Media statement: Medium-Term Budget Policy Statement undermines government’s constitutional duty to protect and promote human rights
29 October 2020 - National Treasury’s Medium-Term Budget Policy Statement (MTBPS), tabled by Finance Minister Tito Mboweni yesterday, was too focused on fiscal consolidation - reducing government spending in the economy - as a panacea to debt repayments, and paid little regard to human rights. Importantly, Minister Mboweni failed to seize the moment to present a positive vision of a new economy for our new post-COVID-19 reality.
What South Africa needs now is better government resourcing and regulation that enables the adequate financing of health, education, social development, decent housing and programmes focused on combating gender-based violence and increasing sustainable employment and livelihoods. The Budget Justice Coalition (BJC) notes with concern the impact of budget cuts on public services and the concerted attack on the public sector. In a context of increased poverty, inequality and unemployment due to the COVID-19 economic crisis, government’s response is woefully short of what is required.
In light of this, Budget Justice Coalition demands the following:
- Government must prioritise fulfilment of human rights in the budget. This means guaranteeing that people’s hard won rights of access to education, health care services, housing, social security, safety, water, sanitation and a healthy environment will not be sacrificed to austerity.
- The incorporation of human rights based budgeting principles - outlined in Imali Yesizwe, the alternative budget based on human rights that we tabled last week - into the budget process rather than zero-based budgeting, which evidence shows has not had positive impacts on the budget process in any country where it has been tried.
Revenue and debt
- Rising debt must be addressed by raising more resources from wealthy and high income individuals and large profitable companies, which is also essential to reduce inequality.
- Government should consider raising more revenue from the sugar tax to fund diabetes treatment programmes and the COVID-19 health response.
- Critical entities such as SARS and the National Prosecuting Authority must be adequately resourced to plug revenue shortfalls and prosecute those guilty of state capture, corruption and tax evasion.
- Focus on improving the efficiency and effectiveness of government expenditure rather than making cuts. Reductions to the public sector wage bill, which the MTBPS proposes, along with declining spending on school infrastructure, police and health services (among others) will negatively impact on the state’s ability to drive economic recovery and fulfil human rights.
- Govt must extend the R500 Caregiver Social Relief of Distress Grant (SRD) and the R350 Unemployment SRD until the implementation of a Universal Basic Income Grant and increase these along with R450 Child Support Grant to the level of the food poverty line (R585).
- Investment in the care economy (for example, early childhood development practitioners) to transform gender relations and ensure that women - who carry the burden of paid and unpaid care work - are able to access their rights.
- South Africa must resource environmental protection and invest in a just, clean energy transition away from extractive ventures such as coal mining while protecting the rights of all workers.
- Government must introduce public budgeting processes that are not only transparent but genuinely democratic, participatory and open.
Regressive reductions to expenditure
Minister Mboweni is wrong to say that cuts to social spending are inevitable or necessary. BJC showed in Imali Yesizwe that there are robust economic, monetary and fiscal alternatives to sustainably deal with our lenderswithout jeopardising progress made to expand access to healthcare, social assistance, education, early childhood development, decent housing, water and sanitation.
Instead, the 2020 MTBPS doubles-down on Treasury’s commitment to austerity budgeting for the next five years, prioritising debt repayments and cutting social services while bailing out mismanaged state-owned enterprises (SOEs), which have shown too few signs of reform. Bailouts for SAA and Eskom should not come at the expense of spending on social services. The repurposing of SOEs and the entire state machinery must be part of a developmental agenda that prioritise human rights and not be based on unsustainable and unfair trade-offs between rights.
The MTBPS proposes cuts (in real terms) to social spending across the board. The MTBPS states that:
Compared with the 2020 Budget, main budget non-interest expenditure excluding technical adjustments is reduced by R60 billion in 2021/22, R90 billion in 2022/23 and R150 billion in 2023/24.
Local and municipal governments are among the biggest losers, with MTBPS stating that “the level of free basic services” will now have to be reconsidered. At provincial level, the provincial equitable shares will be slashed by R60bn in the coming year and R12.1bn cut from conditional grants over the medium term. Yet it is these spheres of government that provide critical social services like housing, education, health and social services. MTBPS shamefully admits that the poorer provinces and municipalities will be the most impacted by these cuts.
National Treasury’s failure to heed civil society’s call to extend the SRD unemployment grant and the SRD caregiver grant until the implementation of a basic income grant will contribute to heightened experiences of hunger, poverty and inequality during this period. Women and children in particular have been dealt a heavy blow with the decision to stop the R500 caregiver grant that was being provided to 7.1 million caregivers (98% of whom are women) caring for 13 million of South Africa’s poorest children. This is being done at a time when the economy is in a recession and school holidays are soon to start, meaning that children will not have access to school meals through the National School Nutrition Programme.
Moreover, the MTBPS neglects the fight against gender-based violence and femicide, and does not elaborate on how funds will be allocated to support the implementation of the National Strategic Plan.
BJC believes that these decisions represent regression on the realisation of human rights enshrined by South African and international law.
