CCS Seminar: Can the SA budget afford #FeesMustFall demands and other social spending?
Speaker: Patrick Bond
Date: Tuesday 23 February 2016
Time: 12:30-14:00
Venue: CCS Seminar Room 602, 6th Floor, MTB Tower, Howard College, University of KwaZulu-Natal
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The poor face double-digit inflation
Patrick Bond (Mail&Guardian) 26 February 2016

Look beyond the fawning and you’ll see some horrifying flaws in Finance Minister Pravin Gordhan’s budget, writes Patrick Bond.
So much in what Finance Minister Pravin Gordhan announced to Parliament in his budget speech on Wednesday was pleasing, such as the myriad developmental accomplishments, and yet so much more is truly ¬horrifying.

Apparently, achieving a balanced assessment is beyond most commentators trying to steady our feet on the SA Titanic, what with world financial markets roiling the rand.

In spite of bending over backwards to meet financial markets’ demands for a lower budget deficit (he promised just 2.4% of gross domestic product by 2018, down from 3.8%), Gordhan was pummelled by an immediate 3.2% currency collapse in the minutes after he spoke.

Frankly, most of us who pore over the budget speech are, in class terms, petit bourgeois or above. That’s revealed in the kinds of budget reviews that dominate media such as the Mail & Guardian.

When at theconversation.com a normally humane, democratic political scientist like Ongama Mtimka blithely praises Gordhan because “the increase in social grants continues to provide a social security net to millions of South Africans, keeping them out of extreme poverty,” he subliminally ignores the substantial after-inflation cuts to poor people’s grants.

So does another Conversation contributor, Leon Schreiber, when he says: “The fact that government has avoided cuts to social assistance grants is a politically shrewd move.”

Lads, here’s a fact check: Gordhan provides just a 3.5% nominal increase to foster care providers (who play such a vital role, given our catastrophic Aids orphan rate) and a 6.1% rise for mothers who are child support grant recipients. These poor families face double-digit inflation this year thanks to food, electricity and transport hikes.

So Gordhan’s “real” – after-inflation – cuts to welfare grants of several percent hurt us (in the petit-bourgeoisie) the least, yes, but 16.5-million recipients from South Africa’s lumpen-proletariat will struggle to find more holes in their frayed belts to tighten up, given that 63% of our compatriots – mostly women – already live below the poverty line.

Mtimku endorses South Africa proudly taking our financial place within the Brics (Brazil, Russia, India, China, South Africa) bloc: “The R2 billion allocated to the New Development Bank (NDB) focused on investments in Africa should be welcomed.” .”

Reality check: what Tito Mboweni in 2013 termed the “very costly” NDB – for which taxpayers in each of the Brics countries will cough up $10-billion in capital – is run by hard-core neoliberals best known for privatisation and high-interest monetarism. The nonsensical “Africa rising” meme has come to a crashing end thanks to post-2011 commodity price implosions.

The continent’s current account deficit is soaring since excess multinational corporate profits are expatriated so quickly, not only through illicit financial flows (knocking South Africa for R330-billion a year since 2004) but also through licit outflows, because exchange controls have been removed.

And partly as a result, Africa’s foreign debt has doubled since 2006 to $400-billion – just as South Africa’s has doubled to $145-billion since Gordhan first took over the finance portfolio in 2009. That puts the continent back in the 1980s when fears of a developing countries debt crisis drove finance ministers into self-destructive fits of austerity and structural adjustment.

And so, directly as a result, the chaps who really yank Gordhan’s chain are not those of us in the vain intelligentsia overflowing with advice, praise or critique.

Let’s worry more about upper-class twits running Standard & Poor’s, Fitch and Moody’s international credit rating agencies, and financiers such as New York-based Goldman Sachs, which helped raid our currency on January 11, sending it to R17.99 to the dollar in a few minutes of flash-crash speculation, just after telling its traders that globally, the rand’s decline is the bank’s second most aggressive bet for 2016 (after the dollar’s rise).

These men can obviously be charged with malicious economic self-interest to the extent that in coming months it is likely they will hit Gordhan with junk-minister status. To that end, they’re still selling our currency short.

But, more complicated than mere ill will, recall that back in 2009, when International Monetary Fund managing director Dominique Strauss-Kahn advocated deficit spending to save world capitalism from implosion, Moody’s actually upgraded Gordhan after his soaring 7.3% deficit-to-GDP rise that year by raising our credit rating from BBB+ to A-. With similar wild abandon, Moody’s clowns also rated Lehman Brothers as “investment grade” just days before it crashed.

