Governance and democracy
Governance and democracy
- Still a Rocky Road Ahead.
It was already clear in Pravin Gordhan’s first medium-term budget policy statement in October 2009 that a substantial adjustment is needed to be made to public finances over the next few years as economic recovery will be slow.
With recovery of tax revenue anticipated to be slow and an increased deficit from 23% of GDP to 40% over the next three years; doing more with less, and how to actually achieve this, should therefore be a key aspect of budget debates in the next weeks and months. Budget 2010 suggests that the 2009 MTBPS adjustments were realistic and accurate. Virtually all allocations for the 2010 Budget will only stay the same or decline from April 2011 onward.
The 2010 Budget stresses the scarcity of recourses and presents a muted increase in government sending in particular aimed at addressing unemployment. The wage subsidy for first time workers and the proposed Industrial Policy Action Plan are two proposed interventions, and together with the prioritisation of education are hoped to better position the economy for future growth.
Small real increases from 2009/2010 to 2010/11, reflecting some of the stated budget priorities, can be seen for Health, Education and Social Protection, as well as for Housing and Community Amenities and Public Order and Safety. The real increases in allocations to Social Protection reflect increases in eligible beneficiaries as a result of more poverty stemming from recent job losses and the extension of age-eligibility to 18. Personal income tax relief worth an estimated R6.5 billion and an increase in so called “sin taxes” and fuel levies will be further cause for both celebration and frustration.
The emphasis on cutting out the ‘bells and whistles’ in departments, and in reducing corruption, as well as on enhancing efficiency and service delivery, are a welcome shift in emphasis away from allocations only.
The 2010 Budget is largely successful in the realism of its growth and tax revenue assumptions. In the priorities it allocates additional resources to, in the clarity it provided on questions such as possible changes to the monetary policy framework as well as the calling for multi-stakeholder involvement, all of which will be particularly essential going forward.
It is possible that the October 2010 MTBPS will in fact provide a further upward adjustment of growth and revenue estimates. However, the likelihood is that we have entered a period of comparative austerity which will require changes in the way government departments conceive of what they do, and which require effective oversight if allocations are to achieve what they are intended for.
While Parliament is developing the institutional capacity to utilize its powers to amend the budget, as required by the new legislation passed in 2009, it will be important that civil society seize the opportunity to influence the budget through its engagement with Parliament and legislatures.
PIMS Budget Unit
- We welcome the increases in the budgets for education, land reform, health and social security. However, the increases in the budget does not mean that there will be quality free education, quality health care services, which include the national health insurance, that Government will meet its target of redistributing 30% land by 2013 and improved livelihoods.
We would like to put specific emphasis on two demands which relates to farm workers, whom we represent.
We demand a sufficient budget allocation to support agrarian reform which supports food security, tenure security and ownership of housing through the land reform grant. It should have a capacity building component as well where farm workers, especially women farm workers and dwellers, are to own and run farms independently.
This would realise Government’s targets in terms of land redistribution. It would also realise the ANC Freedom Charter that states that the land shall be shared amongst those who work it.
It is indeed farm workers who work the soil of the earth, who are feeding the nation, and who are producing the food for the nation.
The second area we would like to highlight is the demand for a budget that supports quality free education up to tertiary level.
We believe farm worker children has the potential to become doctors, advocates, lawyers, professors and as former President Thabo Mbeki has said, a farm worker child can become the president of the country.
South Africa has been rated the most unequal country in the world and it has the fastest growing gap between the rich and poor. Brazil has increased its income of the poor through land reform and social grants and have moved from the most unequal to the second most unequal country.
Recession became the excuse not to implement the 4 pillars of decent work which is social protection, social dialogue, decent wages etc. Companies all over the world are bailed out and blank cheques are given by governments.
We would like to post a question to the Minister of Finance: is this not the perfect opportunity to support workers to take over and run these companies, would this not give meaning to socialism? Is this not what is needed to decrease the gap between the rich and the poor and where the wealth of the country is shared?
- In our response to President Zuma`s State of the Nation Speech last week, SACTWU issued a press release which stated the following:
"The COSATU-affiliated Southern African Clothing and Textile Workers` Union (SACTWU) has noted the President’s statements in his State of the Nation speech that "…industrial policy will build labour absorbing industries…", that the broad policy direction outlined in his address will be practically detailed in implementation strategies to be announced by the responsible Ministries, that Ministers will be required to sign target performance agreements and that 2010 will be a year of action.
We welcome this.
