With almost half of South Africa categorised as poor, the national Budget must be looked at for its impact on poverty. To what extent does it extend an effective social welfare net and how much tax relief is targeted at working-class families as opposed to the wealthy?
The Budget goes some of the way, but an embracing net is still a work in progress. More than a third of the government’s additional revenue this year has been dedicated to social grants, which have become a cornerstone of the state’s anti-poverty strategy.
But trade unions and civil society organisations say Minister of Finance Trevor Manuel’s philanthropic budget is not bolstered by a coherent jobs strategy that will ensure — as the People’s Budget puts it — ”the changes in production and ownership required to overcome unemployment”.
Of the R74-billion in additional allocations over the medium-term, 30% (or R22,3-billion) has been added to the social grant system, for a total R180-billion. This allocation will see child support grant beneficiaries double to 11-million. The grant will increase by R10 to R180 and cover children up to 14. Pension and disability grants will rise by R40 to R780 a month.
Research shows that since 1995 real social spending has increased by more than R15-billion — a 25% increase per capita for the poorest 40% of households. But the People’s Budget — an alternative presented by the Congress of South African Trade Unions, the South African NGO Coalition and the South African Council of Churches — has calculated that the wage level of the majority of poor workers in the formal economy is still less than R1 000 a month.
Based on the United Nations poverty line of R354 a month per adult, poverty remains very high, at 48,5% of the population — a moderate decrease from 51,1% in 1995.
Manuel reinforced his commitment to increase spending on the poorest 40% of the population, noting that access to economic opportunities for the large proportion of the population remains highly skewed and that ”eradication of poverty can only be achieved through an increase in employment or through successful entrepreneurial ventures by poor households”.
He said that although the black middle class has boomed — black households earning more than R153 600 a year increased by 368% between 1996 and 2004 — on the lower end of the income spectrum, the Gini coefficient rose from 0,66 in 1996 to 0,69 in 2001. The Gini coefficient is a measure of economic inequality where 0 corresponds with perfect equality and 1 with perfect inequality.
Manuel also cautioned that while 280 000 jobs a year have been created since 2000, this is not enough to have an impact on the 30% official unemployment level. The expanded definition of joblessness is closer to 40% because it takes account of people who have given up looking for work. To stimulate job creation and investment, Manuel has injected R3-billion into infrastructure development under the Expanded Public Works Programme .
In total, social services now account for nearly 60% of consolidated non-interest expenditure.
While the money is available for the state to extend a caring hand, attention will be focused on effective spending. Increasingly it has become clear that constraints are no longer fiscal, but human. Civil servants at provincial and local government level lack ”capacity” to ensure the impact of increased spending.