Call For Budget Justice Comments on 2013/4 Budget

Monday, 4 March, 2013 - 10:16

We call on Finance Minister, Pravin Gordhan, and the Executive to ensure that government raises and spends public money in a manner that respects universal human rights and contributes to sustainable economic and social development

Budget for the people!
 
As the Minister of Finance Pravin Gordhan prepares to give his 2013 Budget speech, let him remember that the wealth of South Africa belongs to all. Government must collect taxes and spend money to ensure that everyone lives a life of dignity.
 
We call on Finance Minister, Pravin Gordhan, and the Executive to ensure that government raises and spends public money in a manner that respects universal human rights and contributes to sustainable economic and social development. In other words, as was the case in 1994 and is still the case in 2013, there is an urgent need to reprioritise existing budget resources and service delivery from services to middle-class and rich South Africa towards services for working-class, low-income and poor members of the population.
 
A Summary of our demands for budget 2013/14

  • We call on the government to develop a budget that truly can address structural inequality and poverty, and create an environment for ecological development. In the first place this entails abandoning the 25 percent tax revenue to GDP ratio and deficit hawkishness that have been the standard since democracy;
  • We call on the government to fund this budget through a just redistribution strategy. A strategy that increases taxes for rich individuals and corporations, clamps down on tax-dodgers, and broadens the tax base by addressing inequality;
  • We call for an open and accountable budget that recognises the right to know, gives meaning to participatory democracy, and prioritises the realisation of the promises of the Constitution.

To this end:

  • We call for a budget that directly creates decent jobs through a climate change adaptation and mitigation strategy. In the light of SA's energy intensive economy and the urgent need for transition to a low carbon economy, the state must play a decisive role in building a renewable energy industry, rapidly expanding public transport, retrofitting public buildings and promoting small-scale organic agriculture. Many South Africans would be happy to see their tax money being spent to these ends;
  • We call for a budget that realises the right to free education by abandoning school fees and expanding school infrastructure and ensuring appropriately funded maintenance programmes;
  • We call for a budget that realises the right to health by creating the fiscal space for an expansive and efficient national health system including the National Health Insurance (NHI) programme with sufficient human and administrative resources;
  • We call for a budget to strengthen the social welfare system on which so many rely for survival by a social solidarity strategy that increases grants above official inflation, ends the underspending in the UIF, and increases basic service allocations; and
  • We call for a budget that fully acknowledges the crisis of violence against women and develops a strategic response to it. This entails: expanding resources and gender-based violence (GBV) training for relevant government departments, welfare organisations, and the justice system; providing funds for the professional empowerment of women and sexual ‘minorities’; and implementing mechanisms to ensure effective monitoring and evaluation of government responses.

What should 2013 budget address
 
To make our dream a reality, we call for a just budget that taxes individuals and corporations in South Africa according to their ability to pay. We need a budget that frees up money for service delivery, public sector jobs, a national health system reform (NHI) and a robust social safety net. This safety net must serve to support our children, the elderly, unemployed youth, and those living with disabilities and work injures. Citizens continue to be discriminated against because of the colour of their skin; and let us not forget that it is women who bear the heaviest burden of inequality and the violent effects that unemployment has on everyday life.
 
A call for a sufficiently-funded public sector
 
In last year’s budget speech, Finance Minister Pravin Gordhan said that ‘tax revenue stabilising at about one-quarter of gross domestic product (GDP)’ is one of five “key features of the budget framework” and tax revenue to GDP ratio of about 25 percent was set for the next three years in the Budget Review. This political decision, repeated again for the first time since the 1996 GEAR document, limits the ability of the state to achieve social cohesion. It undermines the government’s ability to support economic development and to create employment as well as reduce poverty and inequality. We hope that this unnecessary and short-sighted policy rule will be abandoned this year.
 
Contrary to the statement made in the MTBPS last year, there is an urgent need to “increase available funds beyond the 2012 budget baseline”. We note with concern the likely knock-on effects that the adopted policy will have on national and provincial departments, which are already struggling to finance essential services such as education and health. Indeed, even in the short run, the adopted policy will hinder the much needed health system reforms of which the NHI is core component. A demarcated tax to GDP ratio should not be a part of the budget framework.
 
