People’s Budget Campaign Comments on the 2010/11 Budget

Thursday, 18 February, 2010 - 11:58

The People’s Budget Campaign (PBC) is a civil society coalition comprising of the Congress of South African Trade Unions (COSATU), the South African Council of Churches (SACC) and the South African NGO Coalition (SANGOCO). This coalition has for the past ten years tabled proposals on the spending of revenue by the National Treasury and argued for a participatory budget process.

The People’s Budget Campaign (PBC) is a civil society coalition comprising of the Congress of South African Trade Unions (COSATU), the South African Council of Churches (SACC) and the South African NGO Coalition (SANGOCO). This coalition has for the past ten years tabled proposals on the spending of revenue by the National Treasury and argued for a participatory budget process.

The speech sets out a brilliant political vision with which we broadly agree with. As the PBC, we therefore welcome the evidence that the Minister is guided by the five key priorities as identified in the ANC manifesto, and agreed to in the Alliance Economic Summit, which are:

  • Creation of decent work and sustainable livelihoods;
  • Education;
  • Health;
  • Rural development, food security and land reform;
  • The fight against crime and corruption.

Much of the speech comprises proposals to address this fundamental challenge. But this vision cannot be realised without simultaneous fundamental shifts from failed macro-economic policies, such as inflation targeting, which contributed to the perpetuation of the very inequities that the Minister refers to as “inequitable growth not being sustainable for broad based development and growth”. 

In essence, therefore, the Minister has failed to shift policy. We are therefore very disappointed that the Minister failed to shift from the failed monetary policies of the past administration, despite claiming to have learned lessons from the crisis.

We will therefore escalate our struggle for the scrapping of inflation targeting, because we are of the view that the persistently high unemployment rate, strong exchange rate, and de-industrialization of our economy are due to the policy of high interest rates, of which inflation targeting is a form. Inflation targeting tends to maintain high interest rates, especially because our economy is vulnerable to supply-side shocks such as food price and energy price increases.

On youth employment

The PBC will be seeking further clarity on the proposed subsidy to employers that will lower the cost of hiring young people without work experience. While we note that such employees will be “subject to minimum labour standards”, we are still concerned that this scheme could lead to a two-tier labour market. We therefore look forward to the hearings on the issue in March.

On Tax Relief

The Minister has noted the massive wealth and income inequality that characterises our economy.  In this connection, he has put forward some tax relief proposals. In the light of gross income inequalities in our country resulting from the stagnation of wages in the past 10 years as opposed to the meteoric rise of executive management salaries, the PBC is proposing a revision of the R500 000 threshold (of 45 percent for all individuals earning above R500 000), noting that the number of people earning above one million has increased. We are proposing this redistributive measure to the highest income quintiles.

On Corruption

The PBC welcomes the much tougher line taken by the minister against corruption and will give its full support to the proposed measures, including “target lifestyle audits”, in order to root out this scourge.

The PBC further welcomes, among others:

  • The recommitment to the Expanded Public Works Programme;
  • The extension of social grants to two million more children aged 15 to 18 years;
  • The reaffirmation of preparations to establish a national health insurance system;
  • The allocation of over 6 000 hectares of land for low-income and affordable housing;
  • Ambitious targets for skills development.

In essence, therefore, the PBC is disappointed in the Minister’s stance regarding this conservative macro-economic framework. We do, however, welcome the notion that spending on social services will be maintained. The PBC is further pleased that the Minister has an enhanced understanding of the issues of unemployment, inequality and poverty.

Mbali Toyana
Researcher
Social and Economic Justice Unit
National Labour and Economic Development Institute (NALEDI)

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