We now look forward to the details and call for increased resources to be allocated for industrial policy implementation measures to build labour absorbing industries, such as clothing and textiles, by the various responsible ministries, in particular by the Minister of Finance in his budget speech next week."
We now notice that, in his Budget Speech of today, the Minister of Finance, Mr Pravin Gordhan, has announced the following:
"An additional R3.6 billion is allocated to the Department of Trade and Industry for industrial policy interventions consistent with government’s new Industrial Policy Action Plan. In particular, these funds go to support investment and production in the automotive components and clothing and textile industries."
We are aware of the national resource constraints and in this context welcome this specific additional allocation. We now look forward to working with the DTI on the details of how this additional allocation is to be spread amongst and spent in the identified sectors as rapidly and as efficiently as possible.
In addition, we look forward to hear what other Ministries have to say about how their specific departments can support labour absorbing industries such as clothing, textiles and leather.
- The Development Action Group (DAG) is a non-governmental organisation working in the urban development sector and focusing on housing and access to well-located land for the urban poor. DAG anticipated the Finance Minister’s announcements with interest, especially considering the challenges of rapid urbanisation coupled with an enormous housing backlog evidenced by over-crowded backyards and informal settlements, and deepening urban poverty.
The Minister acknowledged that the human settlement grant is one of the faster growing items in the budget together with rising spending on water and sanitation, and that such investments are critical to reshaping our townships, cities, informal settlements and rural areas.
Notwithstanding, the Minister announced a budget that did not convincingly deal with these challenges and that diverged from the nation’s expectations of Government.
The Housing White Paper (1994) recommends that the housing budget constitutes 5% of the national budget to meet current housing demand and eradicate the backlog. However, since 1994, we have been unable to reach 3%, and the housing backlog has further increased. The question beckons whether government is still interested in its policy mandate of 5%.
Minister Gordhan emphasised the country’s commitment to a ‘new growth path’ to build a future in which all can share the benefits. It is refreshing to hear commitments to do things differently - echoing the state of the nation address. This is critical in effectively challenging and addressing factors underpinning poverty and structural inequality.
Last year, South Africa’s Gini-coefficient was 0.679, illustrating vast differences in income inequality between rich and poor, especially in urban centres where poverty is deepening. It is unclear what strategies the Ministry of Finance proposes to address structural inequality through making fundamentally different macro-economic policy choices.
In reprioritising spending towards targeted outcomes, specifically investing in local government and human settlements, the state of the nation address committed to set up a R1 billion guarantee fund to incentivize the private banking and housing sectors to meet the needs of the so called ‘gap market’.
DAG agrees that government should focus on the entire residential market and that middle-income citizens including nurses, the police and teachers, require housing finance assistance from both government and banks.
However, we question whether it is appropriate to invest disproportionately in this section of the population, considering that they earn more than R3 500 per month and constitutes less than 15% of the national housing need, whilst more than 70% of the housing need in South Africa constitutes people who have monthly incomes of less than R3 500.
Government’s approach to urban management and development has to prioritise release and access to well-located serviced land for the urban poor. The state of the nation address committed to setting aside over 6 000 hectares of public land for low-income housing. It remains to be seen how this will be financed as the cost of acquiring well-located land remains an obstacle in delivering adequate housing for the lower end of the market.
The review of the current Municipal Property Rates Act (MPRA) is imperative as it makes provision for a tax on both land and building improvements, discouraging intensive use of land and encouraging land speculation. This, in turn, inflates land prices, making well-located land for housing inaccessible for the poor, impedes efficient use of land, and misses opportunities to generate revenue for municipalities to enable greater access to affordable housing.
While DAG recognizes the Minister’s attempt to balance the disparate needs of our people, there is still insufficient movement in the macro-economic policy arena to match the policy-speak of the new administration. We stand ready to contribute to the creation of truly integrated human settlements through development processes that enhance human rights, dignity and equity.
A community-centred settlement development ethos, a pro-poor policy environment, and finding creative ways such as progressive tax on land to increase revenue for further investments, hold the potential to rekindle the spirit of the generation that was celebrated in the release of President Mandela on 11 February 1990.
Chief Executive Officer
Development Action Group
- The Socio-economic Rights Institute of South Africa (SERI) is a new NGO set up to provide individuals, communities and social movements with legal, policy, research and advocacy assistance around housing, basic services, and migrant rights and livelihood issues. We have chosen to comment on some of the aspects of the 2010 Budget speech which are relevant to our thematic areas of work, and which we view as being critical to ensuring the maximum positive impact of government spending in economic and social policy implementation.
