Namibia – UBI success and institutional failure

by Gery Petrova | Jul 14, 2020 | News, Opinion

1. Namibia – country background

A South West African state with a troublesome colonial history, Namibia has a population of around 2,5 million people and is one of the least populated countries in Africa due to its extremely dry climate. The country is rich in natural resources like – diamonds (annual value of mined diamonds around 1 billion US dollars)¹ , uranium (4th largest producer in the world), gold, zinc, copper ². Other important industries are fishing, agriculture and tourism.

Unfortunately for the majority of the Namibian people the benefits from an abundant national wealth are not equally distributed. Namibia ranks as one of the most unequal places on the planet where 50% of the population live on less than 5.50 USD per day ³ and in 2017 27% ⁴ were living below the poverty line. A place where people have not enough food to sustain their nutritional needs.

On top of poverty, hunger and the impact of climate change contributing to suffering, there are some additional challenges:

• Unemployment rate 2018 – 33.4% where female joblessness is prevalent ⁵
• HIV/AIDS epidemic – number one cause of death ⁶
• Gender inequality and violence against women and children ⁸
• Child forced labour and child trafficking ⁷

Children are trafficked within Namibia for forced labor in agriculture, cattle herding, domestic work, and commercial sexual exploitation. San children are particularly vulnerable to forced labor on farms or in homes. ⁷

The list goes on.

2. The Universal Basic Income Pilot Project in Namibia  ⁹

In the context of the socio-economic situation described above The Basic Income Grant Coalition comprised of citizens’ organisations (the Council of Churches, the National Union of Namibian Workers, the National NGO Forum, the Namibian Network of AIDS Service Organisations, the Legal Assistance Centre, and The Labour, Resource and Research Institute) funded and ran a pilot project the purpose of which was to trial and study the application of Universal Basic Income in Namibia.

From January 2008 to December 2009 every resident of Otjivero – Omitara (about 1,000 people) received a monthly allowance of (N$80 = USD 4.5 ) which was paid regularly until March 2012.

The research had the following results:

• social cohesion – the community established an 18-member committee to advise members on how to spend their allowance wisely
• it attracted migrants who could benefit from the favourable environment. More sharing meant that the value of the monthly allowance dropped from N$89 (USD 5) per month in January 2008 to N$67 (USD 4) in November 2008
• poverty dropped by 39% among residents who were sharing with migrants and 60% in cases where the allowance was spent only by the resident
• income-generating activities like brick-making, baking of bread and dress-making jumped 15% and a local market was created as people had a bigger purchasing power
• by November 2008 child malnutrition decreased 32%
• people with HIV could afford better food and medication
• school drop-out rate fell to almost 0%
• healthcare became more accessible to residents as they could afford it
• crime fell by 42%
• the basic income grant empowered women and made them more secure as they did not have to engage in transactional sex services

In conclusion, the pilot project had a dramatic overall positive effect on the selected community. The Basic Income Grant Coalition calculated that the cost for nationwide implementation of unconditional universal basic income for all would be N$ 1.2 – 1.6 billion (USD 71 – 95 million) per year, equivalent to 2.2 – 3% of Namibia’s GDP (2019 – 12.37 USD Billion) ¹⁰

In short, UBI in Namibia was and is feasible. The missing component then and now remains the lack of political will to apply the project on a national level.

3. Government response regarding the pandemic crisis in Namibia

Following from the brief summary of state of affairs in Namibia and an example of a possible solution to the human suffering caused by institutional inadequacy and economic logic that produces inequality, I will now list the measures that the Namibian government has taken to tackle the health/economic crisis triggered by COVID-19.

1. Emergency Income Grant ¹¹ – one off payment of N$750 (USD 45) for people experiencing financial difficulties caused by COVID. The government allowance should cover 749 000 people in need and will cost the government N$562 million (USD 34 million).