But now we see the impact of their turn from the whimsical to the wicked. Partly to their credit, these agencies have put pressure on Gordhan to throw cold water on President Jacob Zuma’s $100-billion nuclear follies. And to Gordhan’s credit, he dodged that round of Russian roulette by kicking the bullet over to Energy Minister Tina Joemat-Pettersson to do “preparatory work for investment in nuclear power.”

But what else might be pleasing to a lefty like me, twice trained by Gordhan in Marxist revolutionary theory alongside Natal Indian Congress youth at Mahatma Gandhi’s Phoenix ashram 31 years ago?

On the horrifying side, Gordhan announced a whopping R600-million increase in funds for the notorious public order policing unit – the unpunished Marikana hit men who joked about defective muti while planting weapons on their victims – instead of replacing it with skilled peace-broking units.

But on the other hand, this remark was uplifting: “Spending on defence, public order and safety services will rise from R172-billion this year to R204-billion in 2018-2019.”

Pleasing? Yes, because without being blatant about it, Gordhan just chopped out R8-billion of securocrat funds compared with Nene’s medium-term budget allocation last October.

But it was when Gordhan bragged of the state’s most active spending that leaders of my residential community grew furious. After living on Durban’s Bluff for the past seven years, the highlight of budget day was reviewing the carnage with the South Durban Community Environmental Alliance in a long strategy session two hours after Gordhan finished speaking.

In the basement of a Wentworth community hall that Gordhan himself once frequented, as rusty fans blew Durban’s humid air back at us, two dozen hardened activists of all races, classes, genders and ages mulled over his generosity towards Transnet, and how that will ¬ultimately be etched on our wretched landscape.

Gordhan would not be the first politician accused of pandering to the KwaZulu-Natal construction mafia by turning a blind eye to repeated collusion and overpricing here.

The current outrage is Transnet’s racist rerouting of the often exploding pipeline that doubles petrol-pumping capacity to Johannesburg from the Engen and Shell/BP plants here at Africa’s largest refining complex, sandwiching the Indian suburb of Merebank, whose Settlers Primary School has an asthma rate that was not long ago measured at 52%, the world’s highest.

Last month’s cost estimate on what Transnet originally priced at R6-billion is now R29-billion.

When Mtimku celebrates that Gordhan’s “investment in infrastructure aimed at stimulating the economy is continuing, with over R870 billion planned,” he should first dissect how much of that vast sum goes to Zuma’s KwaZulu-Natal white elephant breeding project.

In south Durban, we look at the Baltic Dry Index that measures shipping capacity: it’s now at its lowest in history (about 300 after a 2008 peak of 12 000).

And fossil fuel prices have hit the floor, casting a dark spell over Gordhan’s bragging that “work has begun on a new gas terminal and oil and ship repair facilities at Durban”.

Ironically perhaps, this sentence came just after Gordhan praised the Paris Cop21 summit’s (highly dubious) commitment to fighting climate change.

He continued: “We need to accelerate infrastructure investment in the period ahead. So we must broaden the range and scope of our co-funding partnerships with private-sector investors. In taking this forward, we are able to draw on our experience in road funding concessions.” Oops, he hasn’t been briefed by Premier David Makhura about the impact of those concessions on the ANC’s Gauteng voter base.

Worst of all, violating both climate and economic common sense, Gordhan bragged about Transnet’s financing of the lead presidential infrastructure co-ordinating commission project, with its planet-threatening goal of rail-to-ship transfer of 18-billion tonnes of coal.

That Waterberg-Richards Bay line – also costing in the hundreds of billions of rands – may have looked profitable in 2008 with coal at $170 a tonne, but now the price is $50 a tonne. Yet the project trundles on.

Further south, describing frustrating delays in getting Durban’s dig-out port up and running in 2012, Toyota boss Johan van Zyl (whose plant is adjacent to the old airport site) complained: “If return on investment is the line of thinking, we may never see the infrastructure.”

Amid rumours of a two-year dig-out port delay, in December Durban Chamber of Commerce and Industry president Zeph Ndlovu insisted on adding this large white elephant to the herd: “We have to press ahead and if we are to unseat our competitors up north, we can’t win this battle if we pull back every now and then and look at accounting principles.”

Whether Gordhan goes ahead with reducing the state payroll by tens of thousands of public servants or continues his nudge-nudge-wink-wink towards corporations’ illicit financial flows, it’s in the coddling of accounting-challenged KwaZulu-Natal cronies and the crackdown on welfare grant recipients that Gordhan has most decisively intervened in South Africa’s world-leading class struggle. Pleasing to some, yes, and hopefully horrifying to most.

