25 February 2020
In the State of the Nation Address (SONA), President Ramaphosa emphasised the value of social compacts, yet he also announced that there will be reductions in expenditure. Budget Justice Coalition (BJC) worries that the President Ramaphosa’s notion of a social compact in the 2020 State of the Nation Address (SONA) will mean that low-income households and vulnerable groups will have to disproportionately shoulder the costs of “turning this economy around”. The BJC is convinced that the current spending trajectory does not prioritise the demands of a developmental state nor will it result in building much-needed state capacity.
BJC reaffirms its position that fiscal austerity is undermining the realisation of human rights in South Africa. We are concerned about the government’s 2019 Medium Term Expenditure Framework (MTEF) which proposes that budgets be cut by 5%, 6% and 7% respectively in 2020, 2021, and 2022. While we understand that these are difficult times, we believe that accelerated austerity will significantly undermine the progressive realisation of people’s Constitutional rights.
BJC has repeatedly provided the government with pro-poor economic policy options to steer the country back towards a higher and more equitable growth path. The BJC has shown that the government’s implementation of regressive policies has only served to drag economic growth down, and make the debt-to-GDP ratio higher. Additionally, BJC believes that Parliament has not fulfilled its key role to represent the public’s interest in budget decisions. BJC is not convinced that Parliament and the National Treasury have adequately engaged with our proposals.
The BJC will be deeply disappointed if Value Added Tax (VAT) is increased. Since 2017, the BJC has advocated against the 14 to 15% increase, which was, in our view, a regressive tax with potential to increase poverty and inequality. The Finance Committee promised to review the impact of the VAT increase and analyse the effects on revenue collection on the poor. Three years have not lapsed since the implementation of the VAT and so a review has not yet been undertaken. In lieu of a potential review, we maintain that VAT fails to target higher income earners and ignores the need for much greater taxation of wealth: the main source of SA’s inequality.
The BJC agrees with President Ramaphosa that “we need to fix our public finances.” The BJC welcomes more resources being directed towards infrastructure and looks forward to seeing what shovel-ready projects will be presented. However, the BJC disagrees that spending is misdirected towards what the government considers as just consumption. Public goods and services, expenditure on education, health, social development, amongst others, are investments into the economy.
The coalition hopes that the government will indicate the principles that have guided their recomposition of the budget. The concern is that programmes are being cut on a basis of underspend, which is a complex issue that requires deep evaluation. Underspend is a soft target for resource cuts, which are often reallocated towards debt servicing costs. This is taking away from service delivery and undermines the capacity of government to progressively realise human rights.
BJC remains steadfast in our belief that the budget is a major tool for transforming gender relations and we are committed to the realisation of an intersectional feminist budget. Relying on information on how the ‘intersections’ of race, class, gender identity, age, geographical location, disability, migrancy impact on different people’s lives should underpin the budget process. South Africa was the second country globally to pioneer gender responsive budgeting, yet we have significantly regressed in this regard as stated by the chair of the Select and Standing Committee on Finance. The lack of a gender responsive budget is reflected in how government has engaged with issues of gender-based violence in this country.
THe budget is an important economic tool to advance social justice and reduce inequality, as well as promoting equitable economic development that realises socio-economic rights. Government must center the needs of the majority in the budget.
To arrange interviews with members of the Budget Justice Coalition contact:
Boitumelo Masipa 081 452 9096
Julia Chaskalson 083 440 2674
ABOUT THE BUDGET JUSTICE COALITION:
Civil society organisations which 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 (PMEJD), the Public Service Accountability Monitor (PSAM), the Rural Health Advocacy Project (RHAP), SECTION27, the Studies in Poverty and Inequality Institute (SPII) and the Treatment Action Campaign (TAC).
The purpose of the Budget Justice Coalition is to collaboratively build people’s understanding of and participation in South Africa’s planning and budgeting processes – placing power in the hands of the people to ensure that the state advances social, economic and environmental justice, to meet people’s needs and well-being in a developmental, equitable and redistributive way in accordance with the Constitution, including the obligations of the progressive realisation of socio-economic rights contained in the South African Constitution.