Some concern regarding the stimulus: ¹²

• the sum is insufficient to sustain an ongoing lockdown and future economic inactivity
• the grant is conditional – employed persons and people who already receive social benefits do not qualify being supported by this policy
• to obtain the one off payment citizens must own a mobile phone and an ID number

The EIG is a self-nomination process. Therefore applicants are required to have, or make use of an active cell phone number, and a valid Namibian ID number.

Applicants must SMS their name and ‘EIG’ to 141222 to start the registration process, or dial *141*222#. After the approval of the application by the ministry, applicants will receive a token from the bank they have selected in the application process. ¹²

• there is a considerable distrust among the population about potential problems with the distribution system and application process
• the policy is not universal, it does not cover every single Namibian which means it fails to act as an emergency safety net for all

2. Tax-related measures:¹³

• repayment of overdue VAT to companies, N$3 billion (these are funds the government already owes to VAT paying enterprises)
• payment of overdue invoices for goods and services provided to the government – N$800 million
• Tax-back loan scheme for tax registered and tax paying (PAYE) employees and self-employed affected by the pandemic.
• Extended deadline for filing taxes. Mandatory payment date remains the same.

These measures are very far from a policy supporting the business community given the implications of the crisis.

3. Employment-related measures ¹⁴

3.1. Subsidy for employers in the construction, tourism and aviation sectors. Workers will receive 17% of their wage for 3 months.

3.2. Employers who are benefiting from measures should not be firing any of their workers or reducing their salaries with more than 50%

3.3. The programme will benefit 7,900 employers employing 65,420 employees. The budget amounts to N$150 million (USD 8 million) which is approximately 25% of the total wage bill.

3.4. Grants for workers affected by COVID-19. These are conditional application based stimulus that has the potential to help 56,000 to 117,000 applicants.

3.5. Government and business owners will be allowed to negotiate a temporary 20% drop in salaries.

How these measures can be interpreted:

• insufficient funding of affected workers
• conditions and administrative obstacles for receiving help
• potential to undermine workers income for a long period of time
• the policy does not cover all workers in Namibia

4. The Economic stimulus measures which will be administered by banks consist in: ¹⁵

4.1. Tax-back loan scheme for businesses and individuals

4.2. Agricultural and non-agricultural and small business loan programmes

Here the government enables the banks to make businesses dependent on loans which creates more instability by increasing debt in society. Hardly an adequate solution for the needs of business owners, workers and their families.

5. Water subsidy equal to N$10 million. This will enable water points to be kept open without people needing to use water cards.

Probably the bare minimum a state can do to prevent riots and social breakdown.

There is a general concern about administration and distribution of emergency funds based on past and present experiences. In a report called COVID-19 Emergency Procurement ¹⁶ by Frederico Links the author outlines issues with transparency on spending by government institutions which raises doubts about how much of the already unsatisfactory help will reach people at the bottom of the income chain.

Another report Analysis – Namibia’s National Budget 2020/21 ¹⁷ comments on potential problems with the financial stability of Namibia and its economic future which has direct implications on the wellbeing of the Namibian people.

In conclusion, based on the information above:

• Emergency spending to alleviate poverty and tackle social and economic inequalities was and is needed regardless of COVID-19.
• The ongoing crisis requires working solutions based on unconditional, regular distribution of wealth for all Namibian people in order to sustain their individual sovereignty, dignity and human rights permanently.
• The measures announced by the government are inadequate, insufficient and cruel as they don’t meet the needs of the population.
• Basic Unconditional Income, proven by the BIG pilot project, is feasible and has the potential to create social cohesion, improve the local economy and bring back trust in existing institutions and political leadership.
• To achieve the above the citizens of Namibia have the opportunity to unite and stand behind a clear demand for the implementation of Basic Unconditional Income for all.
• All people have the right to determine their present and future. An unconditional basic income is what will enable them to fulfil their fundamental human rights.

