Budget correctly analyses legacy of apartheid – Office of Chief Whip

Caucus says budget calls for transformation that must be mass-based, benefiting the most disadvantaged

ANC Caucus response to the 2017 budget

23 February 2017

The ANC Parliamentary Caucus welcomes the 2017 budget speech presented by Minister of Finance, Pravin Gordhan. The 2017 Budget is informed by the need for radical economic transformation for inclusive growth.

The speech gives practical effect and resources to governments programme in this current financial year, particularly on key priorities, which relate to economic development and transformation, education, health, rural development etc.

2017 Budget structured for transformation and growth

The 2017 Budget correctly analyses that the entrenched legacy of colonialism and apartheid are to be found in the structure and character of the economy and the Budget is one instrument to address this. Wealth is produced and allocated along lines that remain fundamentally unjust.

The ownership of assets and the distribution of income are captured by a minority of the population – a situation that is morally wrong and economically unsustainable. The 2017 State of the Nation Address, informed by the ANC NEC and Cabinet Lekgotlas, calls for a new perspective on economic transformation.

The call in the Budget is for a transformation that must be mass-based, benefiting the most disadvantaged through the creation of new assets, capabilities and opportunities to build livelihoods. As part of this, the mobilisation of both private and public investment in social and economic infrastructure, new technologies and new activities that help build a diversified economy are essential.

Transformation of the economy must build self-reliance and reject the dependence on debt and protect our fiscal sovereignty. It must result in an economy that belongs to all, black and white.

Transformation must unleash growth, establish a new economic direction, mobilise investment, empower the masses and create new resources for social change.

Protecting the vulnerable through a redistributive economy

The 2017 Budget is about protection of the vulnerable. Over the medium term, expenditure on public services will continue to grow moderately above inflation billions of rand’s have been shifted to meet new needs. A substantial additional allocation to higher education is again proposed, adding R5 billion to the R32 billion previously announced. After debt service and post-school education and training, the fastest-growing spending categories are health, social development, and community and economic infrastructure. The ANC government continues to safeguard expenditure that protects poor households.

A growing economy makes more rapid transformation possible, but it is the fiscal system that is the most direct vehicle for redistribution and inclusivity. The budget finances the construction of houses and schools, the education of young people, care for the elderly and incomes of the most vulnerable. About two-thirds of the Budget is dedicated to realising social rights.

The budget is highly redistributive to poor and working families. It also redistributes substantial resources from the urban economy to fund services in rural areas. The formulas used to distribute resources to provinces and municipalities are governed by transparent rules in which equity and needs are the primary consideration.

The nature of support to education, health services and municipal functions in rural areas remains a central thrust of spending programmes in the 2017 Budget.

The acceleration of the upgrading of informal settlements is addressed in the Budget and we welcome work with municipalities on measures to reduce the cost of dealing with construction permits, obtaining electricity connections and registering property.

On Health and Education

On Health we welcome the service package financed by the NHI Fund will be progressively expanded, and that various funding options, including possible adjustments to the tax credit on medical scheme contributions. This will release approximately R20B per annum to the revenue to assist in the implementation of NHI. With this goes the need for Parliament to be ready and at the time to move rapidly on this matter in preparation for the necessary legislative support. We welcome the revision and finalisation of the NHI White Paper and the longer-term financing arrangements.

In addition to the increases of R32 billion made in the higher education allocations in last year’s Budget and the 2016 Medium Term Budget Policy Statement, a further R5 billion in the outer year of the MTEF has been added to ensure that no student whose combined family income is below R600 000 per annum will face fee increases at universities and TVET colleges for 2017. All poor students who applied and qualified for NSFAS awards, and who have been accepted by a university or a TVET college, will be supported.

On Revenue and Taxation

We welcome the progressive taxation proposals to fund the major ANC economic policy principle of a redistributive economy. An extra R28 billion is being raised through the tax proposals in the budget.     

If we are to deal with inequalities and we are one of the most unequal in the world, then top income accumulation in the sea of lower income being seriously disadvantaged, the redistributive nature of the tax system is central. Social solidarity for our country is critical, to transfer from the wealth to those who are less well off.

The budget is also about growing the revenue base. Depending on 6 million tax payers to carry the needs of revenue is not sustainable. Growing the tax base requires structural and character changes in the economy to growth the revenue base.

We need to state that there is no wealth tax as some claim. Tax measures for the wealthy are already there in the form of transfer tax and property tax and dividend taxation. The new 45% tax on those earning over R1, 5m per annum will bring in a further R16 billion. Globally we are in line with other countries and this will affect 103,000 tax payers.     

What is necessary is that more revenue for social services is needed, health, education, law enforcement and social services are the main recipients and again this reflects where the ANC government is driving a more redistributive economy.

We further welcome the proposal on a “Charter of Economic Rights” – a charter that would bind all of us to aneconomy which provides access to decent and well remunerated jobs, facilitates training and retraining of citizensin the face of technological change, and creates a supportive environment for micro, small and mediumbusinesses and co- operatives.

Moderate GDP growth recovery

We note the expectation at this stage that GDP growth will increase from 0.5 % to 1.3 % in 2017 and will continue to improve moderately over the medium term. What is critical in terms of growth is the need for its inclusiveness and therefore a careful study of where growth is taking place is important.

Whist commodity prices have rebounded and the exchange rate has recovered from its rapid depreciation last year, which assists capital flows, the projected rate of growth is not sufficient to reduce unemployment or impact significantly on poverty and inequality. It falls well short of our NDP goal.

In order to address, this Caucus welcomes the proposals to boost investment in the short term through specific instruments such as the finalisation of legislation relating to mining development and land redistribution and implementing the transition from analogue to digital television, which will release spectrum for broadband services. In addition an enabling environment for small enterprises and support through both public and private sector procurement budgets and focused support on labour-intensive sectors, including agriculture, agro-processing and tourism-related services. There is a need to increase to increase economic growth through co-operation between government, the private sector, trade unions and civil society.

As Minister Pravin Gordhan said in his budget speech, "Our growth challenge is intertwined with our transformation imperative. We need to transform in order to grow, and we need to grow in order to transform. Without transformation, growth will reinforce inequality; without growth, transformation will be distorted by patronage."

The ANC Caucus in Parliament will closely monitor and offer the necessary support to ensure the full implantation of these programmes.

Issued by Nonceba Mhlauli, Media Liaison Officer, Office of the Chief Whip, 23 February 2017