Patrick Bond is director of the University of KwaZulu-Natal’s Centre for Civil Society and a professor of political economy at the University of the Witwatersrand. (This article was adapted following theconversation.com’s reattribution of quotations.)
http://mg.co.za/article/2016-02-25-the-poor-face-double-digit-inflation

Pravin Gordhan tried to reassure capitalist investors – NUMSA
Irvin Jim 25 February 2016

Irvin Jim says Treasury must accept their right-wing policies are responsible for the economy being in junk status

Numsa statement on the Budget 2016
The National Union of Metalworkers of South Africa is not disappointed with the 2016 Budget delivered by Pravin Gordhan, because the trajectory of the budget continued to sing to the tune of international and local finance capital, white monopoly capital and credit rating agencies.

As so often in recent years, the budget speech can only be described as an exercise in “business as usual”, a speech which gave no hint that the minister understands the depth of the crisis facing the poor, working class majority of South Africans.

There were some passing references to “the challenges of tough economic times and difficult adjustments”, “the retreat of capital” and “emerging patterns of predatory behaviour and corruption” but nothing about the devastating quadruple crisis of unemployment, poverty, inequality, corruption.

He was obviously trying to reassure capitalist investors – and appease credit rating agencies who have threatened to downgrade the South African economy to ‘junk’ status – by pretending that everything is under control and no radical changes are required to the neo-liberal policies the ANC government has been following for the last two decades, which have so clearly failed.

The Minister’s approach was a continuation of the GEAR strategy, now enshrined in the National Development Plan, for neoliberal, free-market capitalist policies. Notwithstanding the revolving door of finance ministers, Treasury has maintained its neoliberal path through successive annual austerity budgets.

The 2016 budget is no different. It contains the hallmarks of austerity, some of which include:

– A reduced budget deficit projected at 3.2% and declining to -2.4% in the medium term;

– Freezing of so-called “non-critical vacant posts” in the public service through which the reduction in the expenditure ceiling of R25 billion will be achieved over the next three years;

– Projected real annual average growth in expenditure to be limited to 0.8% in the medium term;

– Opening the door to privatisation of state-owned enterprises, despite the Minister refusing to describe it as that

On inequality there was not even the expected token gesture to raise taxes on the very rich, just the incredibly evasive statement that “our current taxes on wealth are under review by the Davis Committee”. Within a context of shortfalls in revenue collection it would have been appropriate to finally introduce a wealth tax, with added benefit of reducing rising inequality.

One of the biggest reasons for the massive levels of inequality is the illicit flows of capital to tax havens and what Gordhan himself describes as “abusive practices by multinational corporations and wealthy individuals”.

Yet the best he can offer as a solution to these problems is a promise that “with effect from 2017, international agreements on information sharing will enable tax authorities to act more effectively against them”. This lame statement demonstrates that the ANC government acts in the best interest of capitalists with no political will whatsoever to stem the tide of illicit flows of capital.

But while putting off action to tackle millionaire tax dodgers, there is no good news for the poor.

Last year Nene cut the welfare grants budget in real terms by several per cent. In this year’s budget, there is a 6.4% nominal increase for the larger grants: “Old age‚ disability and care dependency grants will rise by R80 to R1‚500 in April 2016‚ and by a further R10 to R1‚510 in October.”

So R1505 is the average 2016-17 payment to people, an increase per month of R90 (6.36%). The child support grant will rise by R20 to R350 (up 6.1%). The foster care grant rises by R30 to R890 (3.5%).

Given however the anticipated double-digit food prices, a potential 16% Eskom increase and high transport price rises, inflation for poor people will be more than 10%, so there will be a real cut in living standards, as the increase for the average grant recipient is in the range of 3.5% to 7%.

There was nothing concrete on the long-promised National Minimum Wage, Comprehensive Social Security Plan and National Health Insurance system. All he could say was that “Progress has been made towards a minimum wage framework, and to reduce workplace conflict. The National Health Insurance White Paper has been published, and proposals for comprehensive social security will be released by mid-year”.

The only crumb of comfort is that he took a similar vague view on the planned nuclear energy deal, which Numsa strongly opposes. All he said was that “Minister Joemat-Pettersson is overseeing our renewable energy, coal and gas IPP programme, and preparatory work for investment in nuclear power.” Such a half-hearted reference to what President Zuma saw as a key project, suggests that it may also have been put on the back burner.

On higher education the minister did nothing more than Jeff Radebe had already announced. He has given R5.4 billion a year “additional” to the R63.7 billion “Post-School Education and Training” line item.

An additional R16.3 billion has been allocated for higher education over the next three years. R5.7 billion of this addresses the shortfall caused by keeping fees for the 2016 academic year at 2015 levels, and the carry-through costs over the MTEF period. R2.5 billion goes to the National Student Financial Aid Scheme to clear outstanding student debt, along with a further R8 billion over the medium term to enable current students to complete their studies.