Sources:

1 https://www.kimberleyprocess.com/en/namibia-0

2 https://assets.kpmg/content/dam/kpmg/pdf/2014/09/namibia-mining-guide.pdf

3 https://www.macrotrends.net/countries/NAM/namibia/poverty-rate

4 https://www.macrotrends.net/countries/NAM/namibia/hunger-statistics

5 https://tradingeconomics.com/namibia/unemployment-rate

6 https://www.cdc.gov/globalhealth/countries/namibia/pdf/namibia_factsheet.pdf

7 https://www.dol.gov/agencies/ilab/resources/reports/child-labor/namibia

8 https://evaw-global-database.unwomen.org/en/countries/africa/namibia

9 https://tradingeconomics.com/namibia/gdp

10 http://www.bignam.org/BIG_pilot.html

10 https://www.centreforpublicimpact.org/case-study/basic-income-grant-big-namibia/

10 http://www.bignam.org/Publications/BIG_Assessment_report_08b.pdf

11 https://openknowledge.worldbank.org/handle/10986/33635

12 https://theworldnews.net/za-news/namibia-concerns-over-emergency-income-grant

13 https://home.kpmg/xx/en/home/insights/2020/04/namibia-tax-developments-in-response-to-covid-19.html

14 https://home.kpmg/xx/en/home/insights/2020/04/namibia-government-and-institution-measures-in-response-to-covid.html

15 https://home.kpmg/xx/en/home/insights/2020/04/namibia-government-and-institution-measures-in-response-to-covid.html,

15 https://www2.deloitte.com/na/en/pages/tax/articles/COVID-19-Clarifications-on-the-SSC-economic-stimulus-package-announce-Tax-Alert.html

16 https://ippr.org.na/wp-content/uploads/2020/06/PTN-10-web-1.pdf

17 https://ippr.org.na/wp-content/uploads/2020/06/IPPR_2020_BudgetAnalysis.pdf

Here are some links to resources that might help one understand and relate better to statistical data:

1. Living on one dollar a day – Documentary  
2. The Boy Who Harnessed the Wind – Film based on a true story
3. Namibia: Waiting out a deadly drought – UNICEF video
4. “Anatomy of a bribe – A deep dive into an underworld of corruption. – Documentary

Belgium’s chance for a welfare system revision

by Sophie Van der Does | Jul 10, 2020 | News, Opinion

Like almost every European country, Belgium is facing declining trends of confirmed coronavirus cases. Its government is now looking for a balance between maintaining physical and mental health and restarting the economy. Nevertheless, Prime Minister Sophie Wilmes emphasized that even though the statistics are looking good, citizens must also remain careful, practice social distancing and – when possible – work from home. Belgium’s economic response included a series of tax reliefs relating to corporate income tax and individual income tax. In addition to that, social security authorities have implemented measures to reduce job losses. Those measures include extended deadlines for social security contributions and a guarantee of 70% continued salary. Those who are self-employed, and due to the corona virus are obliged to stop their work, can apply for a ‘replacement’ income. In addition, for regular workers, social security authorities are offering a supplementary sum to the employer, in addition to the continued salary, provided that the sum total (continued salary + supplement) will not be more than the regular salary. Businesses can benefit in various other ways from government support, such as extension of payment terms, loans, and other financial compensations, depending on the size and kind of business (start-up, small business, or big companies, amongst others).                                                                                             

Opinion

Now that it seems that, at least in Europe, the first wave of the corona virus is coming to an end, we can have a moment of reflection. Despite government support for individuals as well as companies, a lot of people still fall outside government support systems. As a result, a large group of people is suddenly without a job and thus without a stable income, and for those who were already on the margins, the impact of the crisis is even greater. To put it simply, the economic consequences of the crisis show how many workers cannot survive after one month without income. Not to mention those on welfare benefits for whom it has not been worth looking for a job for years.

The virus has changed the way we think about fundamental economic questions and gives the Basic Income debate a new dimension. A basic income is an unconditional periodic cash payment to all on an individual basis. It disconnects the relation between labour and income that today, in Belgium as well as elsewhere, is still the leading principle. Of course, there is a difference between the short term economic measures required by the coronavirus crisis, and long-term social and economic legislation: but maybe the crisis can pave the way to a revision of the current restrictive social welfare system.

Sources

Bruegel datasets

Worldometer

KPMG