The issue of the budget deficit
 
The failure to tax the rich and big corporations adequately is the main cause of exorbitant budget deficits and state debts globally. Government’s attempts to bring the budget deficit down to 3 percent of GDP and its reduction of the total public debt were features of last year’s budget speech. To continue this policy in 2013 will not address the development aspirations expressed in the National Development Plan. Marikana, De Doorns and Zandela showed the moral costs of not addressing the living conditions of the majority. Failing to create a stable social environment also results in short term economic consequences. To continue this policy is more problematic than to abandon a 3 percent budget deficit dogma copied from the European Union.
 
The prospect for tax increases
 
There has been much speculation in the media that the Finance Minister may, in this budget speech, announce an increase of the tax rate to 42 percent for personal incomes above R617,000 and even to 45 percent for incomes above R1 million. These tax rates were abolished 12 years ago. A majority South Africans would 1As with last year’s call for budget justice, this call is not meant to be comprehensive, nor meant to provide an alternative budget. It provides a summary of demands and points to alternative key policy positions.
 
“We dream about a South Africa of full employment, nonviolence and equality for all women and men. We dream about a South Africa where everyone can afford quality health care. We dream about a South Africa where everyone has a home and no one is evicted. We dream of a land where those that grow our food have enough to eat. We dream about a South Africa with a government that takes the threat from climate change seriously and realises that millions of new jobs are needed to protect our environment. We know that this can be achieved. We know that everyone who wants a job can get a job if wealth and income are distributed differently and if priorities are set right. A Just Budget Is One of the Tools,” Call for Budget Justice 2012.
 
We certainly welcome their reintroduction. Even with the current low levels of tax compliance among high income earners, observers have estimated that this would increase the tax revenue by more than R10 billion.
 
The narrow tax base fallacy
 
But tax compliance could be better. In 2011, SA Revenue Service (SARS) recorded only 2100 tax paying individuals with a taxable income above R5 million per year. These people paid R7.1 billion in personal income tax. In comparison, contacting just one financial institution in 2011, the SA Revenue Service found 30 000 individuals who saved one million rand every year. According to Wealth Insight (Business Report 11/12), the number of “High Net Worth Individuals” living in the country was 44 700 that year.
 
By forcing tens of thousands of rich tax dodgers to pay tax, the Government could change the nature of the budget completely without increasing tax rates. Still, this would increase the number of people paying income tax only marginally. Those who complain about the narrow tax base are often the same people who are supporting a system that keeps the vast majority of wage earners below the tax threshold of R64 000 per year.
The so called ‘narrow tax base’ is a direct consequence of the extreme income inequality in the country, but high income earners want to both have their cake and eat it.
 
A call for budget to promote decent services, basic needs, public jobs, and confront climate change
 
The State of Local Governance Reports of the Good Governance Learning Network (www.ggln.org.za) have shown in more ways than one that the service delivery protests do not necessarily occur in places where there is greatest poverty and hardship, but in places where inequality is most visible. A democratic government must have the capacity to deliver decent services that meet basic needs to realise the Constitutional guarantee of dignity. We call on Government to avoid using the budget as a tool for furthering neo-liberal corporatisation and privatisation – policies that perpetuate inequality, poverty and unemployment.
 
Climate change hits the poor hardest and climate change jobs programmes can help to mitigate this problem. To this end, we would like to draw the government’s attention to some examples of necessary interventions and required budget prioritisation. For all the talk about infrastructure investments, we need a massive investment programme for decent housing, school buildings, health centres and local clinics, meeting peoples’ needs for quality health and education. Spending on health and education is an investment in the future.
 
A budget that realises the right to free and basic education
 
We need libraries and schools equipped with books and qualified staff. Age restrictions on learnerships must be taken away so that people can catch up on what they missed in schools or when losing a job. Completely unrealistic registration fees demanded everywhere by public schools, whether legal or illegal, make a mockery of
the promise of free education for all children. Such fees keep thousands of children away from school. Moreover, free school uniforms in public schools would put learners on more equal footing, lift a heavy burden from the budget of poor households, and give work to our textile industry.
 
A budget that realises the right to health
 
It is long overdue for the Treasury to present how the reformed public health system and the National Health Insurance (NHI) will be financed, what the nature of the transition is, and its goals. The conditional grants given to administration and management systems only in the so-called NHI pilot projects give rise to deep concerns.
 