But this R5.4 billion additional funding is tokenistic compared to the R35 billion a year that even the neoliberal Democratic Alliance has advocated. As even that party pointed out, [the Ministerial Committee] found that South Africa’s budget for universities as a percentage of GDP was only 0.75%, lower than the Africa-wide proportion of 0.78%, the world-wide proportion of 0.84% and the proportion spent by Organization for Economic Cooperation and Development countries of 1.21%.

“The report also noted that between 2000 and 2010, state funding per full-time equivalent student fell by 1.1% annually in real terms, while fees per each of these students increased by 2.5% annually in the same period…” (Democratic Alliance, Oct 2015)

The minister announced the tabling of the draft Revenue Laws Amendment Bill, which is intended to postpone by two years the compulsory annuitisation of provident funds. As Numsa has previously indicated this is too late as the Taxation Laws Amendment Act is scheduled to be implemented in less than a week on 1 March. Furthermore this belated bill will not address constitutional problems in the original act as it was incorrectly processed as a money bill.

The budget is presented within a context of threats of further investment ratings downgrades for the country by international credit ratings agencies, and makes the admission that debt-service costs are the “fastest growing category of spending”, with an annual increase of 11.4% over the medium term.

The bulk of this is drawn from foreign funding sources, which leaves us at the mercy of volatile exchange rate fluctuations and foreign interest rates that slavishly respond to the tyranny of credit ratings agencies, thereby increasing debt servicing costs. The time has come to consider local sources of financing.

The Public Investment Corporation (PIC), for example, controls assets worth over R1, 8 trillion, the bulk of which is composed of the Government Employee Pension Fund (GEPF), and much of which is ironically invested in foreign financial markets.

One of the worst aspects of the budget speech, however, is Gordhan’s frequent references to what he insisted is not “privatisation”, but in reality is. For example he says: “We must broaden the range and scope of our co-funding partnerships with private sector investors. This requires an appropriate framework to govern concession agreements and associated debt and equity instruments, and appropriate regulation of the market structure”.

He reported that Minister Brown is in discussion with Transnet’s leadership on measures to accelerate private sector participation in the ports and freight rail sector. The Budget Review also says government is looking at “strategic partnerships” to allow SAA “to draw on private sector capital and technical expertise to improve its performance and expand its network”.

“The recent tremors felt by emerging markets,” he said, “are a warning that we need to take corrective steps urgently or we will be worse off. At the same time, we need to move forward to mobilise the resources and capacity of all our people, large and small enterprises, civil society organisations and public-private partnerships.”

As the Daily Maverick correctly concluded minutes after the speech, “Gordhan puts state-owned companies on notice”.

Numsa notes with concern that special economic zones and employment-intensive sectors with export potential have been prioritised for support by the Industrial Development Corporation (IDC). This is however happening at a time when IDC has refused to fund or to buy Evraz Highveld Steel, a plant that employees about 18 000 workers.

If it closes the whole of Emalahleni in Mpumalanga would become a ghost town like many towns which are victims of deindustrialisation. Why will this government throw money to IDC, which has been spending billions on green field projects for years, but won’t spend money to save so many jobs? If this capacity is destroyed it will never come back?

Numsa demands the following immediate steps:

1. The Numsa ANC government must nationalise Evraz Highveld Steel or, through the IDC, they must buy it for R150 Million – a drop in the ocean in comparison to splashing billions to green fields and to so-called black industrialists.

2. Numsa calls on the black industrialists who are now swimming in no less than R23 billion to invest their free allocated money in buying this company, as we are completely uninformed as to what they will be investing this huge allocation on.

3. Government must appreciate that our country is facing a national crisis of a job loss bloodbath – a national emergency; action is needed now not tomorrow and in the light of this crisis Numsa demand that government nationalise the steel Industry and the entire value chain in manganese, coal, iron ore and vanadium.

This government, in particular the Treasury, must accept that their right-wing conservative policies are directly responsible for the economy being in a junk status, whose results has been mass poverty, unemployment, inequalities. This chosen path resembles the old apartheid capitalist colonialism and this can only mean that apartheid and a system of racism through a new dispensation in our country has continued by other means and both systems have successfully kept blacks and Africans at the bottom of the food chain.

This government must act swiftly and urgently so as to cut interest rates, bring back capital controls to stimulate the economy and to stop capital flights, both legal and illegal.

All capitalist right-wing wing ideological priests must accept that for the past 21 years there has been no socialism in SA and they must take full responsibility for the mess, including Tito Mboweni, Trevor Manuel and the Free Market Foundation led by Herman Mashaba who is anti-worker and a union basher who has now made himself available for an opportunist project to be Mayor of Johannesburg for the DA.

He is challenging in court collectively negotiated agreements in order to reverse all workers’ hard-won gains, their improvements, benefits and conditions of work. This very desperate greedy capitalist and exploiter still wants to win elections through the carcasses of the slaves he is determined to keep exploiting.

