Enoch Godongwana called this budget one of trade-offs. He is right. But let’s be clear as to what exactly has been traded. Amid undeniable economic pressures and uncertainties, the finance minister has opted to divert money from the poor majority, to give to those already doing comparatively well.
Despite much being made of nominal increases in expenditure, in reality, when adjusted for inflation, spending has been slashed across public services and social security. Over the next three years, the government will spend R162bn less on service provision (“non-interest expenditure”) than if allocations had risen in line with inflation. This is a real decrease (of 2.65%) across items such as health, education, public services, social grants and community development.
At the same time, income taxpayers — those doing comparatively well — benefit from this budget. Personal income tax brackets have been adjusted upward for inflation. Various tax benefits increase above inflation. For example, the tax-free amount that can be withdrawn at retirement increases by 10%. In addition, the government promises to pay the wealthy able to afford solar electricity systems up to R15,000 in installation costs.
This upwardly redistributive sleight-of-hand will have disastrous consequences for the majority of households.
In the short term, social grants — excluding the Social Relief of Distress (SRD) grant — have received welcome adjustments for inflation. However, while this compensates for overall inflation, the poor majority spend a greater proportion of their budget on necessities and are much harder hit by the rising cost of living. In January 2023, for example, overall inflation was at 6.9% while food inflation reached 13.4%, the highest reading since April 2009. This is not accounted for by the increase in grants. In simple terms, that translates to more hunger and more child malnutrition.
Approximately a quarter of the population (at least 15-million people) survive below the food poverty line of R663 and most of this group are locked out of our ailing labour market (or having only sporadic, precarious and exploitative work). For them, the SRD grant has been a lifeline.
How, then, with the resources available to expand it, can there be any justification for the gutting of the SRD grant? Not only has the value of the grant not increased in line with rising costs of living (remaining static at R350) — the grant’s nominal budget has been cut by a full R8bn this year, and funding drops off entirely from 2024.
This means that while the budget previously allowed for 10.5-million people to receive support, that number now falls to 8.5-million over the coming year, and none thereafter. Exactly who the 2-million are who will be deprived of assistance immediately, and how their ineligibility for support will be rationalised, is a question National Treasury washes its hands of.
This represents arbitrary and unilateral decision-making from Treasury and directly contravenes the policy commitments made by the president in his state of the nation address a fortnight ago. It will almost certainly be an unconstitutional retrogression in rights.
At a time when more people than ever rely on basic public services, health care and education both take a hit, with expenditure down 4.9% and 2.4% respectively when adjusted for inflation. That’s R423 less for each uninsured health-care user, and R922 less for each pupil in 2023/2024. Overall, R47bn less for health and R39bn cut from basic education over the next three years.
Financial assistance to Eskom is welcome. However, highly concerning are the strings attached and the Treasury's attempt to have a veto over Eskom’s actions. Conditions include restricting new generation capacity to the private sector while forcing Eskom to bear the costs of modifying the grid to accommodate this, and imposing pre-paid meters, with higher tariffs, on poor households.
This is done while offering wealthy households and large businesses able to afford solar power systems money to exit the grid, thus reducing Eskom’s long-term income and ability to cross-subsidise poor households.
The tossing of the poor under the bus is, as always, justified with the rhetoric of fiscal responsibility and debt consolidation — the need to pay off debt as the first priority. But while our deficit reduction is outpacing targets, the choking of public services and infrastructure spending will stymie economic growth — exacerbating the debt-to-GDP ratio in the long-term. It’s analogous to taking your children out of school to pay off your student loan faster than required by your lender. All in the context of R94bn more in tax revenue than expected.
Rather than cutting taxes, we should be increasing them on the wealthiest to provide basic services and basic income. If taxes are being well spent in ways that improve infrastructure and services, reduce crime and improve social wellbeing then cleverly targeted increases are sustainable. This requires radical political change in the executive and strong support for prosecutorial and oversight bodies.
The only way to gradually emerge from the crisis is to use the resources we have to invest in South Africa’s people. To give everyone the basic tools they need to participate in their communities and economy, to grow our human capital base and our economy over time.
This budget cynically and short-sightedly takes away from the poor while supporting the comparatively well off — preventing people from becoming income tax payers in the first place. If we continue on this path, we will find ourselves with an unsustainably small tax base, and a crisis of exclusion that will ultimately destabilise our society.
The minister of finance and Treasury refuse to believe in South Africa’s people, and in doing so condemn them to hopeless intergenerational poverty.
• Isaacs, Selman, Mncube, and Howson are affiliated with the Institute for Economic Justice (IEJ)
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