Economic Freedom Fighters Statement on the budget speech by minister of finance Pravin Gordham:
27 February 2014
The Economic Freedom Fighters (EFF) notes the budget speech by Minister of Finance Pravin Gordhan delivered to the National Assembly on the 26th of February 2014. The budget, like all the previous budgets, is a continuation of the neo-liberal agenda of the ANC led government and insistence on macroeconomic policies that have reproduced South Africa's crisis levels of poverty, unemployment, inequalities and under-employment. The neo-liberal agenda emphasises the distribution of our resources - land, water, electricity, education through the markets in which those who have money cannot buy and sell. As a result, the poor without any means to access these needs are left without adequate means to live.
In our considered view, the budget speech anchored in the neo-liberal paradigm, is not a solution to the problems confronting South Africa today and will exacerbate the poverty, unemployment, inequalities and under-employment crises that define South Africa today. The budget speech reflects many anomalies which have primarily been the main cause of the challenges and crises that define South Africa today, and which the political elite is ignoring for their own convenience.
The very fact that the budget speech is premised on the neo-liberal National Development Plan is an ingredient for continued failure because the NDP is not a sustainable solution to the problems that confront South African society today. The NDP is a strategy that seeks to shift the goal posts of the so many promises made by the ANC government that poverty and unemployment will be halved by 2014 and now the objectives are shifted to 2030 because the ANC government failed to reach its objectives and aims by 2014. What is sad, but not surprising, is that there is no appreciation that neo-liberalism and total confidence in the private sector to create jobs and address unemployment is totally misplaced and altogether despicable. In fact, the so-called good story that the ANC government is propagating to society, is the story of neo-liberalism, which the SACP conviently fought because it was just carried out by former President Mbeki. But the SACP has actively embraced this neo-liberal agenda merely because some of them are now in cabinet.
The private sector and private capitalist interests have been given an opportunity for the past 20 years to invest, create jobs and address poverty through policies such as the Growth, Employment and Redistribution (GEAR) strategy and they dismally failed. The post 1994 government bended backwards on its earlier revolutionary commitments to accommodate private capitalist interests and there is still no result that private capital will resolve the crisis of unemployment and poverty. Instead, they make more demands from the state, including demands for wage subsidy, which will not resolve South Africa structural unemployment and under-employment, and therefore poverty.
The EFF's view on the budget is that it is useless and a reflection of the fact that, if re-elected into office, the ANC will continue with the neo-liberal and capitalist agenda that has failed South Africa in the past 20 years. In this regard, the EFF's concrete views on the budget are as follows:
Taxation and state revenue:
The EFF believes that a substantial component of the state revenue should come from privately owned corporations and enterprises, because as things stand, ordinary citizens contribute more than 50% of the state revenue through income personal tax which is 33.8% of the revenue, Value Added Tax (VAT) which is 26.6%, Fuel levies which are at 4.6% and customs and excise taxes which are at 8.2%. Corporate tax, which should be the biggest contributor to a resource rich and developing economy, is only at 20% of the revenue and such is never justifiable.
As a resource rich country with mineral resources and wealth, the EFF believes that a substantial component of our revenue should be generated from private corporations to constitute not less than 50% of the state revenue. South Africans should begin to benefit out of the reality that beneath our soil are valuable precious and industrial mineral resources.
EFF government will ensure that state revenue is increased to R2 trillion by 2017 by increasing the resource taxes on all private corporations and redirect those resources to the benefit of the people. While reducing taxes on individuals who earn below R300 000 per year, the EFF government will ensure that there is maximum tax collection on those who earn above this income bracket.
Additionally, EFF government will increase taxes of speculative capital inflows and customs with the aim of generating additional revenue and building local capacity to produce goods and services which would otherwise be imported from other parts of the world.
Budget deficit:
The EFF is of the view that the budget deficit should and can be eliminated if the state is in control and ownership of the strategic sectors of the economy. Under state ownership and control, mines and minerals extraction, beneficiation and industrialisation will increase the state fiscal capacity to cater for everyone.
