Gordhan's gone from hero to Nero
Pravin Gordhan's budget at the end of February received top accolades from those whose voices tend to dominate the media. A broad sweep from big business and credit-rating agencies to the Democratic Alliance went into rhapsodies over Finance Minister Pravin Gordhan for choosing "prudence" rather than grand plans, reflecting the high degree of consensus on economic policies among the powerful. "We are all business now", as one commentator put it.
This reflected relief that, post-Marikana, radical changes were not going to be ushered in and that the government had reaffirmed that social goals are to be the prerogative of growth and the market.
Nowhere was this more evident than in the many elegies for the small base of taxpayers who must shoulder the "unbearable burdens" of supporting the rest of us. As though the "narrow tax base" isn't a direct function of extreme inequality — a "heavy tax burden", in fact, is a marker of extreme privilege, the obverse of which is the "burden" of surviving on R500 or less a month, which almost half of South Africans must bear.
But surely anyone not trapped in an ideological well would realise that the post-Marikana climate, which business commentators suggest was the inspiration for Gordhan's credit-rating approved budget, should have given rise to its total opposite? The rapidly accelerating economic and social crisis that confronts us calls for a budget that enshrines a massive, state-led effort to redistribute wealth and to uplift the poor through social spending and direct job creation.
Some part of the business world must understand this, because many polls suggest "social unrest" is the primary impediment to investment. Given this, the free-market brouhaha and ideological bunkering down may appear surprising. By all indications, South Africa's wealthy have become both absolutely and relatively better off since the end of apartheid, supported by buoyant business profits.
In part, the intransigence of South African capital is rooted in a deep fear that any proactive redistribution will be the thin edge of the wedge in unravelling the elite compact that has sidelined the Freedom Charter and reproduced historic privilege. In part, it reflects the transmutations of South African capitalism in which the megafirms at the heart of the economy fully indulged in globalisation and aligned themselves with the international system that protects the mobility and "freedom" of capital, and in which finance garners unprecedented power over social and economic policy.
If not beholden to those interests, Gordhan's budget would have started with the repudiation of the 25% tax revenue to gross domestic product (GDP) rule that appears to have come out of the negotiated settlement of 1993 and that has ensured that the "social solidarity" our history demands has never been forthcoming.
The R7-billion giveaway will provide the better-off with roughly R300 more each month for an extra game of golf. If redirected to bolstering grants, it could have given about R35 a month to 16.5-million recipients.
Instead, the floor beneath the poor was whittled away further by grant increases below headline inflation and far short of inflation experienced by the poor. Old age and disability grants increased by 5%, but inflation in the first quintile, which is the inflation affecting those spending up to R21 399 a month, was 6.9%, according to Statistics South Africa.
Tax brackets were shifted upwards by 3.5% — slightly lower than headline inflation. That will mean fractional real increases in tax rates (a R1-million a year earner will pay 0.001% more than if brackets had followed inflation) but, in practice, Gordhan declined any substantial efforts to bolster revenues. Yet that will need to happen at some point if the government is to fund a National Health Insurance that will provide for the millions locked out of South Africa's hyper-commercialised health system.
Some income will come from the continually delayed carbon tax now scheduled for 2015 but not enough, because it will be accompanied by so many concessions and loopholes that only the dirtiest companies will feel the pressure. That's a major oversight — South Africa is one of the world's biggest polluters and the costs of failing to implement a root-to-branch mitigation and adaptation programme, with the requisite incentives, will be major. At the heart of this should have been a radical vision of ramping up the expanded public works programme to create hundreds of thousands of jobs in renewable energies, retrofitting, agro-ecology, water protection, public transport and other green infrastructure.
Instead, Gordhan turns to the very market responsible for unemployment to create jobs by giving even more away to business with a youth wage subsidy. The economy continues to haemorrhage jobs, the only notable growth being in precarious work, and yet some continue to doubt that business would have no compunction in simply swapping older for younger workers and pocketing the subsidy as profit, with no aggregate employment creation.
With the growth outlook far from promising in the context of a sclerotic global economy, the job targets of the national development plan can only look risible given the current trajectory. But Gordhan forecloses on any chance of repairing the situation by submitting to the dictates of the rating agencies and committing to balance the budget in the medium term. In the long run, the social and ecological costs of this decision will far outweigh the costs of standing on the toes of financial markets.
Indicator of the government's priorities
Let us remind ourselves that the budget isn't just Gordhan's pet project but also the strategic framing of the state's activities for the year and the clearest indicator of the government's priorities and social vision.
Those who continue to doubt that an alternative is possible should cast their eye across the Atlantic to where President Rafael Correa of Ecuador has just won a landslide re-election. Little wonder, as unemployment in his country has halved, minimum wages have doubled and poverty has shrunk dramatically — during the most gruelling years of the crisis. This was achieved by doing everything financiers most revile — doubling social spending, regulating the finance sector and revoking the independence of the central bank. "We can't be beggars sitting on a sack of gold," Correa says, referring to Ecuador's substantial mineral endowments.
The same patterns were visible in the "Lula moment" that so enchants Cosatu's leaders. A massive social spending programme in Brazil never destabilised the fiscus because it succeeded in bringing masses into the formal economy and stimulating demand and hence growth.
But the Cosatu top brass are being wishful if they think a South African rendition of the "Lula moment" is in the making any time soon. Mangaung didn't result in any of the promises for change that Polokwane did. With the election of Cyril Ramaphosa, the quashing of the nationalisation debate and the subsequent embracing of the youth wage, the ANC has firmly signalled its commitment to trickle-down economics. In fact, Mangaung represents a realignment to and growing consensus over the economic programme of big business.
Gordhan's budget is the latest indication that political elites and the corporations with which they have allied have no intention of altering the current course.
If they, the 1%, are "all business now", the 99% must be the spirit of resistance and social change that was born in Marikana.
Niall Reddy is a researcher at the Alternative Information and Development Centre