Last week’s Mail & Guardian lauded Minister of Finance Trevor Manuel for his medium-term budget policy statement. He is shedding his Maggie Thatcher image, claimed the editorial, and returning the African National Congress to its ”social democratic roots”. Even Zapiro (who is usually sharper than this) joined the merry band of praise-singers by depicting Manuel revisiting the old Reconstruction and Development Programme.
This really is a lot of nonsense. Firstly, Manuel was never Thatcher. He has increased real social spending steadily since the late 1990s and his party has empowered, rather than emasculated, the trade unions. Secondly, the medium-term budget policy statement does not amount to a social democratic transformation. It is an election budget designed to give the ANC cover for its largest failings — most notably, Aids policy and unemployment. And the ANC couldn’t have hoped for a better start to its election campaign than the surprisingly uncritical reporting in last week’s M&G. If this kind of hagiographic journalism is a sign of what is to come in the run-up to the election, I despair for my Friday evening reading.
Social democracies are characterised by high levels of social spending financed by correspondingly high levels of taxation. If the ANC really was a social democratic party it would be increasing borrowing and asking income earners to dig deeper in their pockets to help the unemployed and those with Aids. Instead, it has opted for an election budget that allows the deficit to widen over the short term to finance an expanded public works programme and to start — or appear to be starting — an Aids treatment roll-out.
The increased allocation to public works programmes is clearly desirable given South Africa’s massive unemployment crisis. It was also entirely predictable because every opinion poll reports job creation as the voters’ top priority. Given the manifest failure of the government’s economic strategy to create jobs, the ANC had little choice other than to embark on an expanded public works programme. Whether this impetus will be maintained in post-election years remains to be seen.
The Aids allocation is more complex as it combines substance with a hefty dose of spin. According to the medium-term budget policy statement, just less than R12-billion has been ”allocated” to fight Aids over the next three financial years. Of this, 60% is channelled to the provinces via the ”equitable share” allocation. As provinces can spend the equitable share money any way they choose, there is no guarantee that this ”Aids allocation” will actually go to Aids-related interventions.
The Institute for Democracy in South Africa’s indefatigable Aids budget unit has been pointing out this problem for some time now. It estimates that less than a third of the equitable share earmarked by Manuel for Aids in the 2003/04 budget was actually spent by provinces on Aids-related interventions. It is thus pure spin to describe the budgeted increases in the provincial equitable shares as if they were fixed and mandated allocations for Aids.
A cynic might say that by opting to allocate additional Aids money via the equitable share Manuel is killing two birds with one stone. On the one hand, he can portray the government as caring about Aids and have this message lapped up by the press. On the other hand, he can give extra resources to provinces, almost all of which are fully controlled by the ANC, to spend as they please — that is, in ways that maximise their chance of re-election.
By delaying the Aids treatment roll-out through years of obfuscation about the science of anti-retrovirals and now by requiring a series of unnecessary changes and extensions to the proposed roll-out plan, the ANC has placed itself in a comfortable political position. Electioneering politicians can deflect criticism about Aids policy by claiming that they are about to do something about it, thereby neutralising Aids as a rallying issue for other parties.
Even if one was not a cynic, there are other obvious pointers to the short-term political nature of the policy statement. Assuming for the moment that all the money Manuel has allocated for Aids is actually spent on Aids-related interventions in 2004/05, then this would be sufficient to fund a treatment roll-out (as estimated by the government’s task team). But this happy scenario is manifestly not the case for years 2005/06 and 2006/07, where the Aids allocation falls short of the government’s own costing estimates. The strong implication is that the government is not intending to fund a full roll-out, and that soon after the election, will dampen the increase in social expenditure so as to prevent the deficit from growing. The option of raising the necessary revenue through taxation is not on the agenda.
Which brings me back to the issue of social democracy. Ultimately, the ANC’s economic strategy rests on the hope that low taxation and small budget deficits will boost growth and thereby alleviate poverty. It rests, in other words, not on a social democratic vision, but on a version of ”trickle-down economics”.
A genuinely social democratic response would pose the citizenry the following question: How much redistribution through the Budget are we prepared to accept in order to make our society a better place to live? For example, it would take an increase in the VAT rate of 8% to 10% to fund a full-scale Aids prevention and treatment programme and provide public works employment for a third of the unemployed. Is this politically feasible? We can only know the answer to this question if the government facilitates a broad social discussion or campaigns on a genuinely social democratic platform in the next election.
In the meantime, portraying this short-term election budget as a credible social democratic response to unemployment and Aids is seriously misinformed.
Nattrass is professor of economics and director of the Centre for Social Science Research at the University of Cape Town