Is a universal ‘Basic Income Grant’ feasible in Namibia?

The campaign for a ‘basic income grant’ is based on principles of equity and social justice. But critics argue that cash transfers for all are unaffordable, especially in poor countries. A pilot project in Namibia demonstrates that a universal Basic Income Grant (BIG) could be both effective and affordable.

Namibia’s Basic Income Grant (BIG) pilot project is the world’s first universal unconditional cash transfer. It transfers N$100 (US$13.5 approximately) every month to all residents under 60 years old of the Otjivero-Omitara area near Windhoek. People over 60 years are excluded only because they already receive a social pension from the government. Unemployment, hunger and poverty were very high in this area when the BIG project started.

The pilot project is for two years, from 2007 to December 2009, but this could be the first step towards a BIG for everyone in Namibia. Funds for the project were raised through voluntary contributions. An evaluation conducted after the first year of implementation combines data from a baseline survey in November 2007, panel surveys in July and November 2008, as well as qualitative data from key informants and a series of individual case studies. It finds that:

• The community responded positively by establishing its own 18-member committee to advise residents on how to spend the BIG money wisely.
• Family members who lived outside the area moved into Otjivero, attracted by the BIG, even though they were not eligible for the grant.
• Household poverty dropped significantly: residents below the food poverty line fell from 76 percent to 37 percent within one year. Amongst households who did not host in-migrants, food poverty dropped to 16 percent.
• People engaged in income-generating activities rose from 44 to 55 percent, and productive incomes increased by 14 percent. A local market was created as a result of increased buying power.
• Child malnutrition reduced significantly: the number of underweight children fell from 42 percent to 10 percent.
• Before the introduction of the BIG, almost half of school-going children did not attend school regularly. Pass rates stood at 40 percent and drop-out rates were high. Many parents were unable to pay school fees. After the introduction of the BIG, nearly 90 percent of the parents could pay fees, nonattendance due to financial reasons dropped by 42 percent, and drop-out rates fell from 40 percent to almost zero.
• Access to health services improved, as local residents reported they could now afford to pay the user fee charged of N$4 (US$0.5) for each health visit.
• Average household debt fell from N$1,215 to 772 (US$164 to 104 approximately), and savings increased, as reflected in increasing ownership of large and small livestock, and poultry. Could the pilot project be scaled up? The costs of a national BIG in Namibia are substantial – estimated at N$1.2–1.6 billion per year (US$160 –214 million approximately), or 2.2–3.0 percent of GDP.

Figure 1 -  BIG helped to reduce child malnutrition significantly. The number of underweight children fell from 42 percent in Nov 2007 to 17 percent in Jun 2008. (Source - Making the Difference! The BIG in Namibia, Basic Income Grant Pilot Project Assessment Report)  (Larger version)

However, a moderate increase of value added tax (VAT) and income tax rates could finance this. Other options include re-prioritising the national budget and introducing a special levy on natural resources. Namibia's tax capacity exceeds 30 percent of national income, but the current collection rate is below 25 percent. This excess capacity to raise tax revenue exceeds the costs of a national Basic Income Grant, making it fiscally affordable.

Dirk Haarmann
Evangelical Lutheran Church in the Republic of Namibia (ELCRN)
P.O. Box 5069, Windhoek,
Namibia
cd.haarmann@gmx.ne