Distribution of income across spheres of government:
The EFF does not agree that only 9% of government expenditure should be allocated to local government, because that is where majority of essential services are provided. Distributing only 9% to local government exposes local government authorities and councillors to genuine service delivery protests and harassment on the basis that local government is not delivering basic services to the people.
As a sphere that is constant and direct contact with the people, local government should be allocated adequate resources and capacity to meticulously and speedily respond to the demands of the people because that is where services matter most.
EFF Government will ensure that not less than 30% of government revenue is allocated to local government because this is a critical and important sphere of government that deals with the concerns of the people on a daily basis.
Social grants:
The budget speech announced increments on social grants which is not above the current inflation rate, means that in real terms, the actual value and cost of social grants has been decreased because the percentage increase is lower than inflation. What Minister of Finance did was increase the child support grant by a mere R10 and R20 from April and October respectively, meaning that there is really no commitment to helping indigent children.
Social grants are an important aspect of bringing the poorest of the poor into some level of economic participation, and the EFF Government will introduce a system which will link social grants to development. The EFF government will create sustainable jobs and open educational and training opportunities for women who receive child support grants, so that child bearing is not seen as a basis to receive social grants.
Within this framework and commitment, EFF Government will increase social grants to take the following shape:
a. Grant for older persons: Increase from R1300 to R2600 per month.
b. Disability grant: Increase from R1200 to R2400 per month.
c. War veterans grant: Increase from R1220 to R2440 per month.
d. Care dependency grant: Increase from to R1200 to R2400 per month.
e. Foster child grant: Increase from R800 to R1600 per month.
f. Child support grant: Increase from R300 to R600 per month.
EFF Government will introduce a social grant of R2500 per month for all terminally ill South Africans.
It is important to note that social grants are an integral part of developed countries, therefore curbing many social ills that are the direct result of poverty. The misplaced notion that social grants create a society that is dependent on the State for survival is simply false, because social grants can play a significant role in boosting local economic activities and decidedly address poverty. The below inflation increases of social grants by the current government means that social grants recipients will have lesser buying power as compared to previous years and this trend has been happening for some time.
Redirection of government expenditure:
The Minister of Finance did not say anything about redirection of government expenditure. The EFF government will do the following to redirect the government expenditure:
Reduction of ministries at national level.
Reduction of the expenditures on the Presidency, including cutting the unnecessary residences allocated to the president.
Relocating the legislative arm of the state to one city; this will be Tshwane.
Cutting all housing and security expenditures on government ministers.
Stopping the youth wage subsidy which will save the state more than R5 billion per year.
Stopping all tenders, which will save the state more than 30% of the money currently spent on infrastructure development.
These efforts can and will save the state more than 30% of the current budget and will be redirected to useful expenditures particularly education, housing, sanitation and healthcare.
Youth wage subsidy:
The Minister of Finance announced that the youth wage subsidy, which government calls the youth employment tax incentives have already created 56 000 jobs in the first three months of its implementation. This figure does not look true, and the EFF challenges the Minister of Finance to provide exact details of where these jobs were created and the exact cost of the incentive towards the businesses and corporations that employed the youth because of the incentives.
The Youth wage subsidy is not a solution to structural levels of unemployment and such is reflected by the fact that even if the imaginary 56 000 jobs were created because of the subsidies, unemployment is still at more than 24% as per the latest Quarterly Labour Force Survey.
Minimum wages:
The minister of finance did not say anything about minimum wages, meaning that the ANC government is not intending to address the question in the immediate and within the Medium Term Expenditure Framework, despite their feeble manifesto empty promise that they will do so. The EFF government has set concrete commitments on minimum wage in the elections manifesto which basically says that no worker should be paid a less than R4500.
Conclusion
It is very clear that the ANC led government will not shift from neo-liberal economic policies and not intending to address the crisis levels of poverty, unemployment, under-employment and inequalities.
Statement issued by the Economic Freedom Fighters, February 27 2014
Click here to sign up to receive our free daily headline email newsletter