Numsa, unlike the Current ANC of Gwede Mantashe, the SACP of Blade Nzimande and the Cosatu of Sdumo Dlamini, sees itself as an embodiment of what the revolutionary alliances of Chris Hani, Oliver Tambo, Joe Slovo and Harry Gwala were about; that is why we demand an economy and a budget, that must be based on:

– Concrete measures to fast-track the redistribution of land

– A concrete programme of nationalisation of the commanding heights of the economy in order to restore the wealth of the country to the people as a whole – thereby ending poverty and unemployment, and freeing the genius of all our people to contribute to create wealth for themselves

– Full employment for all who need work, which is both a duty and a right

– Full social security for all human beings

– Full free medical services for all

– Housing for all, as a human right

– Abolition of all racial, gender and other forms of discrimination in wages, the work place, communities and culture

– Full state funding for education from birth to death, for all

– Proper conditions of work and decent pay for all public sector workers, and the protection of their right to demand wage increases

– Creation and restoration of the manufacturing capacity of South Africa, under popular working class control and ownership

– Abolition of the apartheid geography, economic and cultural landscape that continues to scar our country, 22 years into the so-called democracy.

The measures we propose above are perfectly possible, and doable. They are a fundamentally important step if we are serious about pulling the country out of the triple crisis of poverty, unemployment and inequalities rather then responding to the propaganda of rating agencies. Our true measure of the development and growth of our economy and country must be determined on the basis of the demands we make above, and not on the growth of profits in a sea of growing poverty, unemployment and inequalities.

South Africa, just like the rest of Africa is too rich to fail to provide for all its peoples. The problem is the current concentration of wealth and political power in the hands of a dominant but tiny filthy rich parasitic capitalist class and mass poverty for the majority – the system called capitalism.

The challenge we face is how to reach and educate every worker and every poor rural dweller, about the real causes of their poverty and suffering, and how to end it. This year we must dedicate ourselves to organising, mobilising and educating ourselves for the overthrow of the God of Profit and its tiny filthy rich followers and parasites in government. The alternative is to starve to death in a rich country.

Numsa reiterates its total opposition to privatisation and all policies whose aim it is to placate white monopoly capitalism and their credit rating agencies. We call on all workers, employed and unemployed, to join us in our United Front, in the work we are involved in to create a new federation, in the work of forming and developing a genuine revolutionary socialist political party of the working class and in defence of Numsa.

This budget, and the ANC government’s commitment to the neoliberal National Development Plan, makes it more necessary than ever to form such a party to fight for the nationalisation of the big capitalist monopolies and the building of a democratic socialist society.

Working together, we cannot fail!

Organise or starve to death!

Statement issued by Irvin Jim, Numsa General Secretary, 25 February 2016

Budget: Pensioners and children will be poorer
Social grant increases are below inflation
Elroy Paulus 25 February 2016

Grant recipients will have less money to spend following the Minister of Finance’s budget announcement yesterday. Photo: Government website

With more than one third of South Africa’s population dependent on social grants, Finance Minister Pravin Gordhan’s announcement that grants are not even going to keep pace with inflation is disappointing.
Social Grant Grant amount in rands 2016/17 Grant amount in rands 2015/16 % increase
(inflation is 6.2%)
Child Support Grant 350 330 6.1

Grant-in-Aid 350 330 6.1

Foster Child Grant 890 860 3.5

War Veteran’s Grant 1,520 1,440 5.6

Care Dependency Grant 1,500

(1,510 from October) 1,420 5.6

(6.3 from October)
Disability Grant 1,500

(1,510 from October) 1,420 5.6
(6.3 from October)
Older Person’s Grant 1,500

(1,510 from October) 1,420 5.6
(6.3 from October)

In his speech yesterday the Minister described the context as a “combination of multiple demands and constrained resources”.

He asked how the state should deal with such complexity and what should be prioritised.

One of the key state instruments to reduce extreme inequality and poverty remains the significant rollout of social grants and the strengthening of social security reform initiatives. We commend his stated intention to extend the social safety net. State allocations by government to those who rely on social grants in our nation, especially at this time, are utterly crucial.

We are disappointed that the increases made to these grants do not even keep pace with inflation. This was acknowledged by senior Treasury officials yesterday and we cannot endorse this decision.

Whilst we appreciate that the 2016 Budget was a fine balancing act in difficult times, we think that this decision will again affect persons in the lower income categories disproportionately.

As the table above shows,for instance, the older person’s grant goes up only 4.2% this year while inflation is running at 6.2% a year. Food inflation is even higher. This means recipients of the grant are actually getting poorer in terms of what they can buy with their money.

