Reneva Fourie
Tensions over the distribution of economic power and adequate representation of marginalised communities have long dominated South Africa’s political landscape.
Despite the transition to a democratic government in 1994, the country’s economic structure remains firmly capitalist, perpetuating deep-seated inequalities that disproportionately affect black South Africans.
Thus, South Africa faces a trifecta of socio-economic challenges: widespread poverty, soaring unemployment, and pronounced inequality. These issues remain significant barriers to sustainable growth and development. Beyond being a tool for managing the country’s finances, the national budget plays a pivotal role in tackling the structural causes of these challenges.
However, with an estimated budget shortfall of R300 billion, achieving this goal must not come at the expense of fiscal stability. Striking the right balance between protecting vulnerable populations and ensuring fiscal stability is essential for the long-term prosperity of South Africa.On 18 February, over 20 left-leaning organisations gathered to discuss a ‘People’s Budget’, a collaborative effort to craft a more equitable and people-centred economic plan.
This gathering was not merely a symbolic gesture but an earnest endeavour to develop a concrete set of proposals that could foster a fairer economic system. The discussions tackled pressing socio-economic issues while firmly rejecting austerity measures and VAT increases, which disproportionately impact the most vulnerable in society.
The following day, the same organisations marched to Parliament, where they once again voiced their opposition to the proposed VAT increase linked to the budget vote scheduled for that day.Interestingly, the Democratic Alliance (DA) was noticeably absent from these important events.
Despite this, the DA claimed ownership of the anti-VAT increase narrative, positioning themselves as the leading force against the VAT hike.This manoeuvre seemed nothing more than an opportunistic leveraging of a grassroots momentum to pressure Parliament into delaying the crucial budget tabling.
The DA, however, will not be able to sustain its facade of commitment to the poor. It is well known for advocating market-friendly policies that benefit established businesses, often at the expense of social justice and transformation. They are resisting the National Health Insurance, which provides universal access to quality healthcare, and land reform, which is vital for equitable development.
They will likely resist the government directing resources through the national budget to maintain control over and invest in strategic sectors like water, energy, digital infrastructure, transportation, and critical minerals mining.
A common argument might be that funding simply doesn’t exist.A logical step forward would be to broaden the tax base by ensuring that the national budget emphasises job creation. By taking control of the above sectors, the government can ensure they serve the public interest rather than private profits, thereby fostering inclusive economic growth and generating jobs.
Additionally, aligning the budget with a clear industrial policy could gradually boost tax revenues. Public investment should target areas with significant growth potential and promising returns, such as infrastructure development, manufacturing, construction, and green and ocean economy-related industries.
Moreover, the government could encourage the private sector to create more job opportunities by offering further tax incentives or subsidies to companies that actively invest in job creation. The overarching aim is to establish a sustainable increase in employment, which would expand the tax base, ultimately allowing for greater public spending without compromising fiscal stability.
South Africa also needs a clear strategy for aligning education and skills development with labour market demands. Public investments in education and skills development are essential for addressing the long-term unemployment problem.
Budget allocations should, therefore, support the creation of institutions and infrastructure that provide technical and vocational education (TVET) to youth, particularly in underserved areas.
While prioritising job creation is essential, the budget must also aim to alleviate poverty by ensuring that social safety nets are robust. South Africa already has various social welfare programmes. Maintaining these interventions and expanding them to reach a broader demographic is essential.
Simplifying bureaucratic processes will also ensure that grants promptly reach those who need them. Additionally, introducing a Basic Income Grant (BIG) could be explored. This could be vital in ensuring that no one falls below the poverty line, particularly in an economy facing high unemployment and slow job creation.
Financing these initiatives will be a key consideration. Alongside broadening the tax base, we could explore additional redistributive tax measures. South Africa has one of the highest Gini coefficients globally, highlighting significant income inequality. A small fraction of the population holds a disproportionate share of wealth while many South Africans struggle economically.
The possibility of implementing a wealth tax for high-net-worth individuals deserves attention. Moreover, by enhancing tax collection efficiency and addressing illicit financial flows, currently estimated at R400 billion annually, the government can boost revenue without stifling business growth.
Furthermore, while the overall cost of the Cabinet constitutes about 0.05% of the national budget, serious consideration should be directed toward restructuring it to reduce costs and enhance public sector efficiency.
This could include reducing the number of cabinet positions, streamlining ministries and merging overlapping departments to eliminate duplication of roles and inefficiencies.
According to the Auditor General, by the end of the 2023-24 fiscal year, the accumulated irregular expenditure had reached a staggering R582,40 billion. There needs to be a radical shift towards a state apparatus that is efficient, transparent, and directed towards long-term sustainable development that benefits the masses. This involves cutting waste, removing bureaucratic inefficiencies, reducing outsourcing and eliminating corruption.
Formulating and implementing a progressive national budget can significantly improve the country’s socio-economic landscape. The government can address pervasive unemployment, poverty and inequality by prioritising wealth redistribution, job creation, and robust social safety nets.
As the country grapples with budget constraints, innovative financing strategies and a commitment to transformative policies will be vital in steering South Africa towards sustainable growth and development.
With determination and a clear vision, it is possible to create a budget that ensures fiscal stability and champions social justice and economic equity for all.
* Dr Reneva Fourie is a policy analyst specialising in governance, development and security and co-author of the book ‘The Art of Power: Pursuing Liberation and Nation-Building’
** The views expressed do not necessarily reflect the views of IOL or Independent Media.