Our cover image this week should, of course, be taken with a pinch of salt. Minister of Finance Trevor Manuel is very far from being the fiery revolutionary of yesteryear. He is a minister in a largely responsible government who has swapped beard, jeans and struggle T-shirt for a suit and tie.
But there can be no escaping the fact that Manuel and his government have come a long way in the past three years, and we applaud their willingness to undertake this crucial journey.
The official line is that the economy was on its knees when the African National Congress took power in 1994, and that the government had no option but to batten down the hatches. Rigid spending controls, clamps on the deficit, harsh anti-inflationary fiscal and monetary policies and contractionary budgets were, on this version, essential to prevent economic meltdown and preserve investor confidence.
There is considerable post hoc rationalisation and rewriting of history in this version of events. How, in an economy with so many inherited socio-economic backlogs, could the actual shrinkage of the Budget between 1996 and 1999 be defended? What lay behind the rigid adherence to deficits lower than those of most developed economies? It is hard to resist the Congress of South African Trade Unions’s complaint that the stringencies were ideological in origin, rather than a pragmatic response to crisis. Much the same could be said of the government’s temporary blindness to the perils of the Aids epidemic, and the attempt to cast the leadership of the trade union movement as a cabal of crazed far-leftists.
The budgets of the past three years reflect a thawing in this ideological ice age; an acceptance that an active state role in the economy is inevitable in a country like South Africa; and a pragmatic recognition that our huge economic underclass cannot be expected to simply pull itself up by its bootstraps. Gone are the soothing assurances that the informal sector is absorbing the haemorrhage of formal jobs and Manuel’s strident insistence that it is not the state’s function to create employment. Instead, in line with the decisions of a Growth Summit the government had long sidestepped, we now have a large-scale public works programme, at a cost to the state of almost R20-billion over four years, designed to halve the jobless rate by 2014. Welfare and social spending are set to increase by about 14% over the next three years, after a 22% rise between 2002 and 2004. And despite a revenue shortfall, this year’s budget was clearly expansionary, representing an overall growth of 9%.
A new — and one suspects more authentic — Manuel has emerged from beneath the crusty carapace. The language of this year’s Budget speech strongly recalled the halcyon days of the Reconstruction and Development Programme. The minister for the first time explicitly referred to expenditure on anti-retroviral treatment for people living with HIV/Aids.
We are far from convinced that Manuel’s “targeted” approach to social welfare, which only reaches particular groups, is a more effective anti-poverty strategy than a basic income grant. Grave misgivings have been voiced by business and Aids activists about the logistics of implementation, given our sluggish and skills-poor civil service. State expenditure on land reform and housing remain pathetically inadequate. But despite these and other concerns, there must be far greater optimism about South Africa’s economic future now that the ideological battle has been won.
A book is a book is a book
So, the definition of “a ‘book’ for tax purposes” raises challenges for Minister Trevor Manuel. Or at least that is one of the reasons he gives for the decision not to remove VAT from reading matter. In the face of a VAT Act that includes more than 60 definitions, many of them relating to far more complicated concepts than books, that excuse is very hard to swallow.
How difficult can it really be? Surely the department’s legal experts can come up with a definition that will distinguish school books, academic books, textbooks, children’s books from the “magazines or coffee-table publications” the minister would have us believe are the target of the anti-VAT campaigners. We have zero-rated foods; why not zero-rated prescribed books?
As for the contention that the tax benefits would “very largely go to higher income households”, it is cynical in the extreme. Reading is not, should not be, the domain of the privileged few. The vast majority of those who need books for their education, for enrichment, for entertainment are ordinary citizens whose access to the world of the written word has been made increasingly difficult by the huge cuts in grants to municipal libraries.
In a country with virtually no culture of reading, where levels of illiteracy continue to be alarming, where learners and students struggle to afford the textbooks they need, it is sad indeed that an opportunity to make a difference is dismissed with such apparent facility by a minister whose avowed aim is to “build a new society, mould a new culture and create hope”.