The behaviour of some financial service providers that are responsible for predatory practices

against social grant beneficiaries in particular, needs to be challenged more urgently. These predatory institutions are wreaking great harm, especially on grant beneficiaries.

We should reject with contempt the practices of these financial service companies – including some insurance, credit, and funeral companies. The judgement in the Flemix case against those seeking unlawful emolument attachment orders against farmworkers, sadly revealed that even some in the legal fraternity (involved in debt collection agencies and loan companies), are guilty of these predatory practices.

Now working class families increasingly have to assist their aged parents, our disabled sisters and brothers affected by these disputed or fraudulent social grant deductions. This is over and above those fearing extortion by loan sharks. They have to stretch their already stretched own income.

Whilst this happens to one cohort of South Africans, another cohort, the wealthy owners of businesses, enrich themselves on these deductions. This practice not only erodes the gains made by the State, but also contributes to so much social tension and fuels inequality.

We hope that the raft of legislation and regulations addressing these immoral practices by some

companies and individuals will finally stop these deductions and unacceptable practices from social grants.

On the revenue generation side, we welcome the decision not to raise VAT, which is an easy way to increase revenue collections. An increase in VAT would have had a seriously adverse effect on the already strained consumption patterns of lower income earners and the working class.

Much more could have been done to cut public spending. Appointed and

elected officials paid from public money could lead by example when calling for austerity measures themselves. A lot of public respect would have been gained if Ministers and the highest earning public servants took even a small cut in their salaries, as has happened in countries such as Brazil, Bolivia and Tanzania.

Paulus is National Advocacy Manager and spokesperson for Black Sash.

Alternative Information and Development Centre, AIDC on the 2016/17 Budget: Caught between the credit ratings agencies and the local government elections

The 2016/17 budget will hurt, but the real pain is still to come. The Minister of Finance has cleverly deferred the real pain to non-electoral years. As for now, the budget is a prisoner of the demands from the credit ratings agencies and the need to stop the further alienation of the ANC’s electoral base before the forthcoming local government elections. It is however doubtful that the measures announced by Finance Minister Gordhan will satisfy the credit ratings agencies and prevent a down grade to junk level. Should a down grading occur, it will throw out most of the calculations that this budget is based on. The Treasury promises that such an event will be met by “aggressive austerity measures” (Budget Review p.30), obviously believing that this is politically and socially possible. In the current climate of increased social tensions, this is delusional. But the government is trapped in the neo-liberal cage and the longer it stays the same, the worse it will get.

The Fees Must Fall movement will be deeply disappointed with this budget. It fails to put free higher education on the radar, never mind suggesting a free education and insourcing plan. R16bn is reallocated to post school education and training, but the allocation in real terms per student over the coming three years will fall!

The budget perpetuates a development path that has failed and which has brought us to this crisis point. It contains no perspective of dealing with South Africa’s nightmarish unemployment and inequality levels. What is the government’s strategy to deal with the current wave of retrenchments affecting the heart land of the country’s industrial base (mining and mineral processing)? The budget has nothing to say. The indecisiveness of the government is evident.

The poor will get poorer as a result of this budget. While the social grants are increased by 6.1-6.4% (the foster care grant by a mere 3.4%), the cost of living will rise much more among the poorest households. Already in Statistics SA’s inflation report for January, the inflation that hits the poor is measured at 6.6% year on year. Food inflation alone is expected to rise to well above 10% this year, further eroding the grant increases.

The insufficient increases of the social grants are especially appalling since there was a political space before the budget for increased taxation of high income earners. Surprisingly, the government did not use the space. Instead it balances a slight increase of personal taxation (through the effect of inflation on tax brackets) by increasing the tax credit for medical insurance. Given the government’s commitment to a national health insurance scheme, one must wonder why this tax credit is not instead gradually withdrawn. On the individual level, the net effect of the adjustments in fact becomes a tax cut across the board, even for income millionaires (p. 143 in the Budget Review)! The major tax increases hit consumption and are regressive. The increase of the fuel levy by 30 cents per litre adds R6.8bn to the revenue, but this will hit the working class and the poor harder, as they spend a larger share of their income on transports, just as is the case with food inflation.

In this budget the Treasury is further cutting the size of the public sector, by reducing the budget deficit more aggressively than was indicated in the Midterm Budget policy statement. This is what the credit ratings agencies wanted and demanded. A smaller public sector will increase the social crisis for the majority. Minister Gordhan has also strongly signalled that privatisation is back on the government’s agenda. This will be pursued through the sale of “non-performing assets”, but it has greater significance in the form of private public partnerships in the delivery of mega infrastructure projects in transport, energy e t c. The renewable energy industry has already been handed over to big multinational corporations. Now the government intends to do the same with coal fire power stations and even nuclear. This will accelerate the increase in tariffs for basic services, such as electricity, transport and possibly water and sanitation.

