The 2013/14 Budget: One step forward, two steps backwards

by Mar 1, 2013All Articles

This budget takes one step forward, only to take two steps backwards. It is delivered in a deepening economic and social crisis. In our country, this is highlighted by desperate struggles for basic needs. We have seen this in Marikana and the mineworkers’ and farmworkers’ continued struggle for a living wage. We have seen this in Zandela and in massive social protests all over country.

The urgency of the situation required an extraordinary response, not a “business as usual response”. But what we see is the Minister to take one step forward only to fall over his feet, in retreat. He calls for a tax review. Very good! He then stays on the same trajectory as always and gives over 7bn in tax reliefs to the wealthier sections of society. Nobody has asked for this, Mr Gordhan. Indeed, when the text in the speech says that tax increases “will be needed”, to finance the National Health Insurance, he retreats to “might” when speaking in parliament. Thousands of unpaid community health workers, tens of thousands of health workers in the public sector, have had enough of wavering and delays. A report was promised already for April last year. Put all papers on the table NOW and make public what is going on behind the scene.

In the same vein, the Finance Minister identifies the necessity of moving to a low carbon economy, but he and his government fails to provide the financing to develop a renewable energy industry in this country. In the midst of the biggest employment crisis in the world, he correctly targets a R270 subsidy for provision of basic services to households with an income less than R2300, but he fails to introduce the desperately needed basic income grant or even to table this for renewed discussion. In contrast, the Finance Minister and his government has decided to channel limited resources into further tax breaks for business through a Youth Wage Subsidy, despite overwhelming evidence that such policies have failed to create jobs in other countries and are particularly unsuited to local conditions.

Whilst offering a number of tax incentives for business, Minister Gordhan highlights the extreme poverty in SA. Again: 59 percent of all households have an income of less the R2300 per month. Now, this household income is hit by a higher rate of inflation than the official rate, due to high price increases on food, electricity and public transport. Still the social grants are not even increased at the rate of headline inflation. The mass of the poor, who until now have voted for Mr Pravin’s party will of course ask: Where is the redistribution Mr Gordhan? The new local government equitable share formula, intends to increase the subsidy for free basic services to the poorest 59 percent of households. But while this is a good intention, experience has shown that the poorest cannot rely on the free basic services, as substantial numbers are connected via pre-paid metres.

The crux of the problem with the budget is the following: It is predicated on the idea that there should first be growth before there can be redistribution. But a budget and a reprioritisation of expenditures is in itself a powerful opportunity for radical redistribution of wealth. This budget fails. It doesn’t prioritise expenditure to the urgent needs of the vast majority of the people. The masses of this country ask: 20 years after the ending of apartheid, what has changed in the economy?

Denico Dube, a farm worker in Western Cape, says: “For us farm workers nothing has changed. We are still, 20 years after apartheid, the most downtrodden”.

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