Minister Gordhan’s call for a “common purpose”, along with his acknowledgment that “economic development and public service delivery are about much more than the numbers through which we measure progress”, is refreshing. There is no doubt that "national identity, social cohesion and responsible citizenship – through building social capital that reinforces trust and cooperation, in the place of conflict and fragmentation” are important. The latter issue is particularly critical given the increasingly antagonistic relationship between the state and communities and the growing dissonance between expectations and public service at the local level, as well as the heavy-handed way in which law enforcement is used to silence dissent and protest about such issues.
In 2010 and beyond it will be critical for government, particularly at the local level, to engage with communities, CSOs, social movements and individuals in the spirit of the “common purpose”, and listen to the people and their representatives. Government spending without the involvement and buy-in of the very people it seeks to transform, will never achieve as much as it could if real participatory democracy, as envisioned in the Constitution, is practiced.
Secondly, it is encouraging that industrial policy is being prioritised so heavily. One of the challenges in 2010 will be how to coordinate this between (at least) three ministries (Trade and Industry, Economic Planning and Finance). Further, the prioritisation of tackling unemployment and job losses, particularly amongst young people, is critically important. As Minister Gordhan states however, this transformation - whereby opportunities to be productive in the economy and earn a decent living abound - will not happen overnight.
SERI is aware that throughout the country, particularly in the urban hubs, there are hundreds of thousands of people desperately trying to survive by engaging in informal activities, for example informal street trading, who are being harassed constantly and having their meagre livelihoods compromised by misguided and pernicious local government policies and corrupt law enforcement officers. Unless and until alternative income-generating activities are provided and decent work is made available for poor people, they should be allowed to engage in informal survivalist activities and not be criminalised.
Thirdly, it is positive that the government is spending more each year on housing and basic services. The identification of the ‘gap market’ with regard to housing, and the exploration of interventions to address this housing policy black hole, is important. However, there is also a crisis occurring at present in cities around the lack of affordable, well-located rental housing for those accessing the city for its economic and social amenities. The critical importance of providing affordable, subsidised accommodation in well-located urban areas, as opposed to only providing bonded or RDP-style houses on the periphery, needs to be recognised and addressed by the government. Likewise, the national informal settlement upgrading programme should become a government focal point, with in situ upgrading prioritised and rolled out countrywide.
Finally, the billions of rands in local government equitable share (ES) that is allocated to municipalities to “cushion poor households for the rising cost of electricity and water” is critical, however municipalities need to be held accountable for exactly how and why they are (or are not) spending this grant. Too much money has been wasted, misspent or siphoned into other areas in the past. At present, the ES is an unconditional grant which means that municipalities cannot be penalised if they misspend it on interventions that do not improve basic services delivery, and that they are not accountable to national government.
Municipalities should know, and make available, information on exactly how many households are receiving subsidised basic services (e.g. free basic water and electricity), the costs to the municipality of providing these services, and whether the ES could, in theory, cover the costs of free basic services provision.
With this information, civil society can act as a watchdog and map exactly what municipalities are currently doing in terms of service delivery against what they could be doing with their ES grants, and hopefully influence the municipalities’ service delivery targets by insisting on greater transparency in the reporting of the ES grant.
Socio-Economic Rights Institute of South Africa
- Continuity is important for ongoing policy development and implementation, and does not result in shocks to either society or the markets. Thus the single most important determinant of this year’s Budget was last year’s insofar as the changes are ones of emphasis and not of direction. Obviously this Budget must also be read within the context of the three year expenditure cycle. The Budget comes within a context of what some commentators believe is the tail end of a world recession. Thus the Budget is mindful of global pressures and uncertainties on domestic economies.
The Budget displays a fairly conservative approach to fiscal expansion while at the same time the Minister has assured the Reserve Bank that its primary brief, notwithstanding monitoring growth and jobs, will still be inflation targeting, thereby reassuring a continuity of monetary policy.
Spending on social services accounts for more than half the budget allocation, an annual increase of 9.3 percent. The Foundation notes the increase in social service spending. This raises a concern that the funding for this increase will have to come from borrowing.
The Foundation warmly supports the Minister’s initiative around health reform with particular reference to the development of sustainable public private partnerships. The Foundation is particularly supportive of the attention which the Minister has paid to education. The Foundation looks forward to the Ministries of Education Budget votes and how they propose to implement greater accountability and overview.
The emphasis which the Minister placed on robustly tackling corruption is to be welcomed. Given his extraordinary successful tenure at SARS, the Foundation believes that he will bring that experience and industry to his oversight function in his present capacity.
The great challenge which the country faces and which this budget cannot address is broadening the tax base in order to finance government expenditure, as far as is possible without borrowing.
