NEDLAC Community Constituency
- Black Sash and FSCC Submission - PCOF 29 Feb 2008
28
February 2008
Budget hearings 2008/2009
Portfolio Committee on Finance
Dear honourable members, thank you for
the opportunity to participate in these hearings as part of the NEDLAC community
constituency.
We have been asked to give a brief presentation
on the government’s macro-economic policy, focusing on whether it contributes
towards the goals of accelerating growth, advancing social development and job
creation, reducing the gap between the rich and poor, and any other matter
concerning the Budget that we consider to be of importance to the Committee.
The Black Sash and the Financial Sector
Campaign Coalition (FSCC). as part of the Community Constituency at NEDLAC, we
welcome the expansionary aspects of the 2008 Budget.
Years of underdevelopment of the majority
of South Africans means that by necessity there ought to be a heavy pro-poor
emphasis in the budget. And so, we are
encouraged by Finance Minister Trevor Manuel's opening remarks that "We
are all in this together". However we are concerned about the extent to
which this is really so.
We must ask whether the Budget
benefits the most marginalized and vulnerable people in our society - poor and
vulnerable women, men and children whose survival depends on government support.
This poverty is, for us, a most serious
and long standing, national emergency – one that demands unusual measures.
No tax breaks for the working poor
The
decision by the National Treasury to provide concessions to business in the form
of business tax relief of R7.4 billion[1] (including
the cut in the corporate tax rate from 29% to 28%),, may have merit, particularly
in the light of the impact of load shedding and power outages on their turnover.
We
are dismayed, however, that no concomitant solidarity has been demonstrated to
the millions of South Africans, falling below the income tax threshold of R3800
per month.
Individuals
(earning more than this threshold) are getting back R 7.2 billion, yet the
majority of wage earners (who earn below R3800 per month), will not benefit from
this concession.[2] 7.1 million workers of the 12.6 million
employed in
Moving
away from income tax, social solidarity could have been demonstrated by implementing
the long-standing recommendation of the People’s Budget Campaign to reduce VAT
by 1% to 13% of the value of the service or goods purchased. This would boost the
disposable income of millions of people, and ensure that food – and essential
service - price hikes could be ameliorated.
The
Minister of Finance (in his Budget Speech), “recognised the hardships that all
South Africans are experiencing as a result of higher food and petrol prices”
and commended the work of the “Competition Commission and the Competition
Tribunal for their diligence in investigating companies that collude to keep
prices higher than they should be”.
It
is concerning that government’s social assistance to the vulnerable and poor is
undermined by staple food price increases (which affect the poor the most). In this way the social gains may be partially
swallowed through illegal collusive practices.
In
our submission to the Competition Commission, we have argued that additional
action is needed to deal with “companies (that) collude to profit from the
impoverishment of ordinary people”. .We
request that the Committee assists in considering mechanisms to address this disquieting
development. It is ironic, for example,
that some of the very companies found guilty of collusion, now benefit from tax
concessions
The
limitations of the Child Support
Grant
While the equalisation
of the State Old Age Pension is welcomed and a necessary move towards gender
equality and increased dignity of life for vulnerable men, we are disappointed
that the Finance Minister,
Trevor Manuel, has failed in his budget speech to realise the
Constitutional rights of all our children by limiting the extension of the Child
Support Grant to 15. Therefore, the 2008 budget once again fails to realise the
rights of children embodied in our Constitution – that they be protected and
supported until the age of 18.
The constitution specifically stipulates “In this section a
“child” means a person under the age of 18 years” (Section 28, 3). Chapter 2, the Bill of Rights, Section 27 (1) makes
clear that “Everyone has the right to access to…social security, including, if
they are unable to support themselves and their dependents, appropriate social
assistance” and Section 28(1) specifically states that “Every child has the
right to…basic nutrition, shelter, basic healthcare services and social
services” . Access to finance is also a critical necessity.
From this year, those children born in 1994, at the dawn of
our democracy, will be left to fend for themselves without any form of social
protection until they retire. Currently, there are over 2 million children
facing the realities of living in poverty. They
will battle to complete school on empty stomachs and as a consequence will
struggle to find work in our skills-driven economy.
