SOUTH AFRICA: Pro-Poor Budget Unveiled in Parliament

"We have sought to lift the crushing weight of poverty and disempowerment," said South African Finance Minister Trevor Manuel on Feb 21, 2001 as he launched what he called a pro-poor budget.

At the other end of town, a coalition of trade unions, churches, civic organisations and non-governmental organisations (NGOs) marched to publicise their "Peoples Budget" campaign. The implied suggestion was that government's budget is no longer a peoples budget.

But throughout his hour-long Budget speech, the Minister implied the country was finally plucking the fruit of liberation, and that the poor would benefit. Manuel increased social service spending by 7.3 per cent (which is slightly lower than inflation of 7.9 per cent); gave more to poverty relief programmes and offered tax breaks worth an estimated R8.3 billion to workers and the lower middle-classes. One US Dollar is equal to 8.7 Rand.

Manuel also cut the cost of paraffin by scrapping tax on the fuel. The very poor - for whom it remains a basic source of energy - will save about 40c on a litre bottle. In this he answered a direct plea from the Peoples Budget conveners. They also want other staple products like bread and basic vegetables exempted from value added tax.

For those who suffered gross human rights abuses under apartheid, Manuel gave R800 million. Each of the 22,000 victims who came forward to testify before the Truth Commission will each receive an average R35,000. Most are destitute, so this also serves as a poverty relief measure.

To deal with unemployment, the state will provide employment incentives in certain industrial sectors and give R3 billion worth of investment incentives on what it calls "strategic projects". Both plans will be implemented in October. A training levy to improve the skills base in the country imposed on payrolls will double to net R2 billion for a training system that includes the unemployed.

"This Budget tells the story of choices and decisions we have made and which have advanced the transformation of our country and its economy to the point where we can now begin to enjoy the fruit," said Manuel. But he plucked the fruit cautiously. He only increased key social grants by very small amounts. The old pension increased from R540 to R570 and the child support grant increased for the first time in three years from R100 to R110. These are the only forms of welfare available to the very poor and they support more than just the recipients.

In real terms, the old age pension has remained stagnant, while the child grant has gone up by just over two per cent. The Peoples Budget argues for a more comprehensive social security system. Its organisers believe that all adults should receive a monthly payment of between R100 and R200 as an income grant, funded by a "solidarity tax" on the rich. They also argue for a national health insurance system that combines the private and public health sectors as service providers. In some measure, Manuel achieved his goal of lifting the weight of poverty that afflicts one in four South Africans who live under the poverty datum line. He increased spending by 9.6 per cent to a projected budget of R267 billion. It's not enough, say his critics, who argue that at least another R4 billion is needed annually over the next three years to restore public spending to its 1996 levels.

Housing and electrification budgets have also declined despite a housing shortage of 3 million. In 1996, government embarked on its growth, employment and redistribution strategy (GEAR) which was a structural adjustment programme to reduce the deficit and debt servicing costs. The deficit has declined to 2.5 per cent of gross domestic product (gdp) and interest costs are on a downward trajectory as well, as Manuel revealed on Wednesday.

The Congress of South African Trade Unions welcomed the real increases in spending for the first time in four years. But they criticised the privatisation focus in the Budget as well as the eight per cent rise in real Defence spending. Government intends accelerating its privatisation programme this year with sales in the telecommunications and electricity operators.

Almost 40 per cent of defence spending this year is being used to finance a massive arms deal to refurbish the South Africa National Defence Force. "The annual cost of the arms procurement programme is around R5 billion a year for the next 3 years compared to the R1.5 billion a year committed to poverty relief," the labour federation complained (Farah Khan, inter press service)