In the coming year, South Africa will require new alliances of students, workers and poor communities to bury austerity, privatisation and the neo liberal trajectory that this government is wedded to under the tutelage of the creditors and predatory financiers.

Further comments: Brian Ashley: 0820857088 and Dick Forslund: 0828957947

Gordhan’s complacency paints over SA’s grim reality
Zwelinzima Vavi 26 February 2016

#Budget2016 / If a visitor from another planet was sitting in the South African Parliament on Wednesday, listening to Pravin Gordhan’s Budget speech, he or she would conclude that South Africa is a wealthy, peaceful country, with maybe just a few little problems here and there, caused by worldwide economic stagnation and the drought, neither of which the government can be blamed for.

The contrast between the finance minister’s bland and complacent picture of the country and the grim reality of desperate poverty, sky-high unemployment, widening inequality and epidemic levels of corruption that are facing the majority of its people could not be greater.

His guiding principle appeared to be to tell international credit rating agencies that they have nothing to worry about, certainly nothing to justify downgrading South Africa to “junk” status, because everything is under control and the country is on the brink of an economic revival.

The reality is that the crisis is getting even worse and this Budget contained nothing to suggest that it would be getting better any time soon. On the contrary, the minister maintained the path he and his predecessors have pursued in successive austerity budgets, based on the neoliberal Gear strategy of the 1990s and its continuation in the National Development Plan.

On inequality Comrade Gordhan did not even make the widely expected token gesture of raising taxes on the very rich, only an assurance that “our current taxes on wealth are under review by the Davis Committee”. One of the biggest reasons for South Africa becoming the world’s most unequal society is the illicit flow of capital to tax havens, depriving Sars of trillions of rands of unpaid taxes, the minister could only promise that “with effect from 2017, international agreements on information sharing will enable tax authorities to act more effectively against them”.

No good news for poor
But while he is putting off action to tackle millionaire tax dodgers for a year, there is no similar good news for the poor. Social grants are to be increased, but by amounts well below the expected levels of inflation for poor families, given a potential 16 percent Eskom tariff hike and the anticipated double-digit food prices as a result of the drought and the fall in the rand. So real inflation for the poorest families will be above 10 percent, while the increase for the average grant recipient is between 3.5 percent and 7 percent.

Nor was there any good news on the long-awaited National Minimum Wage, Comprehensive Social Security Plan and National Health Insurance system. The best he could promise was that “Progress has been made towards a minimum wage framework, and to reduce workplace conflict. The National Health Insurance White Paper has been published, and proposals for comprehensive social security will be released by mid-year”.

I noted that the minister said he was tabling a draft Revenue Laws Amendment Bill, which was intended to postpone by two years the compulsory annuitisation of provident funds, which all workers were so angry about. But he was too late, as the Taxation Laws Amendment Act was scheduled to be implemented on Tuesday.

I welcome the additional R16.3 billion for higher education over the next three years, but credit for this must go not to the minister but the students whose #FeesMustFall campaign compelled government to keep fees for the 2016 academic year at 2015 levels.

But it remains a scandal that South Africa’s budget for universities as a percentage of gross domestic product is lower, at 0.75 percent, than the African average of 0.78 percent, the world-wide proportion of 0.84 percent and the proportion spent by Organisation for Economic Co-operation and Development countries of 1.21 percent.

For me the most alarming features of the Budget speech, was what Comrade Gordhan insisted on not calling “privatisation”, but was clearly just that. He says: “We must broaden the range and scope of our co-funding partnerships with private sector investors. This requires an appropriate framework to govern concession agreements and associated debt and equity instruments, and appropriate regulation of the market structure.”

Private sector
Minister Lynne Brown, he reported, was in discussion with Transnet’s leadership on measures to accelerate private sector participation in the ports and freight rail sector. The Budget Review also says government is looking at “strategic partnerships to allow SAA “to draw on private sector capital and technical expertise to improve its performance and expand its network”.

“The recent tremors felt by emerging markets,” he said, “are a warning that we need to take corrective steps urgently or we will be worse off. At the same time, we need to move forward to mobilise the resources and capacity of all our people, large and small enterprises, civil society organisations and public-private partnerships.”

This is without doubt a policy of creeping privatisation, a green light to capitalist hyenas to start preparing to get their teeth into publically owned enterprises and run them to maximise profits, rather than operate a public service.

In conclusion I repeat what I said in my response: “The Budget speech today, like all other before, simply does not represent any new direction. It blatantly refuses to accept the deepening crisis of poverty, unemployment and inequalities or even the scale of corruption. It is the continuation of the old business as usual ignoring the plight of the black working class and the poor.”

