Breaking down the budget: Your Minister on job creation and social spending

On Wednesday, 26 February, Finance Minister Pravin Gordhan tabled the Budget in Parliament. The national budget is essentially the announcement of government’s estimated spending (dividing state coffers between the three ties of the state), borrowing and tax plans for the forthcoming three years.

Nene-Gordhan Finance Minister Pravin Gordhan has a word with his Deputy Minister Nhlanhla Nene: could the latter be next in line?

Yesterday saw your representatives from across the party spectrum pack the National Assembly to listen to Minister Gordhan’s fifth and last budget of President Zuma’s first administration. At the beginning of his speech, Minister Gordhan said: “Fellow South Africans let me be frank with you – the world economy is still in difficulty and global institutions are struggling to find their way”. Later on in his speech, he described the economic down turn as “a once-in-70-year economic earthquake”.

Set against the background of a sluggish global economy, post the 2008 Financial Crisis, “South Africa’s economy has continued to grow, but more slowly than projected a year ago. We expect a growth of 2.7 percent this year”, said Minister Gordhan.

After the budget speech, Democratic Alliance’s Shadow Minister for Finance, Tim Harris, told a handful of journalists: “The question is how’ve we done in the last five years under the Zuma administration, and that’s where I think the speech was a letdown, because clearly while he played lip service to the National Development Plan and while we welcome that, we’ve had that plan for a year and a half but we are not seeing implementation on getting infrastructure up to ten percent of GDP, it’s languishing at about seven percent. We are not seeing reform of the public service... that sort of implementation is missing and would particularly require the political leadership of the President”.

In his speech Minister Gordhan added that we needed to do more in order to achieve “greater equality” and that South Africans needed “to work together to radically change our economy” in order to bring “those who are marginalised into the mainstream of opportunity and activity”. With regards to job creation, Minister Gordhan told Parliament that 5.9 million jobs have been created since 1996 but that South Africa’s 24% unemployment is “still far too high”. He added that government has spent more than R100 billion on employment programmes over the past five years, funding more than four million job opportunities in the process. Minister Gordhan also said that government would expand their employment programmes over the next three years, implementing them in every municipality by 2017.

According to the budget, government supports job creation through various direct interventions:

  • Expanded Public Works Program (EPWP), which created 973 705 short to medium-term jobs in 2012 13.
  • Community Work Programme (CWP), which is the fastest growing component of the EPWP. It guaranteed approximately 175 00 people two days of work a week in 2012/13.
  • Employment tax incentive (see this report)
  • Jobs Fund, which was launched in 2011 with the goal of co-financing projects that to date has created 12 184 new jobs.
  • National Rural Youth Service Corps, which offers participants a two-year skills programme (amount of people it reaches is unspecified).

The Minister added that the launch of the EPWP in 2004 has already created more than five million predominantly short term and part time jobs and that the next phase is aimed at creating six million jobs.

He went on to refer to the introduction of the Youth Employment Tax Incentive this year, which subsidises the salaries of 18 to 29 year old workers, saying that it had recorded 56 000 beneficiaries in its first month.

Later, DA’s Harris told People’s Assembly, “Government training programmes like the Youth Wage Subsidy, like the Jobs Fund - they are all important but they are never going to be the big job creators. If you look at these programmes right now they are creating work opportunities in the thousands, we need jobs in the millions and that’s going to come down to the private sector and [that’s where] we needed to see him be much bolder in terms of maybe some tax breaks and in terms of big commitments to ensure government works to make South Africa a good investment”.

With regards to social spending, Minister Gordhan said, “We will build 216 000 houses and connect 905 000 households to electricity in the Medium Term Budget Framework” and that “433 schools will be built” in the same time period. He said that in 2007, five million learners had access to free education but that this year the number reached 8.8 million, and that the National School Nutrition Programme now feeds 8.7 million children.

He added that government has spent R41 billion on HIV/Aids programmes, and R43.5 billion has been budgeted for the programme over the next three years. Gordhan stated that we were seeing the phasing-in of National Health Insurance (NHI) as the Department of Health’s white paper on NHI and a financing paper by the National Treasury will be tabled in Cabinet shortly.

In terms of social grants, Minister Gordhan mentioned spending on social assistance has risen from R75 billion in 2008/9 to R118 billion this year, and that the number of grant recipients has increased from 13.1 million in 2009 to 15.8 million today. He added that the “number of children receiving the child support grant will increase to 11.4 million”.

Grant recipients will receive the following increases this year:

  • Old age and disability will increase from R1270 to R1350
  • Foster care grants will increase from R800 to R830
  • Child support grants will increase from R300 to R310 in April and rise to R320 in October

Reflecting on the budget speech later, ACDP’s Steve Swart told People’s Assembly, “We’ve got 16 million people on social grants and that is not sustainable in the long term, but in the short term it is very necessary to address poverty and unemployment so we support the increases that have been granted. They are inflation linked... expenditure on education is massive and we are very pleased the Minister said they are trying to do forensics to make sure that every Rand that is actually spent on education is correctly spent”.

Leader of the Freedom Front Plus, Pieter Mulder, was more conservative in his analysis and said: “Social grants are a problem in the sense that we aren’t a welfare state and we can’t afford them. One positive is that one million beneficiaries that got it invalid [have been taken off the list], but on the other hand it was a bit of an election manifesto to dish out money. You can only do that if you stick to your fiscal discipline, otherwise the credit rating companies will get you and I’m not sure if they can really balance the two because our growth rating is not high enough”.

Referencing "The People’s Alternative Budget Speech" - a collaborative effort by various civil society organisations to incorporate views collected from economists, activists, social scientists and researchers, as well as communities all over the country, into their own alternative budget - and in direct contrast to the argument made by Mulder, the Budget and Expenditure Monitoring Forum’s (BEMF) Thokozile Madonko, added that social spending was in fact essential and that we needed to see more state funding generally and health care funding in particular. She added that it was not just about developing infrastructure such as new hospitals but that money was needed for preventative care and education around non-communicable diseases.

When People’s Assembly asked Madonko where the government would find the funds to increase social spending, considering the recession, she said, “[The idea] of cutting and trimming or doing more with less is problematic... there are a number of options available... what we recommend in our speech is that we look to local borrowing such as borrowing from the idle [state] reserves, for example the Unemployment Insurance Fund (UIF) and the pension fund, and the Public Investment Corporation (PIC). They are sitting on over a trillion Rand that government could borrow at a more regulated interest rate that could provide the needed cash injection to provide for the services that we would like to see in health, education and social services”.

Madonko concluded that “we are seeing currently around rape and domestic violence that many service delivery organisations are not receiving funds from government... and we are not going to be able to deal with the scourge of violence across the board in this country if we don’t provide well equipped social services and the necessary skills within the sector to protect South Africans”.

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