibian NGO Forum (NANGOF) and the Namibian Network of AIDS Service Organisations (NANASO). Funds to start the pilot project were raised through voluntary contributions from supporters of the idea from all sections of Namibia's society, and by support from people, churches, organisations and donors in other countries. The BIG pilot project will run for a period of 24 months up to December 2009.
The effects of the BIG pilot project are evaluated on an on-going basis. Four complementary methods were used. First, a baseline survey was conducted in November 2007. Second, panel surveys were conducted in July and November 2008. Third, information was gathered from key informants in the area. Fourth, a series of detailed case studies of individuals living in Otjivero-Omitara was carried out.
This report presents the socio-economic results after the implementation of the BIG for 12 months. The key findings include the following:
- Before the introduction of the BIG, Otjivero-Omitara was characterised by unemployment, hunger and poverty. Most residents had settled there because they had nowhere else to go, their lives were shaped by deprivation and they had little hope for the future.
- The introduction of the BIG ignited hope and the community responded by establishing its own 18-member committee to mobilise the community and to advise residents on how to spend the BIG money wisely. This suggests that the introduction of a BIG can effectively assist with community mobilisation and empowerment.
- As the BIG was only introduced in one particular location, there was a significant migration towards Otjivero- Omitara. Impoverished family members moved into Otjivero, attracted by the BIG, even if migrants themselves did not receive the grant. This points to the need to introduce the BIG as a universal national grant in order to avoid migration to particular regions, towns or households.
- The migration to Otjivero-Omitara affected the data obtained for this study. Per capita income from the BIG dropped from N$ 89 per month in January 2008 to N$ 67 in November 2008. We thus analysed the impact of the BIG, taking the influence of migration into consideration.
- Since the introduction of the BIG, household poverty has dropped significantly. Using the food poverty line, 76% of residents fell below this line in November 2007. This was reduced to 37% within one year of the BIG. Amongst households that were not affected by in-migration, the rate dropped to 16%. This shows that a national BIG would have a dramatic impact on poverty levels in Namibia.
- The introduction of the BIG has led to an increase in economic activity. The rate of those engaged in incomegenerating activities (above the age of 15) increased from 44% to 55%. Thus the BIG enabled recipients to increase their work both for pay, profit or family gain as well as self-employment. The grant enabled recipients to increase their productive income earned, particularly through starting their own small business, including brick-making, baking of bread and dress-making. The BIG contributed to the creation of a local market by increasing households' buying power. This finding contradicts critics' claims that the BIG would lead to laziness and dependency.
- The BIG resulted in a huge reduction of child malnutrition. Using a WHO measurement technique, the data shows that children's weight-for-age has improved significantly in just six months from 42% of underweight children in November 2007 to 17% in June 2008 and 10% in November 2008.
- HIV positive residents' access to ARVs was hampered by poverty and a lack of transport before the BIG was introduced. The BIG enabled them to afford nutritious food and gain access to the medication. This was further enhanced by government's decision to make ARVs available in Otjivero, freeing residents from the need to travel to Gobabis.
- Before the introduction of the BIG, almost half of the school-going children did not attend school regularly. Pass rates stood at about 40% and drop-out rates were high. Many parents were unable to pay the school fee. After the introduction of the BIG, more than double the number of parents paid school fees (90%) and most of the children now have school uniforms. Non-attendance due to financial reasons dropped by 42% and this rate would have been even higher without the effects of migration towards Otjivero-Omitara. Drop-out rates at the school fell from almost 40% in November 2007 to 5% in June 2008 and further to almost 0% in November 2008.
- The residents have been using the settlement's health clinic much more regularly since the introduction of the BIG. Residents now pay the N$4 payment for each visit and the income of the clinic has increased fivefold from N$ 250 per month to about N$ 1,300.
- The BIG contributed to the reduction of household debt with the average debt falling from N$ 1,215 to N$ 772 between November 2007 and November 2008. Savings increased during that period, which was reflected in the increasing ownership of large livestock, small livestock and poultry.
- The BIG has contributed to a significant reduction of crime. Overall crime rates – as reported to the local police station – fell by 42% while stock theft fell by 43% and other theft by nearly 20%.