Zwelinzima Vavi is the former Cosatu general secretary.
The views expressed here do not necessarily reflect those of Independent Media.

Budget 2016: A strong society and economy is built on its people: social grant allocations inadequate.
PACSA Media release 24 February 2016

Minister Gordhan budget seeks to build stronger foundations for our future society and economy. Human capital is core to building a stronger foundation. At the most basic level, greater public investment is needed so that households can access sufficient and nutritious food. The increase of R90 on an old-age pension and R20 on a child support grant will not allow that. The implications of not ensuring the core foundational aspect of society is met by ensuring the household base is strong and able to absorb increasingly unpredictable and massive price fluctuations undermines our social and economic outcomes.

Underspending on food will further impact on the public health sector; result in low work place productivity; and underutilization of investments in education and public health.

The social grant increases announced by the Minister will neither stop people from falling into poverty nor help them escape poverty. The increases on social grants would not absorb the high levels of food price inflation projected at beyond 15% in 2016. The February 2016 PACSA food price data shows:

• Food price inflation on the food baskets which low-income households try and buy each month has increased by +R231.14 (14%) over the last 3 months from R1 648.10 in November 2015 to R1879.24 in February 2016.

• The PACSA food basket increased by +R82.20 (4.6%) in the last month from R1 797.04 in January 2016 to R1 879.24 in February 2016.

• The cost of feeding a small child (3-9 years) a nutritional but basic diet for a month; cost R546.80 per child in February 2016. Month-on-month, the cost of feeding a small child has increased by R18.55 (3.5%) from R528.25 in January 2015 to R546.80 in February 2016.

• The cost in February 2016 of a 10kg pocket of potatoes is R70.63; a loaf of brown bread is R9.92; 2 cabbages cost R27.95; a 5kg bag of sugar beans is R86.49; 4 litres of cooking oil is R90.48; and 2 litres of milk is R24.66.

Minister Gordhan has increased the state pension by R90 (6.3%) from R1 420 to R1510 (R10 is staggered till October); and the child support grant by R20 (6.1%) from R330 to R350. These increases do not take into account the projected CPI peak of 7.8% by the end of 2016.

The CSG’s rand value of R350 is not enough to meet the nutritional requirements of a small child in February 2016: R350 vs R546.80. This is an underspend of 36% on the plates of children. The R20 increase on the grant has almost already been eroded since the month-on-month increased by R18.55 between January 2016 and February 2016.

The state pension supports entire families. The total pension, with the R90 increase – if every cent was used on food – is not enough to afford a basket of food for households in February 2016: R1 510 vs. R1 879.24. Between January 2016 and February 2016, the food basket increased by R82.20, already eroding the first tranche of R80.

The increase in the fuel levy by 30 cents as well as the possible electricity increases will also contribute to rising food inflation and will make public transport more expensive – these directly impact on low-income households.

In the light of rising food prices, projected to increase beyond 15% in 2016, with STATS SA projecting an 11% increase towards the end of the year, and the severe household indebtedness and financial stress at household level; we expected that the Minister would have taken bold steps to relieve some of these pressures on low-income households, who make up the majority of households in South Africa.

Low-income households are the majority of households in South Africa. South Africa’s low labour absorption rates, low baseline wages earned by the majority of workers, and low social grant levels do not allow households to support themselves whilst ensuring a buffer to absorb price fluctuations. Annual increases in wages and grants are not keeping up with high levels of inflation (well beyond headline CPI) on goods and services for low-income households. This situation, over the last several years has become more severe. Households, unable to absorb shocks by spending more money have been viciously cutting back on expenditures and taking on higher levels of and more expensive unsecured credit. This strategy is now being found wanting, with deprivations acting to undermine health, education and productivity. These 3 aspects are the foundational elements of an economy – with its core in households having access to affordable, good quality nutritious and sufficient food and municipal and public services.

About PACSA
The Pietermaritzburg Agency for Community Social Action (PACSA) is a faith-based social justice and development NGO that has been in operation since 1979. PACSA tracks the price of a basket of 36 basic food items from six different retail stores servicing the lower-income market in Pietermaritzburg and issues a monthly food price barometer which serves as an index for food price inflation and provides insight into the affordability of food and other essential household requirements for working class households.

PACSA media contact:
MERVYN ABRAHAMS
PACSA Director
PACSA | Pietermaritzburg Agency for Community Social Action
170 Hoosen Haffejee Street, Pietermaritzburg, 3201 | P O Box 2338, Pietermaritzburg, 3200
Tel +27 33 342 0052 | Fax +27 33 342 0303
mervyna@pacsa.org.zawww.pacsa.org.zawww.facebook.com/PACSAPMB