In his budget speech to Parliament, Trevor Manuel noted in apparent contradiction, ’even as we enjoy the fruits of the progress made in our first decade’ we understand the impatience that motivates some of those who are drawn into [the recent violent] demonstrations [including communities in the Free State and institutions of higher learning].’
The ’we’ in Government, Parliament, Big Business and BEE deals are indeed enjoying! The ’them’ in communities, workplaces, educational institutions and on the streets have NOT ’achieved freedom from want, freedom from fear, freedom from prejudice, freedom from injustice.’
The succession of budgets delivered by Manuel over the years is a central reason for this disparity between the haves and the have-nots, the elite and the majority. This, his ninth budget, is yet another Gear budget, a budget which takes from the poor and gives to the rich.
The elite, of course, pretend otherwise. The commercial media, as they have done in years past, portray the budget as being developmental and pro-poor. The Mail and Guardian calls it a ’Manuel for delivery’, the Citizen picks on the phrase ’More for All’, the Sowetan gushes ’Thanks for the Moola’ and the Business Day claims that there are ’Billions more to extinguish flames of popular discontent’.
But analysing the budget together with previous budgets highlights both the continuities between one budget and the next and the degree to which the budget enriches the few at the expense of the majority.
On the income side, much was made of the tax relief announced in Manuel’s speech. The yearly deception that the poor are the main beneficiaries was trotted out again, the Mail and Guardian claiming that ’the poor get richer’ as a result of the R6,8 bllion reduction in income tax. Closer scrutiny reveals that those earning between R35 000 and R70 000 a year take home an extra R500 as year. Those earning R300 000 and more take home and extra R4 570, more than 9 times as much. Of course, those earning R30 000 and below get no relief at all from this announcement. They are still paying the full 14 percent in the form of VAT on the goods and services they are able to purchase.
In addition to the gift to individual income earners, Manuel presented companies with R2 billion in the form of another cut in the company tax rate, now down to 29 percent. In the case of both the income and company tax cuts, they represent cumulative benefits for the elite. The extra money doesn’t just come once, it comes every year, and it comes over and above the gifts and presents of tax cuts in previous Manuel budgets. The top marginal rate of tax on individuals has been decreasing steadily to a rate of only 40 percent today. The company tax has come down to 29 percent from rates in the high forties in the first half of the 1990s.
The media and various organizations have lauded Manuel for increasing allocations to social delivery and have labeled the budgets expansionary. Neva Makgetla, Cosatu economist, welcomes the ’counter-cyclical fiscal stance adopted since 2000.’ This suggestion of a certain Keynesianism or social welfarism in Government’s approach is clearly at odds with the facts. In addition to the tax breaks limiting the income side of the budget, the Manuel budgets have, in true neoliberal fashion, consistently maintained a tight fiscal stance. In fact, the fiscal deficit has been pegged at 2 to 3 percent since 2000, lower than the 3,5 to 4 percent deficits of the Manuel budgets of the 1990s. In other words, the limited income is translated through a restriction on the deficit into less money for expenditure.
The only reason we see a certain increase in some expenditure items is because the business cycle in South Africa is experiencing an upswing at the moment. Should future budgets maintain a similar stance on income and the fiscal deficit in a period of downswing, we will witness a disastrous decrease in social expenditure again.
On the expenditure side of the budget, a substantial portion still goes to servicing the debt, a legacy of Apartheid that is still with us today. It is important to note the persistence of a major portion of the debt, namely the debt in relation to the Government Employees Pension Fund and the Public Investment Commissioners (PIC). This debt ballooned in the latter years of Apartheid as the bureaucrats moved to convert the fund from a pay-as-you-go to a fully funded scheme, in large measure to secure their bloated pensions in the event of losing their positions after a change in government. Today, Manuel is using the PIC to buttress a new narrow class of friends, the emerging black business elite. The recent purchase of Telkom shares to allow potential black investors more time to raise the capital to take over these shares is a clear case in point.
The expenditure on debt servicing exceeds that on health. It dwarfs the expenditures on transport, communications, water, land, agriculture and housing. Of the items addressing the most basic needs, only the education and welfare allocations exceed that of debt servicing.
In addition, there are new loans that are also being serviced, further curtailing the resources that remain for social expenditure. The impact of the arms deal on the defence budget has been substantial, pushing up defence expenditure from R16 billion in 2000 to R23 billion today.
It is in this context that we must understand Manuel’s failure to address the question of HIV/Aids in his budget speech. The unwavering commitment to a neoliberal budget, in the form of cutting taxes, decreasing the fiscal deficit and prioritizing debt servicing, in a climate in which so much more can be done, translates into inadequate financial resources to address the most pressing problems of our time.
The allocation to pensions and child grants clearly illustrates the impact of this budget on the majority. The R40 increase in the state old age pension only just manages to keep up with inflation. In the harsher economic climate of previous years, increases have fallen well short of inflation. In other words, after nine years of Manuel budgets, pensioners are now poorer than they were in the latter half of the 1990s. Add to this the failure of the budget to address unemployment and the massive job losses as a result of Gear policy, and the true extent of the crisis facing the poor becomes more evident. The meager pensions, which over the years purchase less goods and services, have to be stretched to cover more and more dependent members of extended families.
In his budget speech, Manuel said ’We agree on a development strategy that is broad-based and invests in all our people. We agree on the need to reduce inequality and fight poverty.’ This is clearly the language of our time, the spoken word of our new democracy. But it is not born out by practice. This Manuel budget, together with all those that went before, steers clear of addressing these ’key values’. It is the other claim he makes, namely that ’We agree that we need more rapid growth of our economy’, that receives all of his attention. The 2005 budget is yet another budget that is geared towards such growth for a select few.