Actual health service delivery, medicine, facilities and equipment should be prioritised rather than being excluded from the additional provisions, as is now surprisingly the case. Now is the time for the Finance Minister to speak out on the NHI. A first discussion paper was promised in April 2012. We demand the Right to Know.
 
There are already important initiatives such as primary health care reengineering, aimed at reversing amongst the world’s worst maternal, and child mortality outcomes. But stipends for community health workers that are below the minimum remuneration for domestic workers are unacceptable. Community health workers could be the back-bone of a reformed public health system. Their work must be recognised and should be earning a living wage of at least between R3 200 and R 4 200. There must be a plan for their integration into the National Health System and the NHI.
 
The health sector needs to boost its entire human resource base, from management to service delivery capacity. It is only through this base that tight budgets could yield desired public health outcomes. In addition, more transparency is required on the actual expenditures in the health sector, including progress reports on the NHI pilot sites, with clear detail on how the NHI Conditional Grants have been spent.
 
A budget that fights climate change and creates jobs
 
We note with alarm the government’s continued lack of resolve in change South Africa’s carbon intensive energy path. Research done by the One Million Climate Jobs campaign indicates that tens of thousands of jobs could be created if the Treasury applies itself to more creative incentives for state and citizen led investment in renewable energy and climate adaptation. We urge the government to reconsider, not only the energy mix, but also to apply the ‘polluter pays’ principle in line with global climate justice guidelines. Without concerted action, South Africa’s twin scourges - high unemployment and escalating carbon emissions - will merely become a tax on future generations.
 
To fight climate change and unemployment in one blow, the government could expand the successful Community Works Programme to a massive public works programme that pays at least the minimum wages for a corresponding job. The public works programmes must create public assets that protect our environment like building and retrofitting environmentally sound houses and providing safe, reliable public transport as an alternative to private cars.
 
In essence: We must move the country away from fossil fuel dependence! We must invest in renewable energy! We must put an end to fossil fuel subsidies, including an end for subsidies to new fossil fuel explorations, such as fracking.
 
Climate change also makes it even more imperative to put in place a budget that tackles inequality and poverty head on, invests in public goods and protects ecological systems that support all life (including human). The challenges presented by climate change include increased water and food insecurity, higher fuel and electricity prices, and loss of jobs in some sectors (with the potential for job creation in other sectors). This includes investments in water infrastructure that respond to the urgency of climate change, and increasing funds to regulate and enforce the protection of water resources. This is particularly important to counter the adverse
impacts of mining and other polluting industries.
 
The protection of South Africa's scarce water resources is one example of where climate jobs must be created. We must invest in water infrastructure that responds to the urgency of climate change. This includes the installation of waste-water treatment works, investment in infrastructure and maintenance that is energy efficient, uses renewable energy (e.g. biogas digesters), reduces distance that water travels and is resistant to storms, sea surges, sea-level rise, as well as investment in rainwater harvesting and sustainable farming methods.
 
A budget that promotes food security
 
Though South Africa may be ‘food secure’ on the average at the national level, a shocking disparity exists between those who can and cannot access sufficient, nutritious food. In July 2003 the Heads of State of the African Union, pledged to devote 10 percent of their national budgets towards agriculture. For 2012/13 South Africa’s national agricultural budget was R5.8 billion, or 0.6 percent of total state expenditure. The agricultural budgets percent of South Africa’s 9 provinces raise the total to R 21.6 Billion, or 2.2 percent of the total state expenditure. Although this is an improvement, there is still a long way to go.
 
Even if this target is met, how the money is used is of equal importance. Numerous global authorities, including the UN, have recommended a shift in agricultural production and policy, towards agro-ecology. The Department of Agriculture, Forestry and Fisheries has initiated a process for an agro-ecology policy. A significant allocation of funds towards this, and to supporting agro-ecology efforts already underway on the ground both in urban and rural areas, should be an urgent priority.
 
The Fiscal and Environmental Dangers of Nuclear Power and Fracking The proposed expenditure on new nuclear energy projects is unprecedented in South Africa’s history and will impact the national economy over the coming decades, constraining the use of public funds in critical areas like health and education. Initial estimates of the costs for the proposed “nuclear fleet” are already in excess of R1 trillion. If the project costs more than budgeted for, as is likely, it will cause an increase the nation’s budget deficit and national debt. With this in mind, we call for the following:
 
The Department of Energy must complete an accurate cost analysis of the proposed procurement of energy from nuclear power before this program is approved.
 
