MTBPS 2012: Challenges and expectations - SABC News 24 October 2012

Nkosikhulule Nyembezi,  Advocacy Programme Manager

Finance Minister Pravin Gordhan’s Medium Term Budget Policy Statement (MTBPS) is expected to continue the trend to provide a detailed three-year rolling budget (Medium Term Expenditure Framework - MTEF) and to also serve to provide predictability and sustainability of the main budget.  

This year's MTBPS is also important as it occurs during the mid-term for this administration and should therefore also serve to provide reassuring milestones that point to the realisation of the election promises.

The backdrop of this year's tabling of the MTBPS is particularly challenging: a weak and uncertain global environment; deteriorating domestic economic conditions; social tensions; a perceived drift in policy; and fragile investor confidence both locally, as reflected in low levels of capital formation and internationally, as the downgrades of rating agencies demonstrate.

Central to this challenge is the reality that it is sadly predictable that in times of economic recession, the poor get poorer and the middle class loses ground. But, even a downturn as deep and prolonged as the one we are emerging from cannot fully account for the desperate path of so many South Africans who are battered by the twin scourge of poverty and chronic unemployment. 

What remains worrisome as we get ready to make sense of what is contained in the MTBPS is the extent of our impoverishment as a nation that was once more exposed by government’s recent development indicators which show that half of all South Africans are living on less than R524 a month. This shocking statistic demonstrates the extent of our vulnerability and the urgent need for our limited resources to meaningfully address this erosion of human dignity.

It is also worrisome that the economy is not creating enough jobs and there is a particularly severe crisis of unemployment among the youth, who constitute 63% of the working population, yet make up 72% of the unemployed.  

The official statistics also show that workers' share of national income declined from 55% in 2000 to 50% in 2011, an indication of a reverse redistribution of wealth from the poor to the rich. Clearly, the economic recession has been brutal. But even before the recession, far too many South Africans were already living far too close to the edge.

As if that is not enough, Eskom has recently shocked the nation by announcing plans for another heavy increase on electricity tariffs. This is particularly worrisome in the face of the recently implemented three-year tariff increase of 24.8% on average in April 2010, followed by another average increase of 25.8% from April last year and a further increase of 25.9% on average from April this year. 

It is difficult to imagine how many poor household no longer afford to be part of the national electricity grid because since 2008, Eskom’s average selling price has increased from 19.4c a unit to 50.3c. The imminent additional 16% will push the price up to 58.35c a unit, thus resulting to a total increase of nearly 300%.

For this and other important reasons, the MTBPS is expected to offer immediate relief to the struggling households, by at least detailing how government will revise upwards the kilowatts of electricity subsidy to households in order to make it possible to run income-generation activities at home, so as to change the situation where ordinary families in RDP houses cannot even simultaneously connect a kettle, a stove and an iron.

This year’s MTBPS is also important as it occurs during the mid-term for this administration, and should therefore also serve to provide reassuring milestones that point to the realisation of the election promises.

South Africa needs urgent answers to these challenges. The National Development Plan that was recently introduced by the National Planning Commission paves the way by focusing the nation’s long term efforts to find answers to these challenges. 

The key to the answers depends on how government fosters and manages a recovery by using opportunities to harness resource mobilisations and allocation as presented in the MTBPS.

We have learnt over years that, important as it is in the equation, economic growth alone does not guarantee job growth. Government must also resist the reassuring, but false notion that renewed economic growth can, by itself, raise living standards broadly. Instead, through this MTBPS government must demonstrate bold and sustained spending priorities to ensure that economic growth is shared.

The picture painted by this year’s official employment statistics is not consoling as the country will not reach the job targets set by President Jacob Zuma in the State of the Nation Address. This places more responsibility on the state to ensure that a comprehensive social protection system is in place to meet the basic human rights enshrined in our Constitution. 

It is dangerous that so many people in our country continue to fall through our social security net which still fails to provide adequate support to the youth, unemployed, chronically ill, workers in vulnerable sectors and those who live in informal settlements. In this regard, organised civil society formations have expressed concerned about the ongoing delays around the release and public consultations of the much promised social security reforms.

What is widely expected to get a boost in this MTBPS, however, is the fast-moving pace in the implementation of incentives to encourage the efficient and cost effective delivery of services in municipalities and provinces as well as the investment in primary healthcare pilots and the Expanded Public Works Programmes (EPWP). 

The question going forward is whether an economic recovery, when it comes, will help the poor and middle class or whether the top-heavy favouritism we have witnessed across the sectors of the economy so far will reassert itself.
 
It is expected that this year’s MTBPS will further confirm spending commitments in order to take this initiative to the next level and transform the government’s EPWP’s, which so far have been merely absorbers of small numbers of people for short periods; offering limited training; and paying so badly that they have made saving impossible, inhibited initiative and discouraged development.
 
What the country would like to see are more guarantees that the projected billions of rands spending that will be announced in the MTBPS will reach vulnerable households and individuals through the creation of decent work. 
 
This calls for, among other things, a social justice clause to be included in all state tenders to encourage the creation of local employment and social investment. More often than not, these tenders have only served to enrich a small group of elite people. And more often than not, the quality of the service or product provided has been sub-standard.
 
In order to provide hope for the future, this MTBPS must emphasise the creation of decent work by emphasising government’s commitment to protect the millions of poor families who rely on the income of wage-earners. 
 
As a country we need to stand firm on the right to acceptable levels of pay, even as we battle high levels of unemployment, by committing spending to include the one third of working people who make a life in our informal economy. 
 
This commitment must extend to demonstrate new and innovative thinking on rural development, without which our cities will continue to buckle under pressure from the millions seeking opportunities.
 
It is true that more time is needed to show results for policies that are currently in place, including commitment to long-term spending on key areas of the economy, skills development and social security. But it is also clear that joblessness and poverty are worse now than was assumed when those policies were formed. So the need for more government intervention is all but inevitable, as are political fights over macro-economic choices for the country.

There is no time to wait and see. If wait-and-see is anything other than an office mid-term tactic, it’s bound to be a miscalculation. The need for bold action that is underpinned by a long-term vision is urgent and the need for expanded relief and recovery efforts for households and individuals is compelling. Rather than avoid those fights, the Gordhan team – and ultimately the Zuma administration – must win them.

Nkosikhulule Nyembezi is a Policy Analyst and Advocacy Programme Manager for Black Sash