South Africa

Op-Ed: Promise of a new dawn, lost in the 2018 Budget speech

In the coming days, SECTION27 will be engaging with civil society organisations on how best to challenge the regressive proposals in the Budget. By DANIEL MCLAREN.

At 14:00 on Wednesday, many South Africans remained optimistic that a new era of politics was under way – one that would allow us to make a fresh start on the task of building a new social contract and fundamentally reshaping our economy and society to meet the needs and aspirations of the majority of people.

By 16:00, the battle lines had been drawn, and in true South African fashion, one step forward has been followed by another step back. Business as usual would be an understatement. The 2018 Budget was the most regressive and therefore anti-poor we have seen in years.

The Budget speech once again brought home the ever widening gap between the rhetoric of our leaders, the positive constitutional obligations they are under to deliver a more equal and just society, and the reality of our economy and the Budget that shapes it.

The most unequal country in the world simply cannot afford to balance the Budget on the backs of the poor. With poverty increasing since 2011 and unemployment at a 10-year high, the poor simply have no more cents to give.

Yet, despite opposition from workers and civil society organisations across the country, the Budget proposes an increase to VAT, a regressive tax that hits the disposable income of the poorest hardest. This will provide 64% of the additional revenue government seeks to raise this year. By comparison, marginal progressive increases to personal income tax contribute only 21% of the additional revenue, while corporations are not asked to make any additional contributions.

This regressive move is not countered by increases to social grants above food price inflation, or by an expansion of the basket of basic goods that are VAT exempt. Instead, the fall in purchasing power brought about by the VAT hike will be exacerbated by stagnant median wages and declining per capita income.

More poverty and ever higher inequality are the inevitable outcome. This is confirmed in the reports of the Davis Tax Committee, which Treasury is well aware of.

A fact sheet released by civil society organisations demonstrates that there were many other options that would have had an overall progressive impact on our tax structure. These included increases to the personal income tax of the highest earners, higher corporate income tax, an annual net wealth tax, a land tax and increases to capital gains and property taxes.

The first Budget to be overseen by President Cyril Ramaphosa remains so heavily stacked in favour of the wealthiest in our society (high income earners, people with assets, as well as large corporations, banks and foreign investors) that it can never hope to fulfil the hopes and dreams of the majority of people, of which he has spoken about so much in recent days.

As a civil society organisation committed to ensuring that the promise of our Constitution to “improve the quality of life of all citizens and free the potential of each person.”, is achieved, SECTION27 is particularly concerned about diminishing real funding for basic education and health care.

The baseline funding available for basic education and health care has been cut. Although NHI received an increase funded by cuts to medical tax subsidies, the overall reductions in basic education and health funding are a disaster for a system that is already chronically underfunded in some areas.

To make matters worse, despite government being overdue on the implementation of Norms and Standards for School Infrastructure, the education infrastructure grant has been cut by R3.6-billion over the medium term and the health facility revitalisation grant (which pays for maintenance and upgrades to hospitals) is cut by R820-million.

Minister Malusi Gigaba provided no justification for these cuts and President Ramaphosa must also be held to account for the impact that they will have.

Since 2015, SECTION27 has been representing the family of Michael Komape, a five-year-old learner who drowned in his own faeces in a school pit latrine that had not been serviced in years. The Limpopo Department of Education claimed in court that it could not afford to fix the toilet.

Yet we know that countless more school toilets (and other facilities) remain unsafe and far below the minimum standards required by our constitution. How many more learners is this government prepared to put at risk of suffering a similarly horrific fate to Michael?

SECTION27 has also been representing many of the families of the 143 mental health care patients who died at the hands of the Gauteng Department of Health between 2016-2017. In its submissions to the arbitration proceedings, the department stated that the deaths resulted from a “marathon project” of moving patients from Life Esidimeni to unlicensed NGOs, which was implemented in order to cut costs.

Although we were able to debunk this argument and show that malfeasance and utter disregard for patients’ rights by various officials within the department was really to blame, it is well known that mental health services and facilities are grossly under-funded and that tragedy’s such as this are always more likely when budgets are tight (and even more so when they are cut).

No country can hope to develop in a sustainable and equitable way when the majority of people lack access to quality education and health care services. There can be no social compact based on a Budget that is balanced on the backs of the poorest in society.

While we commit to constructive engagement with the state through the summits and other processes that have been proposed in recent days, we do so well aware that there will be no easy victories for the poor and marginalised in our society, no matter who holds our nation’s highest office.

In the coming days, we will be engaging with civil society organisation on how best to challenge the regressive proposals in this Budget. We call on Parliament to demand answers from the Executive on how it could propose such regressive changes at a time when services that people rely upon are already so constrained. If those answers are not satisfactory, we hope our MPs will not be dragged into voting for an anti-poor Budget. DM

Daniel McLaren is a Budget Analyst for SECTION27.

Photo: South African boys look down flooded alleyways between shack homes in Masiphumelele informal settlement in Cape Town, South Africa, 07 September 2016. EPA/NIC BOTHMA