Media Statement: The Budget Justice Coalition calls on Treasury to reverse continued cuts to social spending

With the Medium Term Budget Policy being tabled tomorrow, on 11 November 2021, the Budget Justice Coalition (BJC) remains concerned about the continuation of retrogressive cuts (austerity) to public services, which undermine peoples’ rights and deepens inequality in the country. The budget cuts proposed in Budget 2021 (February), were in fact, indefensible in light of the extreme levels of inequality, poverty and unemployment that South Africa faces. This Medium Term Budget Policy Statement cannot continue with this anti-poor, business as usual approach.

The COVID-19 crisis has laid bare the deeply-rooted and structural inequality inherited from apartheid and maintained neo-liberal capitalism’s unending search for profit. Further disinvestments in state capacity will make it harder to overcome corruption and maladministration. This toxic mix of austerity and the elite corruption has resulted in communities being further left without access to food or income. The erosion of public services deepens our economy and society’s dependence on womxn’s free and invisibilised labour. Womxn are forced to carry additional burdens of unpaid and unrecognised labour.

The turn to austerity budgeting has undermined the kind of country envisaged in our Constitution: This is a state in which people’s socio-economic rights to housing, health care, education, nutrition and social security are realised within available resources. It is now up to Minister Godongwana to rebalance our unequal economy and mobilise the resources that are available to realise these rights

The BJC calls on National Treasury to implement the following improvements to the budget:

  • Much more redistribution is required from the top 10% of income and wealth holders in SA to the majority. This is the elephant in the room that previous Finance Ministers have ignored. More progressive and effective taxation of high incomes, wealth and medium-large size corporates is necessary to pay for the developmental state we need and to ensure that every person is cushioned from poverty through universal basic income support.
  • Government must report back on the short and long-term impacts that retrogressive budget decisions of recent years have had on human rights. BJC supports human rights impact assessments (HRIA) of fiscal policy and of individual budget decisions where human rights are impacted, which government has committed to in the past but is yet to implement.
  • The Coalition rejects the proposal for a so-called ‘Family/Household Grant’ and/or a Job Seekers Grant and re-asserts that National Treasury must urgently provide income support for the unemployed with the improvement and extension of the COVID Social relief of Distress Grant until permanent social assistance is provided and make a firm funding commitment for a Universal Basic Income Grant (UBIG), as part of a more comprehensive social security programme, which must include appropriate work guarantees, and which is now two decades overdue. The ‘Family Grant’ is not feasible at an implementation level, households are difficult to define in a SA context, there is no household registry to roll out such a scheme, with adverse impacts on womxn in a household; and a Job Seekers Grant will exclude many working age destitute and unemployed adults. It is likely being touted due to its ability to reduce social grant spending rather than increase spending. Any attempt to decrease social grant spending in the current environment of high structural unemployment and increasing poverty is regressive and unconstitutional.
  • To achieve gender equality, it is crucial that fiscal sustainability prioritises transforming gender relations through an intersectional feminist budget. This is a budget which addresses some of the root causes of gender inequality, supports the care-economy, prioritises the most marginalised in times of fiscal constraint, and progressively realises the rights of all in South Africa.
  • While gender-based violence and violence against children has often been spoken of as the “second pandemic,” we are, decades after the seriousness of the situation was first recognised by our government, and now years after the most recent commitments to address it decisively, still awaiting appropriate budget allocations and clear plans to tackle such systemic violence. The revision, resourcing and implementation of a National Strategic Plan on GBVF and Femicide needs urgent prioritisation.
  • Gender equity must be prioritised through urgently increased allocations to pro-poor land and agrarian reform; by enforcing the Labour Relations Act to ensure that every worker earns a living wage and by investing in the informal economy, while prioritising the hospitality, child care (both in the home and in ECD centres, the majority of which are informal and unregistered), and domestic work sectors, where black womxn make up the majority of the workforce.
  • Health and economic development are intrinsically connected; investments in health care need to be understood as necessary investments in social stimulus and economic growth. When we talk about health, we are not only talking about what is accessed in hospitals and clinics, we are also talking about the social determinants of health, meaning the societal conditions in which people are born, grow, live, work and age such as access to clean water and adequate sanitation. Health strengthening is an essential component, not only of investing in feminist economies of care in the longer term, but also of the immediately needed restructuring for more adequate social protection systems in context of extreme and worsening unemployment, poverty and inequality in South Africa. It is highly worrying that the percentage of health spending has, in recent years, been declining. There is a need for greater funding of health, when access to quality healthcare is essential social protection.
  • Despite the country’s relative wealth, the ever deepening inequality between rich and poor has resulted in nearly a third of South Africa’s children under five being nutritionally stunted and evidence points to increased levels of malnutrition and hunger since COVID-19; many of today’s children will not be able to develop. Social and economic sustainability is also dependent on children’s ability to survive and develop. In times of so-called “fiscal constraint”, in order to most effectively impact on poverty and inequality, fiscal policy must increase strategic investments in programmes and services that have been proven to impact positively on child wellbeing, child nutrition and health, such as: the Child Support Grant, birth registration, maternal and child health services, Early Childhood Development programmes, and the National School Nutrition Programme (NSNP).
  • We call on government to provide enough funding to the basic education sector to ensure that all children have access to equal and adequate basic education - which is their constitutional right. Government must ensure that funding for basic education is progressive and pro poor with particular investment in school infrastructure. A more detailed analysis by the BJC on basic education funding and expenditure can be found here.``
  • In order to improve service delivery within budget constraints, the operating model of local government needs to urgently be reviewed. This process must not imply job losses but rather aim to achieve more effective and pro-poor revenue and expenditure. Current intergovernmental fiscal relations require urgent reform. For example, while National Treasury allocates funding to local government via the equitable share for 10 million poor households to receive free basic services (water, sanitation and electricity) only 2 million households are currently being reached.
  • Abandon employment tax incentives (ETI). Despite claiming that it has been a success story, there has been no clear evidence that employee subsidies lead to job creation. In fact, existing research has found no significant improvement in youth employment as a result of ETI. Rather, the wage subsidy has been abused by companies to get subsidies whilst hiring youth on a short term basis. In the long run the wage subsidy wastes resources that should rather be channelled towards investment into labour intensive sectors and meaningful job creation.

