27 February 2013

South Africa: Nehawu Response to the Budget Speech By Finance Minister, Pravin Gordhan

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

NEHAWU has noted the budget proposals tabled by the Minister of Finance, Pravin Gordan in his Budget Speech in Parliament today. The Minister has firmly located fiscal policy within the framework of the National Development Plan, without any reference to its alignment with the New Growth Path and the Industrial Policy Action Plan II. Nonetheless, we welcome the steps to establish the Budget Office by Parliament, which is a victory for the People’s Budget Coalition. As part of the People’s Budget Coalition, we have consistently demanded that Parliament must implement its own Money Bills Amendment Procedure and Related Matters Act. Therefore, we hope that upon its establishment, the Budget Office will enhance the capacity of Parliament to ensure that the fiscal policy is consistently aligned to the key national policies and responds to the three primary challenges of unemployment, inequality and poverty.

Macroeconomic policy framework

We find it disappointing that the Treasury seeks to reduce real expenditure growth to an average of 2.3% over the next three years, despite continuing to stick to its counter-cyclical fiscal policy and at a time when economic growth has been revised downwards to 2.7% in 2013. It notable; that the Budget Review 2013 indicates that “spending on compensation of employees is far slower than in previous years, growing at an annual average of 1.3% in real terms over the MTEF period. As a result, government’s wage bill declines as a share of total spending.” Since 2011, the minister has consistently claimed that the gains that workers have made in the collective bargaining process in the public service, the so-called “rising public wage bill”, were crowding out spending on infrastructure and other services. Thus, in this budget there is no correlation between the declining public service wage bill and increasing spending as previously claimed.

National Health Insurance

We welcome the introduction of a new conditional grant to enable the national Department of Health to play a greater role in coordinating the implementation of the NHI pilot projects in provinces. We hope this intervention will accelerate implementation in the pilot districts and circumvent the misallocation of funds to other provincial services, as it happened in a number of provinces.

However, we reiterate our call for the release of the White Paper on the NHI. We are concerned that the Treasury seeks to release a discussion document on funding arrangements for the NHI without any certainty as to the final policy framework which the White Paper is expected to set. The starting point must be the intended transformation of the entire health system, in which the introduction of the NHI is a critical component, as part of the government’s mandate from the 2009 elections rather than the budget envelop. We find the implied proposition that the implementation of the NHI would largely be depended on growth in revenue rather problematic. The expansion of social security system, including the introduction of the NHI, must be seen as stimuli to economic growth and development as it has been proven in the developed countries of the global-north.

Retirement Insurance Reforms

NEHAWU is concerned that the Treasury has already tabled proposals on the retirement insurance reforms in Parliament even before engagement at NEDLAC. In the first instance, we reject these proposals as they limit reforms within the current framework of an essentially voluntary and highly privatised retirement insurance landscape, departing from the comprehensive social security approach originally intended in terms of the 2007 discussion papers. Thus, in these proposals there is no framework for:

Social solidarity between high income earners and low-income casualised workers.

Linkage to the introduction of the NHI in terms of the post-retirement health insurance provision.

NEHAWU believes that without a mandatory framework, it remains and will continue to remain unclear as to how the proposed voluntary “tax-preferred saving and investment accounts” for low income workers will help in creating a sustainable retirement insurance system with inter-generational solidarity.

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