At the conclusion of his Budget delivery, the Minister quoted Amartya Sen’s new work ‘The Idea of Justice’. Sen argued that ‘the idea of justice calls for comparisons of actual lives and inequities, rather than a remote quest for ideal institutions’. This view has no doubt informed much of the Minister’s thinking.
Inspired by Sen’s work, the Helen Suzman Foundation dedicated a special edition of Focus to Images of Justice (no. 55, 2009). In a leading article, the Foundation posed the question: If justice is, as many argue, principally a property of institutions, how well have our institutions fared, and how well have we been their stewards and guarantors? Have our collective practices and their outcomes served the objectives of justice? May our citizens, for instance, reasonably expect a fair hearing before the courts of law? Will our children be able to fulfill their creative potential and realise their capabilities in light of the education they receive? Are we doing the right things to address and alleviate the ravages of poverty on present and future generations?
The Foundation believes that Minister Gordhan’s Budget is a serious attempt to give meaning to a quest for justice. It is a workmanlike budget and, thankfully, predictable. The Foundation assumes that the larger vision about the growth trajectory for the country is being forged in the Planning Commission.
Helen Suzman Foundation
- NEHAWU welcomes the Budget Speech that was tabled before parliament today by the Minister of Finance, Mr Pravin Gordhan and we are happy with the government’s commitment to increase and shift government spending on key priority areas with the intention to create a new growth path for the local economy.
Whilst there are important commitments in the budget speech which we support such as increased allocations for HIV/AIDS although we are concerned that the spending over the Medium Term Expenditure Framework period remains moderate.
We welcome and support the government’s efforts to fight corruption and trim down the obscene salaries and perks that public servants in governments and parastatals have been awarding to themselves.
This obscene spending and crass materialism is the main reason why we have the highest rate of inequalities in this country and we expect those who hold leadership positions to take the lead.
Despite a clear commitment made in the State of the Nation Address and even in this Budget Speech to the National Health Insurance scheme it is surprising that the minister still seeks to increase monthly monetary caps for deductable medical scheme in order to expand the membership of the current medical schemes.
This is disappointing and confusing because it sends mixed messages and underscores the need to expedite the process towards the introduction of a single national insurance fund. The implementation of the NHI is central to the transformation of the health sector and will be a big step towards the goal of building a comprehensive social security system.
The union is deeply worried at the fervor with which government is pursuing and committing itself to the use of “public-private partnerships” in the health sector which we are totally opposed to.
The minister has failed to give more details as to the nature and extent of the PPPs he is alluding to and he goes on to say that “the flagship PPP hospital project will be Chris Hani Baragwanath, for which feasibility study is now complete”. The union is shocked to hear about this clandestine flagship project as we were never informed about it as stakeholders.
NEHAWU has undertaken a widely supported and credible study on the transformation of the Chris Hani Baragwanath hospital on the basis of which we made some important policy proposals for the transformation of our hospital system. Yet, the project has since been stalled in favour of the introduction of PPPs.
The use of public-private partnerships in the face of despicable profiteering in the private health industry is a deviation to the promises made to the electorate in 2009 and can only give confidence to those who are opposed to the transformation of the health system.
We are extremely disappointed that while the governments theme is about “doing things differently” there were no major fiscal and monetary policy changes in the budget speech and that inflation targeting will be maintained.
Although we welcome a further R1.3 billion to improve the salaries of FET college educators, we call on government to extend this increase to all workers in the sector rather than just educators. NEHAWU calls on government to urgently introduce amendments to the Further Education and Colleges Act with a view to transfer these workers back to the public service.
We call on the minister to refrain from negotiating with organized labour on wage increase through the budget speech and while we accept that the wage bill may have almost doubled in five years, this was from an unacceptably low base, which makes even the current level pay of inadequate.
Job creation and the filling of vacant posts in the public service should not be done at the expense of the creation of decent conditions of employment and as NEHAWU we are calling for a comprehensive review of the remuneration policy and the filling of vacant posts as part of improving government’s capacity to deliver service better.
- The 2010 budget speech by Minister Gordhan did not specifically address financing for social development services, which is seen by many as a disappointment and in reality, it is. The other reality is that neither the NGO sector nor the Department of Social Development have made any serious and sustained effort to examine how the bid process can be used to get the best out of the Treasury nor have we managed to link the work of the sector and the department to stated government goals or the Medium Term Strategic Framework (MTSF).
