by Ronald Imbayago
South Africa’s first democratic budget has seen social spending emerge as a priority in the government’s Reconstruction and Development Programme (RDP). Out of a total budget of R135.1 bn (USS36 bn), RDP has been allocated R2.5 bn (USS800 m).
The 1994/95 budget seeks to redress imbalances created by decades of apartheid, and to reduce the budget deficit. South Mica’s budget deficit of 6.9 percent of the Gross Domestic Product (GDP) last year is forecast to shrink to 6.3 percent by 31 March 1995.
The amount for the RDP, which is separate from funds allocated to various ministries, follows on promises by the African National Congress (ANC) during its election campaign. The ANC came to power promising to provide adequate accommodation, more jobs, and basic health and sanitation to large sectors of the previously disadvantaged population.
RDP is all-encompassing as it includes education, housing, health, job creation and general welfare. Most of the RDP funds have been diverted from the defence budget which has been cut by 13 percent in real terms.
Other funds to the RDP have been diverted from the previous budgets earmarked for the former homelands, the police, regional and land affairs, foreign affairs and agriculture, among other sources.
“In the planning budgets for those years (the next four years) we have therefore pencilled in the figures of R5 bn, R7.S bn, RIO bn and R12.5 bn for transmission to the RDP Fund, and the appropriations for all other departments will be required to adjust downwards to accommodate this.”
Presenting the budget, Finance Minister, Derek Keys, who has retained the post he held in the previous National Party (NP) government, said: “The government has the legitimacy, the capacity and the resolve to succeed.
It is determined to pursue both social justice and aggressive growth — the best of both those worlds, and the budget seeks to embody this aim.”
The current budget, which is R20.9 bn more than the previous one, differs from the apartheid-reforms ones in its more comprehensive and strategic approach to long standing social problems which the apartheid budgets tried to deal with through a more fragmented and tactical approach.
The biggest increase of 15.6 percent from last year’s budget, appears in the R2.2 bn allocation for housing, a sector where the present backlog stands at 3.4 m units. An estimated four million houses have to be built during the next 10 – 15 years to clear the backlog.
Ten years of free and compulsory education for all was another ANC major promise. Spending on education increased by 11.5 percent to R29.2 bn, representing 22 percent of total government expenditure.
A South African newspaper, The Star, says this provides for continuing expansion of the college and school sectors.
Spending in the health sector has risen by seven percent over last year’s allocation to R14 bn. Government seeks to restrict growth in secondary and tertiary health care by adequately funding primary health care which has been allocated R3.5 bn, or about 25 percent of the total current health budget.
The government has allocated R….”92m to create jobs, and reduce unemployment. Several millions of South Africans are jobless.
Additional costs of the expensive integration and reorganization of the armed forces have resulted in a total allocation of RI0.61 bn for the 1994/95 fiscal year to the defence ministry. This represents a 4.8 percent increase over last year’s allocation.
Although the budget has been widely welcomed, some critics, including some senior ANC members, argue that the budget favours the business community and does not directly address the expectations of the majority of the people who have endured centuries of racial segregation.
“It’s going to be hard to sell this budget in the townships,” said an ANC executive committee member. Welfare and pension increases of up to 5.5 percent fall short of the nine percent inflation rate. The only tax concessions are a cut in corporate taxes from 40 to 35 percent and the abolition of import surcharges on capital and intermediate goods.
Beer, wine and cigarette taxes have been increased to 25 percent and a widely predicted tax exemption for basic foods did not materialize. The excise increases are expected to generate R525 million a year and some R350 m for the remainder of this financial year.
There are transition costs incurred during the shift from apartheid to democracy, and a “transition levy” has been introduced. The Transitional Executive Council (TEC) and the Independent Electoral Commission (IEC), which steered South Africa to democracy, incurred unplanned expenditures of up to R4 billion.
The government will, therefore, temporarily levy taxpayers earning over R50, 000 a year an extra five percent of their taxable income, but under conditions that will ease the collection. Certain categories of taxpayers will be spared: Married women earning less than R175, OOO a year are exempted.
The levy is expected to yield R3.4 bn, says Keys, who has assured the people that this would be a nonrecurring, one-time-only levy. He added that a streamlined tax commission will review the tax mechanisms and propose improvements for the 1995/96 fiscal year.
South Africa’s economy is expected to grow by three percent, and a stagnant inflation rate is envisaged this financial year.
Higher gold prices should strengthen export performance, but a more active domestic economy could reduce current account surplus on balance of payments. On the whole, the current budget has directed more funds toward uplifting sectors hardest hit by past discriminatory policies and seeks to promote economic growth. (SARDC)
