Ending poverty in Namibia, with income security for all

By Steven Shafarman

Namibia, in southwest Africa, is one of the poorest countries in the world, with a high rate of AIDS and many of its 2.1 million people living on less than $1 a day. But it may be leading the world in showing a way to end hunger and poverty.

The German magazine Der Spiegel has an article about the remarkable successes of a Basic Income Grant experiment in the village of Otjivero. I’ve been following the program since shortly after it began in January 2008, and I contributed money to help fund it. It’s scheduled to run through the end of this year, and the organizers hope it will become a model for the nation, the continent, and the world.

As the article describes, moreover, the program is doing much more than ending hunger and poverty. There have been dramatic improvements in health outcomes, school attendance, reduced crime and alcoholism, and a significant increase in entrepreneurial activity and employment.

This is one of the most hopeful and important breakthroughs in the world today, though it has not been reported by any American news outlet (there have been earlier stories in the BBC and AllAfrica.com). Please circulate this news widely.

This is how our government ought to be investing our foreign aid dollars, and what the Gates Foundation, World Bank, International Monetary Fund, and other aid agencies and charities ought to be supporting. They should pay for expanding the Otjivero program to the whole country — and could do so for less money than they are currently spending on piecemeal programs.

The Der Spiegel article is here. (It’s in three parts: Part one is “How a Basic Income Program Saved a Namibian Village. Part two is “A Village of Entrepreneurs.” Part three is “‘I’m Doing Very Well.’”)

The Namibia pilot program was organized by a coalition of church, labor, health, and social justice organizations. The coalition’s web site has a good description of the program and its advantages compared with conventional aid programs reasons, here.

The coalition recently prepared a comprehensive assessment report that includes a  discussion of how it could be implemented nationwide. For your convenience, copied below are the executive summary and concluding remarks. The complete report is a 103 page pdf, here .

Similar ideas can be applied in any country, including the United States. That’s the subject of my blog, IncomeSecurityForAll.org, and my book, Peaceful, Positive Revolution: Economic Security for Every American.

Steven Shafarman

MAKING THE DIFFERENCE! THE BIG IN NAMIBIA.

EXECUTIVE SUMMARY

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.