27 February 2013

South Africa: Cosatu's Statement On 2013/2014 Budget Speech

Photo: GCIS
South Africa's Finance Minister Pravin Gordhan (left) ahead of the 2013 budget speech.

The Congress of South African Trade Unions has taken note of the 2012/13-budget speech presented by the Minister of Finance comrade Pravin Gordhan. This is our initial response to the statement.

For the past 19 years, COSATU has consistently raised that the fiscal and monetary policy stance adopted by successive Ministers have been inappropriate for a country with massive crisis of unemployment, poverty and deepening inequalities.

COSATU does accept that South Africa has been affected by the sweeping and devastating world economic turmoil that hit every country throughout the world in 2008. This has affected South Africa's revenue as every aspect of the economy was affected, leading to our economy losing over 1 million jobs in just 22 months in 2008/9.

Having said that, we argue that before there was a world crisis, South Africa was already in a deep crisis as a result of the wrong growth path we inherited from the apartheid era that simply reproduced poverty, unemployment and inequalities. The depth of this crisis demanded that we adopt bolder, radical and decisive steps, including realigning our fiscal and monetary policy to the need to urgently address these structural deficiencies.

The framework outlined by the budget speech adopts a business as usual approach, despite evidence of a burning Rome! At the time when our people are occupying the streets demanding better houses, affordable, accessible and safe transport, a new incomes policy to close the apartheid wage gap and growing income inequalities, the budget adopts a neoliberal stance, cutting expenditure by more than R10 billion rands.

It commits to a debt of higher than 40% of the GDP and deficit reduction from 5.2% to 3.1%. Whilst a indication has been given to review tax policy which we cautiously welcome, no statement has been made that tax policy must be more progressive to shift the tax burden away from the shoulders of the poor to the those who can afford to pay. It is extremely disappointing that one of the five priorities of the government – creation of decent work gets mentioned only once in the speech on page 18!

We remain extremely concerned that the conservative and pro-capital National Development Plan continues to receive ringing endorsement from the government. We dispute the assertion of the speech that there is a broad endorsement of the NDP. The only other formations to have welcomed this have been pro-business opposition parties and big business. Labour and many other progressives in the country have long realised that this plan is the reinforcement of the status quo in economic terms; hence the celebrations from the business sectors about it being made the Alpha and Omega!

This status quo message is further reinforced by a totally unacceptable message to our people that they must exercise more patience. The metaphor used of a mountain where rocks have to be removed one by one is extremely worrying.

It comes as no surprise that while exports increased by a mere 1.1% in real terms in 2012, imports increased by a massive 7.2% over the same period.

That is why South Africa will continue to deindustrialise. After all the NDP sees no major role for the manufacturing sector yet the NGP and IPAP correctly places manufacturing as the cornerstone of our future growth path.

Having said that, we welcome the following measures in the budget speech.

We welcome the incentives to help the manufacturing sector of our economy, for instance the Manufacturing Competitiveness Enhancement Programme. We also welcome the progress being made by the Jobs Fund. Our key concern though is that the Minister only mentions the number of applications, project and grants funding approved but nothing about the number of jobs created so far.

In the same vein, it is about time for the Minister, in line with his resolve to ensure value for money in the public sector, to indicate the number of jobs created by the sectors of the economy given incentives funded by the public purse.

While COSATU supports the regional integration efforts as mentioned by the Minister, we are concerned about the continued relaxation of exchange and capital controls which have so far resulted in job losses. We call for an increase in financial transactions tax from the current rate of 0.25% to 1.25% to limit short-term capital flows and to encourage productive investment.

We welcome the proposals by the BRICS countries to establish a "BRICS-led" bank to mobilise domestic savings and co-fund infrastructure in developing countries. This will go a long way to ensure that these countries do not rely on International Financial Institutions whose conditionalities have created serious economic challenges in Africa and other developing countries. We hope that such a bank won't end being another World Bank or IMF.

COSATU also welcomes the focus on infrastructure development, particularly social infrastructure in the form of schools, hospitals, clinics, dams, water and electricity distribution networks, electrification of over a million new houses, sanitation schemes, more courtrooms and prisons and improved bus commuter rail and road links.

COSATU will study the budget allocations in this regard to determine if they are enough to realise this social infrastructure development. We note that the SOEs are expected to spend R400bn in infrastructure development, financed through "own resources and borrowing". Our experience teaches us that "own resources and borrowing" normal go along with high administered prices in the form of electricity and port tariffs and COSATU has a problem with that.

We support funding for environmental programmes such as SWHs and procurement of renewable sources of energy. We reiterate our call that such programme must help create local industrial capacity by ensuring that inputs are sources locally.

We are disappointed that social grants will be increased by a mere 4% on average over a period of three years. In the context of high levels of unemployment and poverty, social grants play an important role in helping the poor to put bread on the table. We are getting increasingly frustrated by the failure to introduce comprehensive social security in the country that will ensure that nobody falls through the safety net. We reject the piecemeal reforms of the retirement fund and want these reforms to be part of the comprehensive social security.

The Minister indicates that the NHI will be funded through high taxes in the longer term and there is no allocation in the 2013/14 budget. COSATU finds this unacceptable. We also reiterate our position that VAT should not be used to fund NHI.

We cautiously welcome the announcement that the tax framework will be reviewed. COSATU will use that opportunity to put its proposals on the table and ensure that the tax framework becomes really progressive and allows more resources for redistribution. We reiterate our rejection of the Youth Wage Subsidy as an incentive for employers to hire young people. This is not a solution to the unemployment crisis facing young people.

We welcome the announcement that measures will be put in place to deal with the problem of tax avoidance by multinational companies. We note the increase of the fuel levy by 23c and we demand this to be used to fund the improved highways so that e-tolling can be abandoned.

We note and welcome the fact that, over time, the budget allocations towards health and education have increased. More work has to be done to determine why there are no significant improvements in the quality of services provided by these public health institutions.

We welcome efforts being made to stem the tide of corruption in the procurement process, including the establishment of the Chief Procurement Office, which will among other things enhance the price referencing. We want to see bolder steps being taken to de-tenderise the state, which is one of the reasons why corruption is at such unacceptable levels. We want promises to deal with government employees involved in business to be turned into reality as a matter of urgency. We also reiterate our call that political representatives should not be involved in business.

We are disappointed that although the President raised an issue of land reform in his state of the nation address, no budget mention has been made in the Minister's speech.

In the speech, the Minister mentions that there will be increased funding allocated to the National Prosecuting Authority for the Thuthuzela Care Centres. Gender-based-violence, rape, sexual offenses and murder constitute a serious challenge in the country. However, there is no budget for the protection, compensation, support services, redress and access to legal financial assistance in the justice system.

Lastly, COSATU welcomes action being taken to deal with a problem of indebtedness of the working class and to address the abuse of garnishee orders.

Patrick Craven (National Spokesperson)

Congress of South African Trade Unions

110 Jorissen Cnr Simmonds Street

Braamfontein

2017

Tel: +27 11 339-4911 or Direct: +27 10 219-1339

Mobile: +27 82 821 7456

E-Mail: patrick@cosatu.org.za

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South Africa's Finance Minister Pravin Gordhan (left) ahead of the 2013 budget speech.

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