While this year’s budget gave significantly increased allocations to police, education and housing, it once again fell short of bold, direct interventions for the poorest in our society.
Interventions such as the Neighbourhood Development Partnership Grant and eradication of the bucket system are critical, but focus only on urban and peri-urban areas. The increased allocations to water, sanitation and electricity will not reach the remote and poorest areas where municipalities are mostly dysfunctional.
The government’s poor service delivery has for some time now been identified as one of the main impediÂments to economic growth and reducing poverty. The fact that there is a budget surplus for the past year, and another projected for the coming year, merely highlights the problem government has spending its money.
Another problem is the focus of the governmental economic plan, Asgisa. While much attention has been given, by the public and private sectors, to identifying growth initiatives, it is the “shared” part that is a lot trickier and most likely to determine the nature of South Africa’s future growth path.
Although the democratically elected government delivered the strongest and most stable period of growth seen in three decades, inequality, poverty and unemployment rates have risen. It is this trend of unequal economic growth that Asgisa aims to prevent with its emphasis on shared growth initiatives.
While the employment, skills development and education initiatives outlined in this year’s budget will go some of the way towards achieving this goal, there have been few direct interventions aimed at those who are not part of any economy. According to the latest census, 40% of South Africans live in rural areas where government services and infrastructure are poor or non-existent.
If bold, direct and urgent interventions are not implemented for these communities, Asgisa’s plans are bound to exacerbate already rising levels of inequality that could undermine political and economic stability.
The inability to forecast the budget has been noted in the Asgisa background document. It details the tendency to understate revenues and overstate expenditure, leading to the budget seeming more expansionary than it actually is. This sends misleading information to other economic players.
Perhaps it is politically too explosive to be honest about our tightening fiscal stance in the face of rising poverty and inequality. Our budget surpluses are either by mistake or by design. If they are by design, then the appropriateness of running budget surpluses at this stage of our economic development needs to be openly debated.
Thus far we have only commended the treasury on its revenue collection prowess and not addressed the ways in which it can be expected to expedite service delivery. If the surpluses are a mistake and just mask an inability to spend, let’s solve that problem already!
While creative interventions were proposed on the revenue side, such as scrapping the retirement tax and removing the secondary tax on companies, there was little thought given to creative measures on the spending side, where it is needed most.
The one intervention that is reaching remote areas is welfare grants and these were merely increased by the rate of inflation. For the most remote, rural areas, bold interventions are needed where private construction companies are contracted directly from national government to get basic infrastructure and services delivered now instead of sitting around and waiting for municipalities to be “capacitated”.
The other disappointment in this year’s budget was the paltry increase in excise duties on alcohol. The 5c increase on a 340ml can of beer in alcohol excise duties is literally, once again, a joke. Over a three-year phase-in period, the excise duty on bottled beer should be raised to the same rate as for cigarettes (about a 30c or 40% increase a year over three years on the excise duty for a 340ml can).
Manuel talked about addressing the causes of crime, yet he fails to significantly increase the excise duty on alcohol. Although current excise duties are similar to those of other countries, the scale of the alcohol abuse problem in South Africa is considerably higher.
The Medical Research Council’s national trauma research programme has found that 67% of domestic violence cases in urban areas and 76% of domestic violence in rural areas are alcohol-related. Approximately 40% of firearm and 58% of blunt instrument homicide victims have consumed alcohol prior to their fatal injuries. Not only are those perpetrating the crimes likely to be under the influence of alcohol, but the victims also tend to have consumed large quantities of alcohol.
South Africa’s high rate of foetal alcohol syndrome and car accidents involving alcohol further highlight the negative impact it has on our society. Alcohol control should simply be applied in the way that tobacco control was so successfully applied: consenting adults have the choice to consume alcohol, but it should be an informed choice about the potential dangers.
As with tobacco, legislation should be enacted to ban the advertising of alcohol, warning labels about health effects and foetal alcohol syndrome should be put on bottles, and taxes on alcohol should be raised to a level on par with that of tobacco products.
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