Given the absence of comprehensive information about the cost of the nuclear program, Parliament will be unable to discharge its constitutional obligation to promote effective financial management of the executive. In consequence, Parliament should take steps to make the process transparent, in line with the Constitution. We need to heed lessons from the arms deal in this respect.
 
The effective suppression of renewable energy and the short-sighted promotion of expensive technologies with long term risks such as nuclear contamination does not support the principle of "sustainability and intergenerational fairness". Future generations will be forced to manage the side-effects of this choice. It is vital that the planned carbon tax is introduced as soon as possible as this will have a material influence on long-term energy planning.
In general, we call for a re-examination and more widespread consultation regarding both fracking and nuclear energy. The importance of this is underscored by the increasing water scarcity conditions in South Africa, and the ruinous impacts of fracking in other parts of the world. Other governments around the world have moved entirely away from nuclear energy after Fukushima.
 
A budget that protects social welfare and insurance
 
In the 2012/13 Budget Review, the Treasury claimed that they were increasing child care grants, disability grants and pensions at the rate of inflation. This was not true, even when comparing with the aggregate rate of inflation reported by StatsSA.  However, higher price increases on food, public transport and electricity, make inflation much higher for the poor and the working class. StatsSA also provides the inflation rate that Treasury should be using when increasing social grants. We call on the Treasury to increase social grants at the inflation rate reported by StatsSA for the poorest 20 percent of households.
 
In view of the lack of social solidarity and cohesion needed to address apartheid-era divisions, and in a situation where the gulf between rich and poor is growing, the debate about a Basic Income Grant (BIG) for all must receive adequate attention. We would welcome such an announcement in the Budget Speech. A BIG could replace some of the current costly administrative systems and introduce the notion of universality and Ubuntu in our fragile welfare systems.
 
The yearly R8 billion under spending of the Unemployment Insurance Fund - projected for years to come in the 2012 Budget Review - must come to an end. The UIF is not a tax. Workers are paying for insurance, not for the money to be hoarded or used for other purposes. The money must be paid out to those insured. The same goes for the 3 billion budgeted surplus of the compensation fund. We call on Treasury to pay out support to the disabled and others who have applied and require it.
 
The budget must ensure necessary resources for working class and unemployed women, hardest hit by economic inequity. This should include larger free electricity and water allocations per month. Instead of increasing electricity prices every year, the government should use the budget to ensure every household receives 200kWh free electricity.
 
A gender responsive budget
 
The start of 2013 has again proved that patriarchal violence against women and children must be addressed directly in the budget. This violence is especially acute in areas where communities are hit by poverty and unemployment. We call on the Finance Minister to ensure that the 2013/2014 budget is responsive to gender inequalities.
 
More than 55 097 rapes were reported to the police in 2009/10. This is alarming, but still the Medical Research Council suggests that only one in 25 rapes is actually reported. Sonke Gender Justice in alliance with others in the gender sector have called for the establishment of a fund to ensure that the many excellent projects operating across the country get the support they need for sustained action. The 2012/13 budget documents of four key national departments, namely Social Development, Policing, Justice and Health all failed to reflect how they will specifically address violence against women and children. There has continued to be minimal attention given to this violence within the MTBPS as well as in the recent State of the Nation Address. The lack of prioritisation at the planning/strategic level clearly translates into lack of prioritisation at a budgetary level. This is of grave concern. Organisations equipped to deal with this violence have reportedly shut down and/or downsised due to lack of adequate funds. Government's budgets must explicitly indicate how much money is being provided to: (i) ensure that welfare organisations are well resourced and supported to deal with the aftermath of such violence; (ii) equip public health and justice services to respond to such violence and also (iii) put in place stringent performance monitoring and reporting mechanisms for ensuring accountability with respect to the state's response to violence against women.
 
In addition, the budget must:

  • Provide funds earmarked for economic and professional empowerment of women and sexual ‘minorities’;
  • Allocate funds to ensure gender justice for women, children and sexual ‘minorities’ in the criminal-justice system. These allocations must assist in encouraging complaints, provide support during court processes, and ensure fair outcomes by removing barriers to access from women and children;
  • Allocate funds for compulsory gender sensitivity and anti-violence training of ALL men and women employed by government,

A call for budget that promotes accountable, effective, democratic and participatory government
 
We welcome the repeated promises made by the government to clamp down on corruption and wasteful public spending. Such practices undermine the legitimacy of taxation. They also lead to a crisis of the democratic institutions. We are sure that the Finance Minister, like his predecessors, will reiterate government’s long standing commitment to fighting corruption and waste in his budget speech. This still is an on-going battle.
 
