South Africa: the dilemma of Western economics; The figures look great on paper, the economy is growing but the gains are trickling up not down as it should be. And the number of the poor is increasing. Pusch Commey reports on South Africa's election year budget.

Author:Commey, Pusch
Position:NA Markets

It was a subdued Finance Minister Trevor Manuel, the former socialist turned free market guru, who acknowledged that despite all the fine figures that showed that South Africa's economy was in fine form, the gains have simply not trickled down. That if a serious dent was to be made on poverty and unemployment, there must be massive government intervention.

Ten years after liberation from apartheid, social inequalities have worsened, with an overwhelming number of desperately poor people, mostly black.

For the first time after a budget speech, the South African Communist Party (SACP) agreed with the government--vindication that Western style neo-liberal economics only serves the interest of its creators. If there was a better illustration, it was the government's decision to promulgate a law that makes for the expropriation of land without a court order--a departure from the neo-liberal willing seller-willing buyer principle that has failed to solve the land question, and with it economic redress.

The election year budget delivered in February (South Africa goes to the polls on 14 April), had the expected tax cuts to benefit the middle class. But this was only R4bn, significantly less than the R13bn given back last year.

This was attributed to declining government revenue due to the strong rand that has reduced company profits. As an illustration, Anglo Platinum, the world champion in platinum production (South Africa has 75% of the world's platinum reserves), paid R2bn less tax, blaming the rand.

Highlights on social spending included an increase in child support grant and old age pension (R740 paid automatically to needy persons over the age of 60).

But there was no mention of a basic income grant to all citizens that will go some way to alleviate the suffering of those who are unemployed and do not qualify for social grants. Perhaps, it was because the idea has been hijacked by the opposition, and may have to wait.

Other highlights included R2.1bn for the fight against Aids, and R1.1bn to support projects in African countries, especially peacekeeping in DRCongo and Burundi, but a meager R700m for land reform at home.

The government further pledged R3.1bn as its first installment in a multi-billion rand public works programme designed to create short term employment.

In all, 20% of the budget went to education, the biggest recipient. Despite gains made in this area, black South Africans still lack the necessary education, training and...

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