Minister Trevor Manual has argued that the state was
allowed the space to progressively realise constitutional rights. We are
concerned, however, that children, who are at a particularly vulnerable phase
in their life, cannot afford to wait. The future of two and a half million
vulnerable South Africans between the ages of 15 and 18 remains in jeopardy.
We are profoundly disturbed by Finance Minister Trevor
Manual’s assertion at the last NEDLAC EXCO meeting (2008), that the demand to
extend the Child Support Grant to 18, should be considered in terms of the South
African Schools Act (which permits children to leave school at 16) and the
Basic Conditions of Employment Act (which allows children to work from age 16).
He appears to be arguing on this basis, that children can be seen as self
sufficient from the age of 16. We would
strongly contest this notion which would relegate such children to the large
pool of unskilled labourers and work seekers.
The proposed “review of eligibility
criteria" for the Child Support Grant considers further conditions - such
as school attendance and healthcare - as a basis for accessing the grant. Such criteria have the potential to exclude many
more poor and marginalized children from the grant unless the government is
able to guarantee access to, and the efficient delivery of, free schooling
and basic medical care. Young people should not be denied their right to
social protection just because they can't access their right to education and
healthcare.
We acknowledge the modest increases in social grants announced by Minister Manuel, but the amount of the Child Support Grant in particular, still does not take into account the cost of raising a child and the impact of food and fuel price increases on the poor. The increase of the Child Support Grant from R200 to R220 will not help poor families stay on top of the increasing food and fuel prices.
Effectively,
these increased allocations hardly keep up with the average Consumer Price Index
(of around 8.8%), and the increases in fuel levy of an extra 6c/l as predicted
by the Budget Speech. Typically mothers now will have to pay more for using
taxis to get their children to clinics, schools and shopping facilities in the
central business districts, which they usually live far away from.
Lastly, while we welcome Manuel's announcement that the current means test will be reviewed, it will continue to act as a barrier for those who do not qualify or who struggle to prove their eligibility due to circumstances beyond their control. We continue to lobby for the scrapping of the undignified means test for the Child Support Grant and the recovery of benefits from the taxes of those who are not in need.
Unemployment and Inequality: Significant but Insufficient Interventions
Parents will make up a large proportion of the four million South Africans - one in four adults by conservative estimates – who have no form of income support and are unable to access jobs or find work through Expanded Public Works Programmes. There has been no recognition of the large group of people even though the Public Works Minister, Thoko Didiza, has acknowledged “…that although the Extended Public Works Programme had so far created 854460 job opportunities, many were of a temporary nature and did not often allow for skills to be transferred” (Business Day, 15 February 2008).
The additional allocation of R12 billion
that has been made to social grants over the next three years is significant
but not sufficient to address the unique unemployment and inequality challenges
in
In the absence of an effective plan to support unemployed and marginalised people, entire families that live from hand to mouth, are forced to survive on grant money intended for the most vulnerable amongst them, thus undermining their care.
To put this in context, Finance Minister
mentioned that we spent 3.3% of our GDP on non contributory grants. Yet over
the medium term, social assistance remains at the same percentage of the GDP
indicating that the allocations are in fact limited. An additional 12 billion
over 3 years (or 4 billion a year) compares insufficiently to the tax subsidies
and incentives given this year alone to individuals and companies.
A bolder integrated and coordinated approach needed
While we commend the belated attempts
by government to integrate and co-ordinate its approach to dealing with
poverty, we need a more comprehensive battle plan, if we want to win
the war. How can the proposed new "National War Room against poverty"
lead such an offensive without adequate resources?
Manuel's announcement that the Poverty Line will be finalised within the next 2 weeks, it seems without consultation, and is a sad indication that "we are not in this together."
In light of the
huge increases in revenue collected by SARS, The Budget does not make significant
inroads into the alarming levels of unemployment, poverty and deprivation
experienced by those most disadvantaged by our apartheid past.
With this failure mind, we call on Manuel's colleagues
in the Department of Social Development to make supportive measures, including
the Social Relief of Distress award, more readily available to adults and
children so as not to penalize those who continue to live in poverty.
The Black Sash and Financial Sector
Campaign Coalition (FSCC) calls for a strategy that includes a comprehensive
Social Security System with income support for unemployed; the generation
of decent and sustainable jobs; and food security for all.
We intend working more closely with the
Community Constituency of NEDLAC in this regard, in order for us all to be in
this important task together.