OPINION: Poverty levels are stubbornly rising. Decent jobs are elusive for a huge number of factors, domestic and international, historic and current. National Treasury’s austerity budgeting has failed to turn around our wasting economy, writes Isobel Frye.
Mid administration budgets are notoriously bland. By then, electoral promises have fed into departmental programmes, and budgets are largely predictable. However, in South Africa, we do like to buck trends.
This budget is a critical one.
There seems to have been a real awakening to the extent of the crisis that we are in, that for once, no spin doctor can change. Last year’s violent protests shocked the nation to the core. Our collective confidence was already shattered by the uncontrollable nature of the Covid-19 crisis. In a very visceral manner, this humbling of our hubris opened our leadership’s eyes to the dystopia that had existed long before the Covid crisis. The question that needs to be answered through the budget is: what is to be done?
The budget is the social contract between the state and citizens. Taxes are collected from citizens, and state departments are allocated budgets to spend. In the taking and the giving, we see an ongoing battle of interests. The past two decades have shown significant favouring of the private sector at the cost of the poor. The result of the repeated cutting of allocations for state services and public investment was evident in the tragedy of the July 2021 protest, in which 337 people lost their lives.
The extreme levels of poverty and inequality in South Africa were not caused by Covid. They have deep structural roots, but historic imbalances have been fed by very deliberate policy choices since 1994.
The window for redemptive change is closing fast. The Minister of Finance needs to accept the responsibility to act in favour of the majority of South Africa and not the favoured few. Eleven million adults in South Africa are unemployed, and a further 14 million were defined by Stats SA in the most recent Quarterly Labour Force Survey as ‘neither employed nor unemployed.
Up to 78% of people in the labour market between 15 and 24 were unemployed, while 77% of the unemployed are in long-term unemployment, not likely to be easily reabsorbed into a job-shedding labour market.
Of the 14 million people reported as ‘employed’, 2,7 million are in the informal sector, and a further 1,1 million are domestic workers, neither of these really reflecting decent work.
In January 2022, 15 million applications for the R350 grants were received. In February, 10 million grants were paid to beneficiaries. The R350 is only 56% of the R625 Food Poverty Line as set by the World Health Organization.
The demand for the miserly R350 is overwhelming, and the heroic tales of how people used this small amount to create micro-businesses, sustained by neighbours with new purchasing power are legion. However, we have been told time and again that this is not to be viewed as a permanent grant and that people should be enrolled into the formal labour market instead. We are told that South Africa is in a fiscal crisis and that this level of support is simply not affordable.
The state is constitutionally obliged to find the maximum available resources to enable it to deliver the human rights it guarantees to all. This includes the right to social security and social grants for the poor. If the constitution is worth its revolutionary reputation, the state needs to ensure that we find the money to pay the grants.
But instead, we have seen the contribution of the private sector to the national well-being decline significantly since 1994. Effective corporate tax rates have fallen from 50% at the height of apartheid in 1990/1 to 40% in 1993/4 as the corporate sector was wooed to stay to a mere 28% in 2021/2.
Tax cuts, of course, deplete state resources.
In addition, there has been a significant decline in the labour share of national income in favour of profits – less is going to the workforce and more to the bosses.
The rationale for increasing profits for the private sector is that businesses should be reinvesting in the economy. For over a decade, we have witnessed a massive ‘investment strike’. The private sector is sitting on massive cash reserves that are not being invested productively in new enterprises that should be the drivers of decent jobs.
On the other side of the balance sheet are growing levels of poverty and unemployment. People are disconnected from the economy; they have nothing to lose but also no hope that anything will improve.
Disconnected autarky is the tinder waiting for any flint of discontent to ignite another destructive wave of violence. Against that image, we compare the miraculous stories of how people have managed to start their businesses with the meagre R350.
Unemployed people, previously disconnected from the economy, have become active producers and consumers with a vested hope in a future. Research also shows that grant recipients of the R350 grant increased their active job searching by 25%.
There is much international research that credits success in innovation and production with social grant safety nets. As blood supplies energy to the body, so money provides energy to economies. The absence of sufficient circulation of money in economies causes economic and social atrophy.
Poverty levels are stubbornly rising. Decent jobs are elusive for a huge number of factors, domestic and international, historic and current. These factors mitigate against the possibility of creating 24 million decent jobs in the next year or two. The chances of generating economic growth beyond the 1,3% annual forecast in the absence of significant economic stimulus is negligible.
National Treasury’s austerity budgeting has failed to turn around our wasting economy.
We get what we pay for. Treasury and government seem committed to pushing money to the private sector in the vain and unsubstantiated belief that the private sector will invest in creating decent jobs that will lift everyone out of poverty and into prosperity.
The only dependable policy that has emerged, despite Treasury’s deep reluctance, is the minimal R350 grant. If we are serious about a turn-around strategy, the grant must be made permanent, and its value increased over three years to the Upper Bound Poverty Line of R1335 per person per month.
*Frye is the director of the Studies in Poverty and Inequality Institute.
** The views expressed here are not necessarily those of IOL and Independent Media.
Insider