This budget was expected to deliver solutions that would put at bay fears of slower GDP growth because of inadequate energy resources.
While the Treasury might need more time to digest all the energy-saving tips it has received, the budget proposals fell short of providing incentives that will lead to the behaviour changes needed to make South Africa more energy efficient.
To reduce demand, an electricity levy of 10%, or two cents per kilowatt hour, will be introduced. This is expected to raise R2-billion in the next fiscal year and R8-billion in the following two fiscal years — a total of R10-billion.
Consumers who use non-renewable energy will be penalised, but only R2-billion of the R10-billion raised in penalties will be used to support programmes for energy generation from renewable sources and the installation of energy-saving devices. The other R8-billion will go back to the fiscus, or perhaps to fund Eskom’s non-renewable energy generation.
This is unfair: consumers will be penalised for using non-renewable energy from the sole supplier, but the penalties will not all be used to develop renewable energy sources that give them environment-friendly options or enable them to become more energy efficient.
Another area of the budget that could have gone further is social grants. While there is an improvement over last year’s miserly 5% increase, the R20 (10%) increase in the child grant is below food inflation, currently running at about 14%.
Children up to the age of 15 now qualify for the grant, but it needs to cover all children up to schoolÂleaving age, especially if schoolÂattendance and immunisation certificates will be mandatory requirements to access the grant, as suggested by Manuel in his speech.
Two studies carried out in the Western Cape and in KwaZulu-Natal show that children from grant-receiving households grow taller than children from households that qualify for the grants but do not draw them. The child grant provides nutrition for growing children and should be extended to ensure that all children under 18 benefit.
While a lack of nutrition at any point in a child’s life stunts growth, inadequate nutrition from birth to three years has been found to cause irreversible brain damage. Although it will be an additional expense and a logistical headache, the Treasury should consider providing children between one and three with food parcels rather than just cash grants, which are often spent on non-nutritious food or non-food items.
While a more robust increase in social-grant spending could have helped reduce South Africa’s growing levels of inequality, the changes tabled on individual taxes will exacerbate it.
Sixty-seven percent of tax relief will go to individuals earning more than R150Â 000. This means the bulk of the tax relief will go to the relatively better off, exacerbating a level of income inequality that is one of the highest in the world.
Although the finance minister proposed measures to deal with the country’s high crime rate, the contribution of alcohol to the levels of violent crime was ignored.
Again the tax on beer and wine was raised by a few cents, nothing close to the taxes raised on cigarettes. Between 50% and 70% of violent crime is linked to alcohol abuse, so, by treating alcohol in the same way as it does cigarettes, the Treasury could make a significant contribution to decreasing crime.
The 2008 budget is a missed opportunity to use fiscal policy to address some of the most critical issues in South Africa today: the energy crisis, inequality and crime.
Réjane Woodroffe is chief economist, Metropolitan Asset Managers
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