- The introduction of the Basic Income Grant has reduced the dependency of women on men for their survival. The BIG has given women a measure of control over their own sexuality, freeing them to some extent from the pressure to engage in transactional sex.
- The criticism that the BIG is leading to increasing alcoholism is not supported by empirical evidence. The community committee is trying to curb alcoholism and has reached an agreement with local shebeen owners not to sell alcohol on the day of the pay-out of the grants.
- The BIG is a form of social protection, which reduces poverty and supports pro-poor economic growth. As a national policy it would greatly assist Namibia in achieving the Millenium Development Goals to which the country has committed itself.
- The costs of a national BIG in Namibia are substantial. The net costs will be between N$ 1,2 – 1,6 billion per year, equivalent to 2,2 – 3% of Namibia's GDP. There are various options to finance such a national grant. A moderate adjustment of VAT combined with an increase in income taxes is one option. This would benefit all middle and lower income households in terms of available incomes. Other financing options include a re-prioritisation of the national budget and the introduction of a special levy on natural resources.
- An econometric analysis revealed that Namibia's tax capacity exceeds 30% of the national income. The current collection rate is below 25% and thus Namibia's excess capacity to raise tax revenue significantly exceeds the net costs of a Basic Income Grant. This makes the BIG affordable in Namibia.
- A national BIG would have several medium to long-term benefits. Based on the developments in Otjivero-Omitara, it is safe to argue that the BIG will reduce poverty and unemployment, increase economic activities and productivity, improve educational outcomes and the health status of most Namibians.
CONCLUDING REMARKS
The BIG pilot project in Otjivero-Omitara has shown the wide-ranging benefits of a universal income grant in addressing poverty. The findings contained in this report document the social and economic changes that occurred during the past 12 months – some of them being nothing less than spectacular.
The Basic Income Grant is more than an income support programme. It provides security that reinforces human dignity and empowerment. It has the capacity to be the most significant poverty-reducing programme in Namibia, while supporting household development, economic growth and job creation. A BIG has various developmental impacts. A grant of N$ 100 per person per month would generate a net benefit of over N$ 900 million a year reaching the rural communities in Namibia. It can be argued that this would work as an engine for local economic development. The poor would have the ability to spend larger amounts on locally produced goods and services. This would create more viable and sustainable opportunities for employment in the rural areas. Furthermore, if people are constantly confronted with economic insecurity, they will not be able to engage in entrepreneurial activities. The BIG would therefore provide income security, which has the ability to free resources for entrepreneurial risk taking. A BIG is not an added burden at a time of economic crisis, but an appropriate intervention that will stimulate demand - particularly for basic consumer goods.
The BIG is a form of social protection which reduces extreme poverty and supports pro-poor economic growth. As a national policy it would greatly assist Namibia in achieving the Millenium Development Goals to which the country has committed itself. These goals include the eradication of extreme poverty and hunger, the pro- motion of gender equality, the reduction of child mortality, combating diseases like HIV/AIDS and malaria, and ensuring environmental sustainability. The empirical results in Otjivero-Omitara have shown that a BIG will have a positive impact in all these areas. While the BIG alone cannot solve all of Namibia's social and economic problems, it will certainly make a substantial contribution. One of our findings in Otjivero- Omitara was that the grant has reduced the dependency of young women on men for their survival. The BIG has given women a measure of control over their own sexuality, freeing them to some extent from the pressure to engage in transactional sex.
There is no doubt that the cost of a BIG is substantial - ranging from 2.2% to 3.0% of national income. As shown by the calculations in this report, Namibia has the capacity to mobilise the necessary resources without undermining financial stability. On the contrary, over time, as Namibia benefits from the long term growth impact, the Basic Income Grant will become increasingly more affordable. Moderate adjustments to VAT and income tax, alternatively royalties levied on natural resources, or a shift in budget priorities or a combination of these interventions, will make a national BIG an immediate option for Namibia. Its implementation is thus merely a question of political will.
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Also see: All About the Citizens Dividend
Basic Income Guarantees
Worldwide Network of Social Dividend Advocates |
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