The Budget Outlook - Response

governance development Budget 2015
Wednesday, 4 March, 2015 - 11:48

In this article, SANGOCO looks at the Finance Minister’s budget speech and the implication that it has on development in South Africa

The South Africa National NGO Coalition (SANGOCO) concurs with Finance Minister, Nhlanhla Nene’s global and domestic analysis and the impact this has on government expenditure for 2015 and beyond. Prudence and discipline is a need for spending resources in the most fiscal balancing way possible. However, more questions arise in our economy, are there future prospects for development given the state that our economy is in? Are we in the near future in a position to focus in inclusive, participatory and growing economy? Perhaps the other concerning factor is whether we can manage this economy, change its structure or accelerate growth or both without making hard political decisions.

Are there future prospects

Global growth has been forecast downwards in many of our trading partners including China, United States of America, European Union and others. Our economy is highly dependent on mineral exporting and therefore exposure to world low commodity demand affect foreign market earnings. Granted we are responding to this challenge by initiating beneficiation in order to produce finished goods and services. Notwithstanding global competition with our trading partners, it would take us some time to establish a competitive beneficiation industry that needs to be supported through skills, finance, and infrastructure.

We are currently struggling to capitalise our own poorly performing State Owned Enterprises (SOEs). Raising capital from the markets to inject into these entities is in itself a challenge both in terms of the mandate that these SOEs have as development agents and the role they play as businesses in the economy. If we regard them as developmental entities serving a developmental state then the model should not be based on private sector profit-driven, but rather a social-oriented entrepreneurial which should be financed from the budget. How on earth do we expect these entities to repay their debt when there is so much mismanagement, corruption and incompetency at the higher level? The state will be required bailouts SOEs due to mismanagement of these resources.

Issuing debt instruments for capitalisation is attracting further problems of increasing state burden that cannot be shifted to any sector but continue to increase taxes. The citizens will end up shouldering the unfair responsibility. Already energy prices are unaffordable for the poor and added to this is the expected tariff increases. The R23 billion that must be raised to sustain Eskom might be from privatisation of non-core assets as Nene has alluded, but it may also come with additional problems as all previously privatised initiatives such as Telkom have. Let us not speculate here and give the Minister a chance since information is not forthcoming due to sensitive nature of negotiations.

The South African Airways (SAA) is continuously failing to perform and yet we still keep changing its leadership with no improvement in performance. One must ask government whether we settle for mediocrity in order to keep people gainfully employed and what the reasons for this are. We have seen some individuals in the management facing court cases that unfortunately never reach any conclusion and at times get out scot-free in the face of damnable evidence and better still, receiving golden handshakes. This time the SAA has reported a net loss of R2.6 billion 2013/2014, as a result of high operating costs, losses on several international routes and evaluation adjustments. The national carrier has guarantees of R14.4 billion. It does not matter that tax payers money is wasted on such poor performance and maybe it is the hen that lays golden eggs for some. I cannot understand that year after year we tolerate this dismal failure.

We are patients without care.

Minister I could not agree with you more. Health is one of the critical sectors that needs resuscitation. It is currently in the ICU [intensive care unit] in other provinces. We have mothers who die needlessly while giving birth. The mortality rate of children under five has improved and we commend Minister Motsoaledi for this tremendous achievement, however, negligence around mothers giving birth by hospital professional staff is not acceptable. One death is one too many. Chris Hani-Baragwaneth Hospital is highly inefficient in managing health care. Patients take more than 12 hours on a stretcher or wheel chair awaiting a decision by a doctor on their condition. It is a stressful experience because some die needlessly in the process. What also worries is the denial by the management and the provincial officials of the status quo.

The facility has been so improved as state of the art health care but the service of our people remains poor. We admire the minister’s work and hope that all these programmes and procedures will deliver on service to our people rural or urban alike. We want to thank for an incremental approach to this sector because it is the backbone of our democracy.

There are people still living in shacks.

Human settlement has been expanding and though there is a substantial backlog, we are convinced that a lot has been achieved. We must however, point out that electrification of houses will be a constraint in the face of what Eskom is going through. The supply side of energy remains a concern. The other concern is the perpetuation of apartheid spatial construct of our urban areas. This points to the need to employ constitutional provision of expropriation of land. Availability of land is key in human settlement development. One cannot underplay the necessity of hard political decisions in the context of redressing the imbalances of the past.

Resourcing education   

Education requires both monetary and non-monetary resources in order for government to deliver on its mandate and targets. We welcome the infrastructure spending especially on the rebuilding over 500 mud schools at the cost of R7.1 billion. An incident in which a learner died after falling into an open pit toilet in Limpopo last year (2014) should be a reminder that the need to invest in putting proper toilets at schools is imperative. It cannot be that after 20 years of democracy, we are still experiencing such a painful occurrence.

We welcome the attention to teacher-learner ratio and teacher training to equip our educators with further skills for an all-round productive capacity. This comprehensive approach to the education sector gives hope that there is light at the end of the tunnel. Issues of curriculum, content, norms and standards need to be addressed. The relationship between school management and educators presents challenges particularly around trade union matters where teachers are above punitive measure even when they are not delivering on their duties.

Post-school education is critical for our economy because this is where high skilled workers are produced. Knowledge economy is something we do not have the luxury of ignoring and our universities and Further Education and Training colleges are imperative to this task of ensuring competitiveness of our industries. It is troubling to say the least to see students unable to complete their tertiary education due to lack of funding. It is even taking time to let applicants of bursaries know their exclusion, making it difficult to engage alternative assistance from other sources. We therefore welcome the cash of R11.9 billion injection on so important a foundation in education. We hope the expenditure will justify our focus in making education the priority it is.

Social development is considering issuing a grant for the unemployed between the 18-59 age group. The NGO sector had vigorously during President Thabo Mbeki’s term of office campaigned for basic income grant, which the government turned down on the basis of affordability. We are now concerned that the proposition or initiative may be brought back. Ideally, we would welcome its implementation but not as an election campaign mechanism for 2016 local government elections because if it is, then we expect fiscal problems of sustainability, especially with downward focused growth and declining revenues, which will obviously increase future budget deficit. South Africa has to avoid the situation in which European countries like Greece find themselves in and having to deal with imposed austerity measures by international financial development institutions. It is wise to leave room for stimulus economic policy approach should the need arise in the future. 

In conclusion, the budget as a whole is a fair exercise and we believe in the efforts of the minister and his team. As non-state actors our primary concern is social security or social protection and we are pleased that to some extent there is work being done. Not all issues have been covered but we appreciate that development is not sacrificed even when economic condition are not favourable.

 

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