Institute for Global Dialogue Comments on the 2010/11 Budget

Friday, 19 February, 2010 - 20:15

We welcome the attempt by Minister Pravin Gordhan to balance the competing demands of staying the course and the need for change in the face of the global economic crisis. This balancing act is made even more complex by the shift in the balance of forces within the governing African National Congress alliance before and after Polokwane, a development that posed a threat to the growth, employment and redistribution (GEAR) consensus.

We welcome the attempt by Minister Pravin Gordhan to balance the competing demands of staying the course and the need for change in the face of the global economic crisis. This balancing act is made even more complex by the shift in the balance of forces within the governing African National Congress (ANC) alliance before and after Polokwane, a development that posed a threat to the growth, employment and redistribution (GEAR) consensus.

The rank-and-file in the governing party seemed intent on, at least, changing the macro-economic framework towards one that would enable the state to intervene more frequently and unashamedly to ensure the redistribution of wealth in favour of those marginalised by decades of apartheid and a decade of skewed affluence after 1994. Many exaggerated the extent to which this signified a leftist take-over or, at least, the power of the left to set or influence the broad policy agenda and under-estimated the capacity of the centrist elements to ward off any shift to the left or the right within the governing alliance. In this context, the policy agenda of the Zuma administration remains a contested terrain as shown by debates over nationalisation of mines, the mandate of the reserve bank, economic portfolios in government, and the national planning framework.

This means that the Zuma administration has an difficult task of striking a balance between expectations of the ANC’s alliance partners, on the one hand, and a number of expectant elite constituencies, on the other. Every major statement and policy announcement must achieve this. One way of doing so is to stick to the programme of action around the governing party’s electoral priorities in the belief that this represents ‘sufficient consensus’ among various interest groups, a safe buffer zone in the battle for policy control. Indeed, during the State of the Nation Address, President Zuma did just that, leaving a number of nationally important issues that deserved some attention out of the speech because they would generate divisive conflict. He thus left it to interests groups to raise these ‘other’ issues themselves, so that he would only venture into them in response rather than at his own initiative.

Gordhan has followed the same route, the safe space between contested terrains in our economic policy. He outlined a budget, probably adopted several months ago, which showed a lot of continuity with his predecessor’s last budget in February 2008. A large part of this is continuity of change begun some time back. For instance, the gradual expansion in social expenditure of which social security is a component began in the early 2000s. While this is made all the more inevitable by the economic recession, it also creates challenges because as a result of the recession a lot more people have been pushed into poverty and need even more social insurance to get by. The intention to aggressively pursue youth employment and rural development, additional spending on primary health care and basic education should be welcome shift towards areas of our socio-economy that have a potential to reduce inequality in the long-run.

There are areas that suggest a subtle, but significant change in the budget speech. These include the invitation to the nation to debate the role of the reserve bank through the letter from the minister to the governor, Gill Marcus, recounted for the consumption of everybody during the speech. This makes it possible for the nation to debate the wisdom of asking the bank to give serious considerations to issues of employment and poverty in making its determinations on inflation targeting. This is different from the position of government in the past. Also important is the announcement that the nation will be debating amendments to the exchange control legislation.

Of course, this goal will not be realised until government leads the nation towards a new growth path promised, one that is sustainable, balanced and employment-generating at the same time. Some of the innovative ideas to this end will come from the experiences to be gained from the implementation of the industrial action plan. South Africa’s economic rejuvenation after 1994 was in part an outcome of benefits derived from active participation in international relations and attraction of foreign investments.

This is because South Africa’s economy is so integrated into the global economy that global prosperity creates a possibility, if conducive conditions exist nationally, for South Africa to have a positive economic outlook. Our ability to take advantage of the current shifts in global power balance towards greater multipolarity epitomised by the G20, the most likely new centre of global economic cooperation, is of vital importance to our economic positioning globally. These issues are not in the budget speech per se, but need to be considered in greater detail in future because we are an active player in these developments. It should be our attitude that we can draw economic advantage from the global shifts if we think strategically about them.

It will be important for us keen observers to watch the conduct of government and National Treasury to see if they stay true to the quest for justice, which is about lived experiences and actual life experiences rather than the usual fetish for cold statistics and systems. Whether government will engage business in a mature conversation about finding the balance between profit and justice, whether they will engage civil society in fulfillment of their pledge and if national government will instill this humanist philosophy instead of the paralysing discourse of ‘service delivery’ will determine whether Amartya Sen’s injunctions are quoted to save face or out of genuine commitment to do things anew.  

Siphamandla Zondi
Executive Director
Institute for Global Dialogue  

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