Corruption is mainly concentrated in the excessively large tender system. This is where private sector price collusion and profiteering intersect with resource-starved local government entities. This is why state officials must be prohibited from engaging in private business with the state and in bidding for tenders. But this is also
why a small state, further tax cuts and restraining the capacity of the state are not part of the solution. Such a policy exacerbates the problem.
 
As an essential part of this battle, the government must abandon its elite organisational culture. As the recent National Energy Regulator (NERSA) hearings have shown, policy making around energy access for the poor takes place with almost complete disregard for inputs from the poor themselves. In line with our constitution, public participation should be actively promoted in all budgetary allocations of this nature. The people must be involved in our own development. We are citizens of a democracy and not passive ‘consumers’ who wait for corporate services. Give life to participatory democracy! Allocate funds for interested and affected people to participate in policy, legislative and governance processes that affect their lives! Provide real support for communities to engage meaningfully in catchment management forums. If the integrated development plan (IDP) processes are sufficiently localised and adequately involve local communities, the problem of housing would no doubt be prioritised on the IDP agendas.
 
Indeed, it is instead the corporate culture of government that has fostered ridiculous remuneration of public servants, and that underpins the plundering of government resources ideologically. We need to break with this culture. We need clear mechanisms to deal with corruption. There must be serious consequences for those who steal public money from the people.
 
In this context, we also recognise that South Africa is currently one of the world leaders in budget transparency with respect to the public availability, timeliness, and comprehensiveness of its national and provincial budget reports. However, the same cannot be said for the availability of more disaggregated budget information. In particular, communities struggle to obtain specific budget information about their local clinics or schools. We demand greater transparency across our budgeting process. People have the right to know and we are deeply concerned that the amended Secrecy Bill may further limit our access to information vital to shaping the spending priorities of Government.
 
A call to give life to the promise of the democratic Constitution
 
If we are to realise the promise of our democratic Constitution, then the government must stop systemic under spending. They must roll back the years of neo-liberal corporatization, privatisation, and the resulting under capacity in the public sector. A democratic government must have the capacity to deliver decent services that meet basic needs to enable the Constitutional guarantee of dignity and to confront the epic threat of climate change. The government must create the many thousands of public sector jobs required to meet these demands and put a moratorium on all tenders that drain the budgets and corrupt our officials.
 
Contacts:
 
Gareth Jones
Africa Centre for Biosafety
Mobile: 081 493 4323
 
Dick Forslund:
Economist
Alternative Information Development Centre
Mobile: 079 912 3372
 
Dick Forslund
Million Climate Jobs Campaign
Christelle Terreblanche
Mobile: 083 232 4134
 
Thoko Madonko
People’s Health Movement South Africa
Mobile: 083 710 3440
 
Sisonke Msimang
Sonke Gneder Justice Network
Mobile: 081 039 3267
 
Rukia Cornelius
World Aids Campaign
Mobile: 079 896 0401
 
Zukiswa Nomwa
Environmental Monitoring Group
Mobile: 079 821 7085
 
Endorsed by the following organisations:

  • Africa Centre for Biosafety
  • Black Sash
  • Alternative Information Development
  • Centre
  • Community Care Worker Forum
  • Centre for Civil Society Project on
  • Economic Justice
  • Democratic Left Front
  • Earthlife Africa Cape Town
  • ECOPEACE
  • Economic Justice Network
  • Environmental Monitoring Group
  • Engender
  • GroundWorks
  • Institute for Zero Waste in Africa
  • Kairos SA
  • On Par Development
  • People’s Health Movement South Africa
  • Progressive Youth Movement
  • Right2Know
  • Mannenburg Development Community
  • Structure
  • Mandela Park Backyarders
  • Million Climate Jobs Campaign
  • Sangoco Western Cape
  • Socio-Economic Rights Institute of
  • South Africa
  • Sonke Gender Justice Network
  • Wellness Foundation
  • World Aids Campaign
  • WFD
  • Western Cape Backyarders Network

Please note endorsements were still coming in after the release of the call – the published call will ensure that all organisations are represented.

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