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Opinion piece by the SAHRC and the SPII on their joint analysis of the 2011 budget

25 February 2011

By the South African Human Rights Commission and Studies in Poverty and Inequality Institute (SPII).
South Africa is a country characterised by highly uneven distributions of income and control over resources, possibly even the highest in the world. The state is mandated to drive transformation towards greater equality in terms of its constitutional obligations. At the heart of such transformation is the progressive realisation of socio-economic rights entrenched in the constitution. Yet in 2011, millions of South Africans still do not enjoy the fulfilment of their socio-economic rights. In the recent State of the Nation Address, the President acknowledged that while “… we have built a vibrant, fully functional democracy” and “… while, many South Africans celebrate delivery of houses, electricity or water, there are yet many others who are still waiting.” Similarly, in his budget speech, the Minister of Finance quoted Chris Hani who said that “We want to build a nation free from hunger, disease and poverty, free from ignorance, homelessness and humiliation, a country in which there is peace, security and jobs.” Is the nation on the correct path to achieving the vision of Chris Hani and can it be argued that South Africa is heading towards a true developmental state?

The national budget is often seen as the litmus test of political rhetoric. It reflects the state’s real decisions about how to manage the collective resources of the country, and whose interests it prefers. It allows reflection on how serious the government is about implementing its policy commitments. In general, the budget announced by the Minister of Finance suggests that the economy is slowly recovering, more taxes are being collected than anticipated and the spending mirrors the priorities of government. However, is this sufficient and for how long will people have to wait for the realisation of their rights to education, social security, housing, land, water and sanitation and food. What do the numbers tell us?

General Overview
2010 was a tough year and even though the unemployment rate dropped to 24%, there was also a year-on-year rise in discouraged work seekers of 25%, which indicates a rise in people who have given up looking for a job.  The rise in GDP from 2.7% in 2010 to 3.4% in 2011 is a welcome sign of recovery and stabilisation of the economy. Similarly, whilst revenue (taxes collected) fell in 2010, it increased by R69 billion in 2011 although its share of GDP has remained constant. This opens a space for the government to increase its expenditure on priority programmes.

The consolidated budget for 2010 was R907 billion which increased to R979.3 billion in 2011. This represents an increase of 3% in real terms (if adjusted for inflation on the projected 4.9% CPI inflation rate for 2011). In addition, the baseline for departments was reduced from R112 billion in 2010 to R94 billion over the Medium Term Period. This means that there has been an additional allocation of R94 billion, although in real terms, it reflects a 16% cut of additional allocations for service delivery between 2010 and 2011.

Social Security
In 2010, the social security budget for social grants was R89 billion which increased to R97.56 billion in 2011. This is a 9.6% increase in allocation, which is a real term increase of 4.7%. The following grants all received an above-inflation increase if the CPI of 4.9% is assumed - Old Age Grant, Care Dependency Grant, Child Support Grant and the Disability Grant. However, it is distressing to note that the Foster Care Grant increased below projected inflation. Given the social impact of HIV/AIDS on children, this grant is often the only assistance available to enable poor communities to take care of orphaned children. As a sign of solidarity, if not respect for such foster parents, it would have been fitting to increase their allocation. Instead they will receive less for their money this year than they received last year.

In 2010, the increase of the Child Support Grant to R250 failed to keep pace with inflation but in 2011, a two stage increase means that until October this year, caregivers will receive an under inflation increase. Social security represents income security for many millions of people but it is imperative to analyse beyond the numbers and towards the concept of ‘adequacy’. For example, does R270 per month actually provide adequately for the basic needs of a child? One can only answer that in the negative especially given predictions that food price inflation is imminent. This will hit the poor the hardest. For the moment, the distribution of adequate income to the poor until the promise of jobs is realised is the easiest way that the state can meet its constitutional mandate as well as other development targets, but is this enough?

In order to build the skills base required to drive a competitive developmental state, quality education is required. Given the concerns about the levels of education available to the majority of South Africans, education continues to be a priority this year. In 2010, R165.1 billion was allocated to education, which has increased to R189.5 billion in 2011. This represents a nominal increase of 14.79%, which is a real term increase of 9.89%. This signals good news, especially if the Department of Basic Education is able to increase the quality of teaching and learner development.

Unfortunately, the same cannot be said about tertiary education. Given the consensus that access to tertiary education should be enhanced, the nominal increase in spending by 11.59% on tertiary education between the 2010 and 2011 budget is disappointing, and belies the rhetorical emphasis in the budget speech itself on getting the youth into university as the real term increase adjusted for projected inflation for 2011 is only 6.69%.

In the 2010 budget, R104 billion was allocated to health which has now increased to R112.6 billion – a nominal increase of 8.27%. This seems hardly adequate to meet the many demands of fixing an ailing system and at the same time building solid foundations for the ambitious planned National Health Insurance. Given that the real term increase is only 3.37%, it will be interesting to see where the additional means of funding mentioned by the Minister of Finance in his speech will come from.

The housing development allocation grew by a whopping 35% nominal or 30.1% real increase, resulting in a budget of R27,6 billion. This reflects a commitment to building a lot more housing stock. Last year’s commitment to increase access to affordable water and sanitation is also reflected in the real increase of 36.1% for water supplies (R40.4 billion).

Land Reform
Land reform remains one of the most problematic government priorities. In 2010/11, the government allocated R7.3 billion in the Estimates of National Expenditure. This amount has been increased to R8.1 billion in 2011, which is a real term increase of 6.1%. Given the reference to the number of jobs that will be developed in agriculture in the New Growth Path, issues of land ownership and rural development require decisive direction.

Service Delivery
Despite the general positive trend in allocations to realise socio-economic rights, two underlying issues must be addressed. Firstly, what data actually informs budget allocations? Is one counting the number of people who could not afford health care in the previous year, and then the number of hospitals needed, the number of staff, the allocations for basic services to the hospitals, the cost of medicines, etcetera? Is there a fit between allocation and need? This is not evident from the budget documentation, and until one has access to this information, the rise or fall of real increases in allocation remains rather void of context. The second issue is the actual state capacity to deliver adequate, if not, quality services which continually poses a challenge to the transformation agenda.

Previous years have shown that government departments are unable to spend all the money they are allocated. In 2009/10, the Department of Education failed to spend R487,647 million. Whilst this is merely 2.23% of its annual budget it is nonetheless a very large sum and it could have bought a lot more knowledge. Similarly, in the same year the Department of Human Settlements under-spent R29 million due to an inability to fill vacant posts, R155 million on goods and services, R37 million on transfers and subsidies, and R12 million on payment of capital assets.

With regard to water and sanitation, the capacity problem resides at municipal level which raises the additional question of capacity at the different levels of government.

Departments typically assert that under-spending does not negatively affect their programmes, but it does nonetheless – and at the very least – highlight the fact that one needs to look not only at spending on human rights but also, and perhaps more crucially, at the implementation at the local level.

Overall, the 2011 national budget shows that the government is spending on socio-economic rights and hence on transforming our society towards a more equitable one. Frustration with the slow pace of transformation has to be reconciled that tin this Budget at least, these above inflation increases occur even in the absence of an increase of revenue as a share of GDP.  Furthermore, it is not only fiscal but capacity constraints within the state that is impeding the transformation of South Africa to become a truly developmental state. This means that, sadly, the most vulnerable will have to wait a little longer for the realisation of their rights.

Jointly written by the South African Human Rights Commission and Studies in Poverty and Inequality Institute (SPII).

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