The good news for NGOs and the Department of Social Development is that the Minister has acknowledged that we need to do things differently, “President Zuma has rightly challenged us to re-examine our plans, and to set a more deliberate, more focused course. Cabinet has agreed on a set of outcomes that will shape our policies and programmes for the years ahead. The public service has begun an organisational restructuring that is driven by the imperative of service delivery. A new engagement between government, the business sector and organised labour is being forged, through which we will mobilise our creativity, our determination, our sheer grit – to build a durable, developmental, just and prosperous nation. In forging this engagement we will build on the foundations laid over the past two decades. We will also have the courage and humility to do things differently.”
So, Minister Gordhan, we acknowledge that this is a process that will take time, that maybe the Department of Social Development is not yet in a state of performance to engage with you meaningfully about new ways of working to build a developmental state and that even the ways in which NGOs engage with the Treasury are flawed. What we do look forward to is a robust dialogue between the Treasury and NGOs in the coming months to ensure that next year, we can see the evidence of this new way of engaging in the news you announce about solid financing for a developmental state.
We are willing and able to deliver what is needed to ensure a just and prosperous nation and the approach in the way we work and engage have shifted too. We now ask that you open a process for NGOs to engage with Treasury directly about how we can work with you to make the ideals you and President Zuma have outlined, come to fruition. We can only build this nation by working together.
This is our offer to you Minister and we await your response.
National Welfare Forum
- Tobacco taxes – increase not enough
Same old, same old, policy. Another opportunity to promote public health and raise government revenues squandered.
Predictably, the tax on cigarettes increased by a meagre R1,24 per pack in today’s budget. In his first Budget, the Finance Minister has obdurately stuck to a policy which keeps tobacco taxes low and so favours the tobacco companies at the expense of public health and government revenues.
The tax rates on tobacco products in South Africa are amongst the lowest in the world. Since 1997, the government has set the cigarette tax rate at 50% of retail price, which increased marginally to 52 percent in 2002.
In Ireland a packet of 20 cigarettes costs R93 with taxes making up 79 percent of the retail price. The average tax incidence in the 27 member states of the European Union is 78 percent. Predictably, another opportunity to encourage smokers to quit and to increase government revenues has been squandered.
Raising taxes, and therefore the price of tobacco products, is the most effective way to reduce tobacco use, especially amongst the young and the poor. People in these two groups are more price conscious. Higher prices convince them to quit or not start in the first place.
An increase in tobacco tax rates is not only sound public health policy but a good way to boost the economy. Higher taxes reduce tobacco consumption, lower health-care costs, help households save money by reducing tobacco use, and increase government revenues.
The National Council Against Smoking and other health groups have been calling for more than a decade for changes to the countries tobacco tax policy. Tobacco taxes are a healthful and voter-friendly levy. Many smokers welcome the tax as they see it as offering them an incentive to quit their deadly addiction.
Dr Yussuf Saloojee
National Council Against Smoking
- Child Support Grant Increase Gives Poor Children One Extra Slice of Bread Per Day
While Minister Pravin Gordham has presented a budget that is probably “right for the time” it is however a very disappointing budget for poor children and their families. Most shocking is the miniscule increase in the Child Support Grant by R 10 per month to R 250 per child per month. This is an increase of 4.1 percent and will give each child one extra slice of bread per day. Phasing in the child support grant up to a child’s 18th birthday does not compensate for insignificant increase. It is clear that to do this the Minister deliberately kept the increase so low. Interestingly he did not say when this would happen.
The Minister started off by saying that he wanted “every family to have shelter and food”. This budget does not provide this. He said that it is critical “to address social and economic weaknesses” but he has not, and he said that he wants all South Africans “to share in the opportunities that our country offers” - but all South Africans do not.
To his credit he acknowledged that poverty is widespread but then presented a budget that does not tackle this.
On education and training we heard little that was new. Much of the extra R2.7 billion to be spent on workbooks for Grades 3, 6 and 9 will be wasted because of the lack of quality early childhood development opportunities for young children. Grades 3 and 6 is too little too late, the damage is already done. Grade R and early childhood development is not mentioned at all in the budget yet international research informs us that the greatest economic return on education investment is at this level.
His goal of better co-ordination and alignment between national policy imperatives and provincial budgets is welcomed in the light of the wide chasm that presently exists, especially in the education sector.
So what does this budget tell us. Ministers will continue to earn in excess of R1.5 million each year and will also continue to have two vehicles valued in the millions and receive heavily subsidised housing. On the other side of the line, young children will continue to go without quality education, without quality health care and without quality housing and their parents will still be without work, the very things that Minister Pravin Gordham wants them to have.
Centre for Early Childhood Development