Budget blues for the reds
There were mixed reactions to finance minister Pravin Gordhan’s 2010 budget. Politicians were largely satisfied with the presentation, heaping praise on the minister for his bold decision to stay the course set by his predecessor, Trevor Manuel. They were particularly pleased with Gordhan’s decision to tackle the ever expanding budget deficit. Treasury plans to rein this in from today’s 7.3% of GDP – to 6.2% in 2010/11 – and just 5% in the following year. Unfortunately South Africa’s so-called ‘left’ weren’t as happy. Trade union organisation Cosatu and the South African Communist Party have indicated displeasure at a budget that doesn’t do enough for the country’s poor. As part of a three-way ruling alliance we were surprised by their reaction to a budget that awarded an average 12% increase in social grant expenditure.
A welfare state par excellence
Some commentators are calling South Africa the ‘biggest welfare state in the world’, writes Svetlana Doneva on Fin24.com. The latest budget allocated R89.5bn across various social welfare grants, including old age pension grants (R34.1bn), child support grants (R30.9bn), disability grants (R17.4bn) and R7.1bn for foster care, care dependency and war veterans’ grants among others. Approximately 14 million citizens now rely on some form of social grant to survive and welfare recipients outnumber taxpayers more than three to one.
The balance will get worse over the next few years. Government has committed to two expensive social welfare reforms. First, they plan to equalise the age at which the old age grant kicks in for men and women. In the past men had to wait until their 65th year to qualify. Today the benefit kicks in at the same age as women, in their 60th year. As a result the old age grant provision in the 2010/11 budget increased some 13.6% despite pensioners only receiving a 4% increase, to R1 080/month. Second, in an attempt to further alleviate the burden on the poor, Gordhan confirmed the maximum age for the child welfare grant would extend from 15-years to 18. The funds allocated to this welfare need surged 13.2% despite a paltry 4% hike in benefits, to R250/month.
“We recognise that the increase in the child support grant is slightly below the inflation rate, but the social benefit and the cost of bringing in two million more children implies that we have to adjust this grant more moderately,” said Gordhan. Analysts say the number of children qualifying for the grant will swell from 9.1m at December 2009 to 11.5m by March 2013.
The left gets angry
Gordhan’s latest budget included plans to alleviate unemployment among the country’s youth. “Labour market data confirm that employers are reluctant to hire inexperienced work-seekers, while school-leavers lack basic workplace competencies,” said Gordhan, who added that bargaining arrangements were keeping inexperienced workers out of the market due to high starting wages. Treasury therefore proposed a wage subsidy, allocated through the South African Revenue Services, for employers who hire young and inexperienced workers. The minister believes 800 000 young people would qualify. But his comments “subject to minimum labour requirements” caused a storm in certain sectors.
“We should have focused on policy rather than individuals. If we were more focused on policy we would have had better results,” lamented NUM general secretary Frans Baleni, over the organisations decision to back President Jacob Zuma over his predecessor, Thabo Mbeki. He indicated to the Mail & Guardian newspaper that unions were unhappy with their treatment at the hands of the African National Congress (ANC) post-Polokwane. “Before the elections we were taken seriously, but after the elections we are not taken seriously anymore,” said Baleni. This complaint frequently surfaces in the months after elections. The unions are unhappy on many fronts, not least of which the Minister’s comments on ‘business as usual’ at the country central bank.
The wage subsidy for young people has caused distress too. Jimmy Manyi, president of the Black Management Forum and deputy general to the Department of Labour notes: “We heard [about the young workers subsidy] for the first time when the finance minister delivered his budget speech this week.” Manyi and certain others say the proposal won’t create decent jobs. Also in the Mail & Guardian, Cosatu president Sdumo Dlamini warned the move to two-tier labour market was a “recipe for disaster.” Their main concern is with the erosion of worker rights proposed in the budget. “They will hate employment because the entry salary will be the same as those who are permanently employed, but there won’t be any room for them to negotiate salary increases,” said Manyi. He also argued that introducing 800 000 positions for young people could result in less permanent positions.
Some sacrifices required
Although one cannot fault Manyi’s observation it seems bizarre an employer should be forced to create a subsidised position and deal with a militant worker in that position. Imagine a nationwide strike of subsidised labour... Business and labour have long locked horns over the issue of workers rights. Ironically, it’s the insistence on worker rights that has quelled employment in the country thus far… Some form of compromise is required to lift South Africa’s unemployment burden!
Editor’s thoughts: Employment and education remain major stumbling blocks to the country achieving a more equal distribution of wealth. The youth employment subsidy proposed by Treasury this year is inevitable given the number of new school leavers swelling the ranks of the unemployed each year. How would you go about solving South Africa’s youth employment problems? Add your comments below, or send them to [email protected]
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