The minister of finance also announced an increase in HIV/Aids spending
Barry Streek and Glenda Daniels
In the government’s first move to promote job creation through the tax system, Minister of Finance Trevor Manuel this week announced tax breaks for companies that employ new workers as learners.
The announcement was a key feature of the cautiously expansionary three-year budget plan unveiled by Manuel in Parliament.
In his medium-term budget policy statement the minister also pledged income tax cuts next year, particularly for low- and middle-income earners; announced an annual 7,2% increase in spending on the social justice system; additional transfers of R1,5-billion to the provinces; and R328-million to local government to promote delivery on social development programmes.
In a welcome sign that sections of the government are starting to acknowledge the magnitude of the HIV/Aids crisis, Manuel announced that government grants to the provinces to fight the epidemic would rise from R110-million this year to almost R550-million in the 2004/5 financial year.
However, the budget policy statement was attacked by a coalition of unions, churches and NGOs, who said it was not sufficient to address poverty, joblessness and low economic growth.
The People’s Budget Coalition comprising the Congress of South African Trade Unions, the South African Council of Churches and the South African NGO Coalition said the health and welfare budgets would not be sufficient to support the introduction of a national health insurance, a basic income grant or other elements of a comprehensive social security system.
The coalition found the “integrated HIV/Aids strategy” and its funding inadequate, while overall education spending was expected to fall slightly on a per capita basis and the water budget was being cut in real terms, with no reason given.
“On the revenue side, despite the welcome, although modest, increase in the revenue to gross domestic product ratio, the proposed level is still well below South Africa’s taxable capacity. This unnecessarily limits the resources available for spending.
“We are also unclear how the government’s pledge to weight tax cuts to middle and lower income households is to be reconciled with its policy of closing the gap between the top individual marginal tax rate (42%) and the corporate tax rate (30%).”
The coalition restated its concern that privatisation revenues were being built into the budget’s revenue expectations, “as this can cause short-sighted decisions on restructuring state assets”.
Manuel’s new wage incentive is particularly aimed at the employment and skilling of untrained young people.
In his budget speech earlier this year he indicated that the government would introduce a wage incentive from October 1 to encourage job creation, and the formalisation of informal employment, by reducing the cost of hiring new workers and offering learnerships.
An inter-departmental task team, set up to consider options, has proposed employers be given a tax allowance when a learnership agreement is signed with a learner, and a further tax break when the learner completes the learnership.
The South African Revenue Service, National Treasury and the Department of Labour would release draft legislation on the incentive before the end of the year for broad consultation, Manuel said.
In addition to Manuel’s proposed increase in HIV/Aids spending, it is understood that Minister of Health Manto Tshabalala-Msimang has tabled draft proposals for the government’s “enhanced response to HIV/Aids” with health and finance MECs, while the Director General of Health, Ayanda Ntsaluba, has submitted a similar proposal to the medium-term expenditure committee.
The departments of health, finance, social development and education have been discussing the campaign, and their proposals are expected to go to the Cabinet within two weeks as part of the 2002/3 budget process.
The Deputy Director General of Finance, Andrew Donaldson, said one focus in the refinement of the HIV/Aids programme is “more appropriate care” for patients, so that they are moved out of hospitals into community care in a more cost-effective way.
Manuel said that the allocation of R4-billion to the provinces for HIV/ Aids programmes was “a lot of money” and had to be effectively spent. The sustainability of these programmes depended greatly on how the provinces allocated resources.
He said a whole range of NGO networks was being supported in the fight against HIV/Aids. It is understood that about R30-million is currently being allocated annually by government to NGOs in the campaign against the epidemic.
The medium-term budget statement said: “The government recognises the steadily increasing impact of HIV/Aids, particularly on the living standards of the poor and vulnerable. The rising burden of communicable diseases intensifies our development challenge and affects the potential growth of the South African economy.”