Daily Maverick (Johannesburg)

31 January 2014

South Africa: Budget Day 2014 - More Bread and Circuses

analysis

Last year, amid much fanfare, on 23 October 2013 the Minister of Finance, Pravin Gordhan, tabled in Parliament the Medium Term Policy Statement (MTBPS), also known as the Mini-Budget, because it provides insight into what the 2014/15 budget is likely to be. The Minister and his team at Treasury are currently preparing for the 2014 budget day circus that will take place on 26 February. Last year, much was said about the Minister's strong stance on rooting out waste and extravagance in government. The media provided much distraction and diversion for the public and, as a result, provided little space for debate about the substance of what the Minister was really saying about what government plans to spend its money on this year and over the next three years. Ahead of the Minister's speech to Parliament, it is critical that we question and debate these spending plans. By THOKOZILE MADONKO of Section27's Budget Expenditure Monitoring Forum.

The Budget Expenditure Monitoring Forum (BEMF) recognises that government has been navigating a tough global and local economic environment. However, the Mini-Budget last year outlined a spending plan for 2014 to 2016 that is unlikely to deliver on the Minister’s goal of building a more inclusive society where those most vulnerable and disadvantaged can say, “This economy works for me.”

The 2014/15 budget to be presented before Parliament on 26February is unlikely to outline spending priorities that are truly geared towards addressing the ongoing downward slide in the quality of key social services such as health and basic education. In fact, it is likely to exacerbate it. While the proposed increase in infrastructure spending over the medium term is a step in the right direction, government must ensure that spending on huge infrastructure projects does not take place at the expense of the day-to-day goods and services and the filling of mid-to low-level public vacancies, both of which are required to deliver quality services. South Africans have for too long experienced long queues at clinics, regular medicine shortages, poor upkeep and maintenance of school buildings, toilets so dilapidated that children’s lives are at risk and poorly functioning to non-existent emergency medical services in Gauteng, Limpopo and the Eastern Cape, for example. In fact, failing to budget adequately for goods and services and the recruitment and retention of mid to low level public servants could undermine some of the worthy objectives of the National Development Plan (NDP).

Keeping our eye on the Constitution

It is important that we remind the Minister ahead of his speech that the Constitution mandates equitable and sustainable development. That, as the Minister stated, “the NDP recognises capable municipalities as the bedrock of a capable state”. However, the Mini-Budget failed to demonstrate how government was going to deliver on this, and this is likely to be repeated in the 2014/14 budget.

BEMF would argue that it is not sufficient for the Minister to tell South Africans that the expansion of public spending on key services is limited due to the current global economic climate. As the Auditor General’s year-on-year findings and recommendations demonstrate, BEMF does agree that there is an urgent need for government to focus on better use of existing resources. However, Finance Minister Gordhan, as well as his predecessor Trevor Manuel, over the last couple of years have failed to adequately demonstrate that enough resources are being raised and allocated to the public purse to deliver a capable state. We are concerned that by not increasing overall government spending beyond the 2012 budget baselines and forcing departments to do more with less, is likely to further exacerbate growth in inequality in South Africa. At the end of the day, the budget speech is a political speech that sets out in monetary terms the true priorities of the government.

We caution that failure to address the current service delivery crisis being experienced in the Eastern Cape, Limpopo and Gauteng and the many municipalities across the country will only force more communities to violently take to the streets to have their voices heard.

Keeping our eye on health

The Minister’s speech is unlikely to signal a clear commitment towards the allocation of resources needed to expand and improve services in health. In the absence of the white paper on the National Health Insurance or the much talked-about Treasury paper on financing a National Health Insurance Fund, we will see for this financial year a budget that does not allocate the resources needed to reform the South African health system.

It appears that the Department of Health and the Treasury are miles away from each other in their vision of a reformed health system. In 2013/14 the total consolidated health budget allocation in real terms dropped by 3.4%. Of concern is that once inflation has been accounted for, there has been a decline in provincial health allocations. In 2013/14 we saw the overall total consolidated provincial health budget reducing in real terms by 2.2%. In other words, the budget allocation for the delivery of health services has forced health workers to do more with less. It is without a doubt that the current crisis in health services in the Eastern Cape is a result of the year-on-year decline in real expenditure towards health services in the Province. The government, as a matter of urgency, must ensure that any measures to cut costs are not done so at the expense of social services and we recommend that an above inflation budget increase is provided for health on top of baseline allocations for 2014/15 financial year.