In order to appropriately respond to the severity of the current crises of poverty, inequality and unemployment, we call on National Treasury to immediately make available funding for the following urgent priorities:

  • Improve and extend the COVID-19 SRD grant by increasing the value to at least the Food Poverty Line (R624 per month). The COVID-19 SRD grant must be extended beyond March 2022 until permanent social assistance for the unemployed is implemented. Remove the COVID-19 SRD grant R595 income means test threshold and replace it with a means test equivalent to the Child Support Grant for the first application of the grant. Income must also be narrowly defined in terms of remuneration for work. Increase the funding for the administration of the COVID-19 SRD grant to ensure that the exclusive online applications and appeals process become a hybrid system to provide face to face services and that online platforms are zero-rated, available in all official languages, and dispense with the verification process using outdated government databases. SASSA must also provide more cash paypoint options in rural and peri-urban areas.
  • The Child Support Grant must immediately be increased to at least R624, while the government works towards increasing it to the Upper Bound Poverty Line, which is currently R1 335 per month. Allocate the necessary budget for the urgent implementation of the CSG Top-Up for orphans in the care of relatives. The reduction of the budget for the Foster Child Grant in the absence of budgeting for its replacement grant, the CSG Top-Up, is a retrogressive step against a very vulnerable group of children.
  • Improve funding towards the Public Employment Stimulus (PES). The BJC welcomes the implementation of the second phase of the PES. However, the budget allocation to this programme remains significantly small in the face of increasing unemployment, especially amongst young people. The PES must be put into the Medium Term Expenditure Framework and the balance of the R100 billion be allocated.

Despite National Treasury’s assertions that the state does not have the money. BJC believes that the above can be funded. Government is under an obligation to utilise the maximum of its available resources to fulfil socio-economic rights. BJC believes that harmful non-interest expenditure cuts could be avoided if the government was willing to combine the expenditure side reforms highlighted above with much needed progressive tax reforms; full balance sheet utilisation including the overfunded Government Employees Pension Fund; and greater coordination of monetary and fiscal policy strategies. The Coalition has continuously put forward alternative proposals for treasury to maximise domestic resource mobilisation.

The Coalition calls on National Treasury to rethink its economic approaches. An alternative should be paved through meaningful participation processes.

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