The budget for the basic education sector - which was already reduced by R2.2bn in June’s Supplementary Budget - will shrink in real terms every year over the medium term, leading to serious setbacks to the realisation of the right to basic education. The impact of wage bill reductions will cut R114 billion wages on the learning and culture sector - mainly for teachers - over the next four years.
In the health sector, South Africa is experiencing a quadruple burden of disease. While we invest significantly in fighting the twin epidemics of HIV and TB, recent evidence is emerging that our current approaches require review. Clearly very little has been learned from the pandemic and where the rest of the globe is prioritising strengthening health systems to avoid future risks, we are going the other way.
We are beginning to see the beginnings of a second wave of COVID-19, with increased infections and deaths after trending downwards. Initial evidence showed that unmanaged diabetes was a significant contributor to covid mortality. Modelled estimates published in the 2018/19 district health barometer indicate that of the 3.5 million people living with diabetes, less than a third are currently on treatment. Government should consider raising more revenue from the sugar tax to fund diabetes treatment programmes and the COVID-19 response.
Health, like Basic Education, is a people driven sector and will be significantly impacted by the proposed salary freezes. In a system where there are grave shortages of healthcare professionals (with 40,000 posts unfilled), cuts to the wage bill will likely slash the employment rates of the already precariously employed community-healthcare workers, and generally negatively impact people’s ability to access quality healthcare services. Additionally there are also proposals to review the occupation specific dispensation which will further impact health care workers. In the context of a global shortage of healthcare workers, this could lead to a mass exodus from the public sector and create a risk of further regression in respect of quality and access.
The reductions to the equitable share creates significant risk of regression in access to health. As a concurrent function shared between national and provincial governments, 80% of the R200 billion allocated to health is spent by provincial governments. As a primarily population based index labour sending provinces such as the Eastern Cape, Mpumalanga, North West, Limpopo and the Northern Cape have all experienced consistent reductions. The additional cuts will significantly impact the ability of these provinces to deliver the health, despite up to 90% of the population in these provinces exclusively reliant on public services.
The MTBPS is largely premised on public sector wage freezes that have not yet been agreed to. More than 80 percent of the proposed reduction in wage bills come from health workers, educators and the police which will lead to a drastic decline in the quality of social services. This will be experienced most acutely by vulnerable groups in society, dependent on these services.
The Public Sector Wage Bill freeze is being challenged by public sector unions in the Johannesburg Labour Appeal Court later this year, and if the state loses, the whole budget will need to be rewritten - leading to a crisis of credibility and further delays to the provision of funding for crucial social services and infrastructure delivery.
Revenue and debt
The human rights approach outlined by BJC in Imali Yesizwe recognises that spending efficiencies and performance improvements rather than cuts, combined with taxes on those who can afford to carry the burden are a more just way to deal with the fiscal fallout of the pandemic. Instead of considering alternative forms of revenue such as renegotiating the terms of our debt repayments, increased taxation of wealth or high incomes to combat rising inequality, or taking strides to strengthen state capacity to collect revenue through SARS, the MTBPS focuses almost exclusively on spending cuts.
BJC has previously advocated for the prevention of corruption and illicit financial flows as a way to make sure the country is not bleeding its revenue. In addition to the more than R100 billion in tax revenue lost to illicit financial flows each year, between 30 to 40 percent of the public procurement budget is lost to inflated prices and fraud by the private sector. The Draft Public Procurement Bill is a key reform in this respect. Procurement is the single largest corruption risk in the public service. We are concerned that in the form the bill was published, it misses the mark, legislating for secrecy while failing to address robustly some of the key oversight failings. It’s not too late to rectify this. The Coalition would like to see the bill making provision for the proactive disclosure of procurement information on a centralized e-platform and for improved real-time monitoring of procurement processes.
A human rights framework
Government proposes phasing in the principles of zero based budgeting (ZBB) and implementing comprehensive expenditure reviews. BJC welcomes moves which improve the effectiveness and quality of expenditure over out-right cuts. However, the BJC is concerned about the efficacy of ZBB given it’s poor track record in other countries.We urge Treasury to engage in a meaningful and transparent process of participation surrounding the terms of reference for these reviews, which we believe must be gender sensitive and explicitly centred around human rights fulfillment.
Send media enquiries to: Julia Chaskalson (Chaskalson@section27.org.za or 0834402674)
ABOUT THE BUDGET JUSTICE COALITION:
Civic organisations who are part of the Budget Justice Coalition include: the Alternative Information and Development Centre (AIDC), the Children’s Institute at UCT (CI), Corruption Watch (CW), the Dullah Omar Institute at UWC (DOI), Equal Education (EE), Equal Education Law Centre (EELC), the Institute for Economic Justice (IEJ), OxfamSA, Pietermaritzburg Economic Justice and Dignity Group (PMEJD), the Public Service Accountability Monitor (PSAM), the Rural Health Advocacy Project (RHAP), SECTION27, and the Treatment Action Campaign (TAC).