We welcome the increases in HIV & AIDS spending as a share of the total health budget with it growing to approximately 10% of the total health budget in 2015/16. However, while these allocations are to be commended, we believe that the overall health budget needs to grow, rather than just the HIV & AIDS share of the total health budget. This will enable continued funding for other spending priorities in the health sector such as rural health, emergency medical services, non-communicable diseases and preventive and rehabilitative services.

Following the money

We welcome the establishment of a chief procurement officer in the National Treasury and the Finance Minister’s commitment to implementing incentives to reward value-for-money in infrastructure delivery in health and education at the provincial level. We call on the Minister proactively to make available on the Treasury website the expenditure reviews being undertaken in cooperation with the Department of Monitoring and Evaluation. We also call on the proposed reviews by the Auditor-General and Parliamentary Committee on Public Accounts for tenders above a certain amount to be made publicly available too.

We believe that there is a desperate need to redistribute wealth, foster social solidarity and drive massive job creation in South Africa. Given this need, government should view reprioritising spending towards realising fundamental rights such as the right to health and education as being good for the economy, contributing to job creation and good for South Africa. We call on government to undertake reforms which create a more equitable tax regime and to create macro-economic policy that is fair and just. We hope that the Tax Review Committee established earlier this year will consider a tax regime that focuses on progressive redistribution of wealth. A starting point would be to scrap the 25% tax rule in favour of a tax to GDP ratio of at least 30%. Any country collecting less than 35% of GDP in taxation is a low-tax economy. The European Union average is 35.6%. We call on government to implement initiatives that curb individual and corporate tax evasion to ensure that a broader tax base exists with the different sectors paying their fair share. This will enable government to broaden the revenue side of the budget making available needed resources for key policy areas such as health and basic education.

It is critical that we see greater “accountability and discipline in the stewardship of public resources”, and in order to achieve this we need a public sector that is capable and paid a fair wage. We recognise the concerns about the costs of “the public sector wage bill” if these costs are related to a top-heavy administration at the expense of middle to lower level public servants, in particular critical auxiliary staff required to keep our clinics, hospitals and schools routinely maintained, inspected, clean and safe. We call on the Minister of Finance in conjunction with the Minister of Public Service and Administration to undertake a thorough review of the “public sector wage bill” across national provincial administrations to ensure that wage costs are those of the many and much needed ordinary health workers and teachers rather than a bloated senior administration.

While South Africa ranks in the top three for budget transparency at the national level, this has not translated to budget transparency at provincial and local levels, nor has it translated into greater public participation in the budget process. Decisions around the raising and allocating of resources cannot and should not take place in a vacuum. In order for the government’s policies to be successful, it is critical that civil society and communities are involved in allocation decisions and operational matters. There is a need to ensure that citizens have access to more detailed and timely budget and service delivery information about their local clinic, school or road infrastructure projects to make meaningful participation and oversight of the budget possible. We therefore request that National and Provincial Treasury and the National Assembly engage civil society on these issues on an ongoing basis and not just on budget day.

It is clear that tough times are ahead and that the South African public deserves more than just bread and circuses on 26February. This is all the more important where the politics of the budgetary decisions may lead to short-term saving in public spending but have huge negative long-term social consequences. Social consequences that 20 years after democracy the people of South Africa cannot cope with, nor do they deserve. It is significant that “meeting constitutional obligations on key rights” is not listed as one of government’s intents in the NDP and therefore is unlikely to guide those tasked with making the budget.

The BEMF believes that in making choices in Budget 2014 and beyond Treasury and government should be guided by the Constitution more than the NDP, and by the communities it serves more than the international rating agencies. We believe that the budget should pay particular attention to those living in South Africa who rely the most on public services and this, in line with government’s constitutional obligations, means giving priority to the delivery of key social services such as health, education and safe places to live and work.

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