Expectations from the medium term budget policy statement

The Peoples’ Budget Campaign (PBC), a civil society coalition consisting of COSATU, SACC and SANGOCO, has for the past nine years tabled proposals on spending and revenue. The PBC bases its proposals from a pro-poor perspective and within the framework of the realisation of socio-economic rights, including but not limited to the right to dignity and life.

This statement highlights our expectations from the Medium Term Budget Policy Statement (MTBPS) to be released by Treasury next week. The MTBPS is an important policy statement from the government as it spells out spending priorities for the next three years. Earlier this year the PBC tabled proposals for incorporation into the 2008/2009 Budget and we will assess how these suggestions are incorporated into the MTBPS. We here summarise the key spending and revenue proposals tabled by the PBC, which are contained in the document titled South African Civil Society Speaks: Spend More, spend better and on the right programmes.”

Our spending proposals are anchored around two themes, namely social development measures and measures to support growth and access to services. On social development measures we proposed a comprehensive social security including the demand for a basic income grant; adequate funding for hospitals and the introduction of the National Health Insurance. We note that Treasury and Social Development department have each tabled proposals on the Comprehensive Social Security and call for an open debate to conclude discussions on a comprehensive social security.

For a nation facing such high levels of poverty, it is unacceptable that we still do not have a coherent anti-poverty strategy. In that context, we must link discussion on a comprehensive social security and the poverty line with a discussion on a comprehensive anti-poverty strategy. We call upon government to open debates on the poverty line as we believe this is not a technocratic exercise. The poverty line must be informed by peoples needs rather than left to experts to design.

With regard to measures to support growth and access to services the PBC proposed improving education outcomes through increased investments; acceleration of land reform within a coherent agricultural and rural development strategy. In this respect, we note the very slow progress to implement resolutions of the Land Summit and the sluggish pace of land redistribution programme. In the absence of support for new farmers with implements, irrigation, skills, access to markets, the distribution of land has proved to be an expensive exercise and anecdotal evidence suggests that most of this land is lying fallow.

The PBC proposals on revenue or development finance aims to increase the resources available to the fund development programmes. We proposed six strategies including increasing the Tax:GDP ratio; reduction of VAT to 13% coupled with introduction of a tiered VAT system; moderate increase in the budget deficit; management of the recurrent cost of debt; redirecting spending away from Gautrain and the PMBR; and mobilisation of pension funds to support infrastructure investments.

Having said that, we are aware that the MTBPS will be tabled in the context of an unplanned surplus and fairly positive mood about the performance of the economy. The surplus should be used to improve the quality of public service including public health care system. It is scandalous that hospitals lack necessary equipment, in some cases leading to avoidable deaths; while the fiscus is in a surplus. How the surplus is used is an ethical imperative which will indicate our commitment to justice and the struggle against poverty.

As the PBC we will reject any suggestion to reduce taxes further because the state coffers are in a surplus. South Africa still faces huge social and economic infrastructure backlogs and notwithstanding the redirection toward social expenditure; our society still face massive inequalities be they in the education or health care system. It is for this reason that we call for an expansionary budget.

Economic growth has since 2003 surpassed the 3% mark, though it is beginning to falter in respond to recent hikes in interest rates. Monetary policy is acting to reverse the growth momentum due to fears of high inflation. In our view, the monetary policy stance is counter-productive by negatively affecting growth, employment and investments. Moreover it is a blunt instrument that does not address the underlying causes of price increases in the economy. We remain firm in our conviction that monetary policy ought to change in line with our development objectives. To that end, macro-economic policy must be subordinated to the goal of encouraging growth; reduce unemployment, poverty and inequality.

The rate of employment creation, while a welcome change from the job destruction of the 1990s, remains far inadequate to make a serious dent on unemployment levels. South Africa also faces high levels of poverty and inequality has been rising in the recent past. Continuing on the current trajectory we are unlikely to realise the goal of an inclusive equitable society. It is for that reason, that we require a new developmental strategy, to place our economy on employment creation growth path. In this respect, we note the National Industrial Policy Framework and believe it is important to align our policies towards the goal of reducing unemployment, poverty and inequality.

The PBC is working towards refining and developing new proposals around women and children’s need and more investments in renewable energy. Suffice to underscore the fact that the budget is ‘gender blind’ but has far reaching implications for gender relations. For example, the provision of affordable basic services such as water and electricity will go a long way to relieve women, especially rural women, from the burden of care which falls disproportionately on women. Parliament is currently debating a children’s right bill and the PBC will develop proposals for the budget to take into account children’s developmental needs ranging from education and social support.

South Africa faces a pressing need to diversify its energy sources and invest heavily in renewable energy. Dependence on fossil fuels is not sustainable in the long run as we are fast running out of coal and oil reserves. Furthermore, fossil fuels damage the environment and South Africa carbon emissions are high per capita, exacerbating the damage to the environment. To that, end the PBC will call for and develop proposals on increased investment in renewable energy. We remain opposed to the diversion of resources to nuclear energy for economic and environmental reasons. PMBR are not only expensive but nuclear waste is potentially hazardous for the environment. The PBC will table its proposals for the 2009/2010 budget in February 2008. Finally, the PBC reiterates, its stance for the budget process to be democratised. In that vein, we call on government to table the necessary legislation to allow parliament to amend money bills.

For further information contact:Patrick Craven COSATU (011) 339 3911 082 821 7456, Desmond Lesejane SACC 011 833 1190, 084 581 6306, Thembi Tshabalala SANGOCO 011 403 7746, 074 265 2521