An Opinion Piece

by

Ebrahim-Khalil Hassen

A political link between the budget and the broad struggle for liberation was a defining moment of the 2007/08 budget speech. Minister Manuel thus argues a foundational point, which is that the budget is about creating a new set of material conditions in our society. This critique focuses on the expenditure side of the budget.

Does the budget meet the test of intervening in poverty traps in our society? The answer to this question depends on the perspective one takes on the budget.

On the one hand, there are encouraging features that suggest higher allocations to programmes aimed at eradicating poverty. The allocations for housing subsidies and land reform grants show significant increases over the Medium-Term Expenditure Framework (MTEF) period, even after discounting inflation. Housing increases by 15%, and land by 80% in real terms for the 2007/8 financial year.  Moreover, the maintenance of the Tax: GDP ratio above 27% is significant given pressure from the private sector to reduce expenditure. Further, the adjustments to the MTEF (i.e. the allocation of the funds not planned for) shows a significant focus on supporting jobs in education and social work. These are important steps towards dealing with poverty in our society.

On the other hand, as the People’s Budget Campaign argues “there was nothing in his (Minister Manuel’s) speech to make significant inroads into the appalling levels of unemployment, poverty and hunger, which still blight our country”. Given some of the progressive shifts described above, is this simply rhetoric? There is good evidence to suggest that the budget will be more supportive of business than the poor. Most obviously, there is little in the budget for unemployed people, especially young adults. Yet, unemployment is the most important problem in our country. Similarly, the adoption of a fiscal surplus of 0.6% for the current financial year is aimed at reducing inflation, and in turn is an attempt to keep interest rates low. The ultimate aim is to keep the cost of borrowing down, in the hopes of continuing the economic growth in our society. The problem is that the current levels of economic growth, supports the creation of low-paying, causal jobs – thus increasing the ranks of the working poor. Overall, government could do more to address poverty.

Using the budget to target poverty and inequality more effectively is however a complex (but not unattainable) policy objective. Three key features should guide this intervention. First, reducing inequality in our society is important for ethical reasons if, in Ministers Manuel’s words, “human life has equal worth”. However, it is also important to support long run economic growth. Tackling inequality is good for economic growth in that it supports a longer run of economic growth but more importantly ensures that the poor benefit from growth. Breaking inequality in our society requires significant transfers of resources to the poor. Despite the welcomed increases in housing and land, budget 2007/08 lacks a major redistributive mechanism. One example of such a redistributive mechanism is the Basic Income Grant (BIG)

Second, South Africa must close the gap in our social security system, as unemployed adults receive no income support from government. The problem of youth unemployment is very worrying, as 76% of all unemployed people who have never worked, are between 15-30 years old. This means that a generation of young people have never experienced work and whome we would argue, are trapped in poverty. Intervening in this area through providing a mix of venture capital, income support and savings schemes is needed to integrate poor, mostly black and female adults into the economy. Here again, Budget 2007/08 fails to provide adequate interventions. 

Third, public service capacities must be improved. Building an efficacious and effective public service is a long term project. If the suggestions for an up scaling of redistributive programmes are to be implemented, then a significant improvement in public service capacities is needed. The introduction of bursaries for teachers and social workers is an important step in beginning to deal with skills shortages. However, South Africa does not have a long term plan for building public service capacities. While there are some important interventions, they represent a patchwork of ideas, as opposed to a coherent strategy. This is not the responsibility of Treasury, but rather the Department of Public Service and Administration.

Implementing these ideas, cannot be undertaken without a comprehensive development plan. This is the responsibility of government to drive, especially since South Africa is a deeply contested society. Civil society organisations should push for a comprehensive development strategy. In turn, it requires new forms of organisations in civil society. Perhaps, the time is right for an anti-poverty coalition that brings together all progressive organisations. Such a coalition would not only strengthen the work of existing campaigns, such as the Basic Income Grant and the People’s Budget Campaign, but also take the fight, much more formidably, to capital. Building an anti-poverty coalition gives practical expression to the ideal that “human life has equal worth”. 

Ebrahim-Khalil Hassen is an independent policy analyst. He contributed to the most recent People’s Budget Campaign proposals. He writes in a personal capacity and welcomes comments, which can be emailed to ekhassen@gmail.com.

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