By Bonginkosi Masiwa

Budget allocations must reflect government priorities. At a time where the overall direction of macro policy is contested in South Africa, particularly within the ANC and its alliance partners, the 2007 budget was expected to provide some key insight on government’s future policy direction. The 2007 budget adopted the theme “Human life has equal worth”. This suggested that South Africa, cognisant of its standing with countries like Brazil as one of the most unequal societies, would favour social priorities and attempt to signal further inroads on poverty.

Indeed, Finance Minister Trevor Manuel commended the economic growth that had been realised in the country under the leadership of President Thabo Mbeki and said that government was now ploughing back the millions of rands made from sound economic policies under Mbeki’s presidency to “embark on a full frontal assault on poverty”. Manuel pledged R2 trillion over the next three years to stimulate economic growth and create employment via accelerated economic growth and for modernising the public services and associated infrastructure. Ten percent (about R2,7 billion) of the infrastructure budget is destined for housing, 9% to water, 5% to hospitals and 4% to schools.

Government claims to have built 1,6 million houses since 1994. However, informed civil society groups suggest that at only 1% of the national budget, housing is still not featuring as a top priority. This however is only part of the reason why municipalities were unable to make serious progress on the housing backlog, said to be about 2,4 million. At provincial level there is still significant under spending of housing budgets.  Provincial capital spending will total R65 billion over the next three years.

Generally welcomed was the increased expenditure on education, set to rise by 11% to R8,1 billion. Some of this increased spending will be used to recruit and train more teachers in the hope of improving the quality of education. Linked to this is a new grant, the “Community Library Services Grant” that aims to improve the stock of books in municipal libraries. Like education, health services have been hamstrung by a lack of skills and the stresses of coping with the HIV/AIDS pandemic. Health services therefore received a significant 4,23% of the national budget of R533,8 billion expected expenditure. R5,3 billion is allocated to salary increases and the recruitment of more health personnel. This is a refreshing shift in policy since 1994, which saw the state concentrating more on building health infrastructure such as the 1300 clinics built by the end of 2006.

Municipalities were allocated R89,5 billion of which 64% was earmarked for social and household services. The local government equitable share grant received a further R5 billion for the delivery of free basic services. In his speech Minister Manuel claimed that free basic services now reach about 80% of poor/indigent households. This allocation is made against the background of 2006/2007 civil unrest, protests and violence over poor municipal service delivery and in particular poor progress in rolling out basic services. It remains to be seen whether municipalities will be held accountable for the R5 billion pledged by Treasury towards the delivery of these free basic services.  Once again the bucket system is targeted as one of the most dehumanising systems of sanitation and  R400 million is set aside for upgrading this municipal infrastructure. The expenditure of such funds will however occur against the backdrop of repeatedly extended deadlines for the full “eradication of the bucket system”.

Another national morale booster is the additional allocation municipalities will receive for stadiums and related infrastructure in preparation for the 2010 FIFA World Cup. This is premised on the idea that such expenditure will result in economic spin offs beyond the short-term impact for sports fans and those involved in the tourism industry.

Transfers to local government continue to increase in relative terms and are said to have grown by 19% over the previous financial year. Increased municipal budgets will only result in public benefit however if an answer is found to the challenge of developing the municipal skills and capacity to make services more efficient and local economic development likely. Noteworthy in this year’s budget was the continued emphasis on the need for better infrastructure to achieve the growth envisioned in the Accelerated and Shared Growth Initiative for South Africa (AsgiSA).

Government continues to try to balance growth priorities with social investment and will no doubt argue in this regard that social development still got the biggest slice of the expenditure cake (22,4%).  The lower-earning levels of the working class have received some relief from the slightly raised cut-off point where tax is payable. Government’s strategy continues to be to broaden the tax base rather than target particular tax brackets in its effort to sustain reasonable expenditure on social services. In general, therefore the 2007 budget seems to suggest that government has not strayed greatly from the basic principles of the Reconstruction and Development Programme.

The Local Government Transformer, April/May 2007