Barry Streek
The country’s poor have been the main beneficiaries of the government’s social spending, which has between 1993 and 1997 increased by an estimated 34%. This was revealed by Minister of Finance Trevor Manuel in this week’s budget speech in Parliament, where he emphasised this “significant shift in social spending from the more affluent in our society to the poor”.
The harsh realities of life in South Africa are buried inside the 169-page budget review, which was released together with his speech. Despite positive developments over the past few years, the review says: “South Africa remains one of the most unequal countries in the world, with the poorest 40% of households still living below the minimum household subsistence level. An enhanced focus on service delivery, therefore, remains essential.”
The review also says that real incomes “of lower-skilled workers of all races declined” between 1991 and 1996, and it linked this “to the scarcity of employment opportunities.
“Income had been redistributed between races since 1991. Although inequality in the country as a whole is stable, inequality within racial groups is worsening.” In 1996, Africans earned 35,7% of total income compared to 29,9% five years earlier, while the white share dropped from 65% in 1980 and 59,5% in 1991, to 51,9% in 1996.
“From 1991 to 1996, the African middle class (defined as households earning more than R72 000 a year) grew by 78% and its share of total income increased from 9% to 14%. The white middle class shrank by 3% and its income share fell from 54% to 46%. The decline in employment of less-skilled African workers (-7%) resulted in an overall reduction in income despite an 8% increase in average earnings.
“For Africans, overall income rose primarily owing to a sharp increase in the employment of highly skilled workers (80% increase from 1991 to 1996), as well as average earnings (8%), resulting in an overall increase in the income share. For both the coloured and Asian groups, employment of highly skilled workers increased, as did the middle class (36% and 35% respectively),” the review states.
So, while Manuel could state that “the fundamental challenge we continue to face as a country is how to grow our economy in a sustainable way so that poverty is eradicated and the well-being of all our people is increased”, he could make some significant announcements on poverty relief, this clearly has yet to be felt much on the ground, except for the middle classes.
The goals of the finance minister are clear: “We have to consider how we protect the poorest and most vulnerable in our society. We have to ensure that growth leads to greater equity and prosperity for all and to the narrowing of the chasm between rich and poor.”
One of the objectives of economic policy was price stability, which directly affected people’s lives. “High inflation eats away the value of people’s income. For a pensioner on a fixed government pension it matters deeply when the price of bread goes up by 10c or 20c a loaf and whether it goes up every single week or once a year,” Manuel told Parliament.
Preliminary research, undertaken last year, to investigate the distributional impact of the budget “confirms that our tax structure is strongly progressive and that the government’s spending programmes have become more effectively in favour of the poor”.
The study focused on 60% of government spending in education, health, social grants, water provision and housing. “An estimated 57% of spending now goes to the poorest 40% of our people: the share going to the wealthiest 20% is now under 9%.”
This redistribution had been achieved by increased spending on programmes targeted at the poor, such as housing subsidies, poverty relief and child support grants, shifts in spending priorities and the redistribution of resources between provinces and between districts of schools and hospitals within provinces.
Manuel said the spending on social services, education, health and welfare, would continue to take up the bulk of non- interest spending in 2000/2001.
Among the measures announced by Manuel were that provincial welfare departments would pay monthly payments to more than three million beneficiaries at a cost of about R1,4-billion a month. “These go to the most vulnerable in society – the elderly and disabled as well as to poor families with children.”
He disclosed that 217 000 children received the new child support grant in January, a rise of 28 000 from March last year. This grant would eventually reach three million of the poorest children in the country.
Manuel said social pensions would go up by R20 to R540 a month, at a cost of R472- million to provincial governments, and a special additional R75-million would be spent to fight the HIV/Aids epidemic. This will increase to R125-million in 2001/2002 and R300-million in 2002/2003.
One billion rand will be allocated to the government’s poverty relief, infrastructure investment and jobs summit programme, increasing to R1,2-billion and R1,5-billion in the subsequent financial years. “These funds,” said Manuel, “target the poorest of the poor especially in rural areas.”
The Umsobomvu Fund, which earned R855- million through demutualisation of Sanlam and Old Mutual, had been established as a non-profit Section 21 company and would come into operation this year. Its main purpose is to “invest in young people, develop their skills potential and invigorate job creation,” according to the budget review.
Three hundred million rand will be used to promote restructuring initiatives in bigger municipalities and R150-million for smaller municipalities. The integrated nutrition grant, previously known as the primary school nutrition programme, would continue to fund projects providing assistance for undernourished children while R3-billion will be channelled through the South African Housing Fund to provide subsidies for low-cost housing.
Manuel said R11,8 million will go to developmental social welfare services for children, youth, families, women and older people; R463,97-million on training in the 35 government departments; and R59,4- million, up from R24,7-million, for community forestry.
The finance minister made no mention of the “income grant” for unemployed people, raised recently by Minister of Welfare and Population Development Zola Skweyiya, but it seems clear that the government will be implementing and expanding a number of anti-poverty and inequality-reduction measures during the new financial year.
Whether these will have significant impact among the 40% of families living below the minimum subsistence level remains to be seen.