For the love of money

Today, Minister of Finance, Pravin Gordhan will deliver his much anticipated budget speech and share with the nation what the plans are for the almost R2 trillion for the new financial year. With the ruling party and president emphasising their strategy of radical economic transformation, one wonders how this will be revealed in today’s budget speech. How will government go about implementing this radical economic transformation strategy? What is the time line they are looking at and who will benefit?

As we await budget 2017, many Activators and citizens alike want more money to be invested in programmes that will uplift communities, empower entrepreneurs, unlock access to education, provide employment and give the poor child an opportunity to enter the economy. In addition, money needs to be allocated for drought relief, water, fires, etc.

The budgetary process and allocations are meant to serve the citizens of this country, but is the pie big enough to satisfy all these dire needs? No.

The pie needs to grow substantially if we are to fulfil some of these. This week on Justice Malala’s show, The Justice Factor, Deputy Minister of Finance, Mcebisi Jonas said what the country requires most is inclusive growth. Inclusive growth contends that in order to redistribute resources to those who need it the most, the simultaneous creation of new assets and wealth needs to take place while the economy transforms. “Growth without transformation can only increase inequality and poverty across the board. Equally, transformation without growth is problematic,” said the deputy minister. Inclusive growth which increases the size of the pie by creating fertile ground for investment while opening up the economy to previously marginalised communities is no easy task. It goes without saying that in order for everyone to fully benefit from the economy it needs to grow, it needs to diversify, it needs to transform and it needs to be inclusive.

Although from the outset the budget can seem like a complicated beast (which it is) Activators who have gone through the ACTIVATE! programme are well acquainted with the budget, how it gets divided and why some budgetary aspects take precedence over others. Unpacking the national budget in the Change Drivers programme gives Activators an opportunity to understand what the core functions of government are and how these are reflected in the national budget. Top of mind for these Activators are that the benefits of the economy need to profit all citizens and not just 10% of the citizenry. Last year, the minister announced that more money will be injected into sectors like education, health, agriculture and social protection, among others. Currently, education is the single biggest expenditure in the budget with a whopping R297.5 million allocated last year and additional funds were made available to the fees must fall movement. “In budget 2017, in areas that ensure greater participation in the economy of the historically marginalised, we must pay more emphasis on labour intensive sectors of the economy, and I stress the point that our schooling system is fundamentally and critically important,” said deputy minister Jonas.  

Looking at the division of revenue, how much of the money in the budget goes to the different spheres of government you ask? Well, national government receives 47%; provincial government receives 44% and local government receives just over 9%. It is our responsibility as active citizens to hold administrators in the various spheres of government accountable on how they spend our money. Certainly, we all want inequality to be narrowed, we all want jobs and thriving businesses, we all want fewer people in poverty, but what are we going to do to contribute to the solution and to the betterment of the country?

When questioned about the alleviation of personal income tax which burdens every working citizen, minister Gordhan said: “Our general policy on taxation is that we have a progressive tax system which means it’s a system which says the more you earn, the more you will be taxed, so the burden of taxation is spread evenly…no country in the world works without public finances. Secondly, our tax system must be redistributive as part of being progressive and within the economic model we work in, it is the key instrument by which the less advantaged people in our society benefit from the more advantaged people in our society.”

Based on that response, it does not seem like hard working South Africans can expect to see more money in their pockets at the end of the month. On the up side though, according to the minister, the budget process in South Africa is amongst the most transparent in the world. “We compete with 94 countries in a budget transparency process and to the best of my knowledge we were in the top 3 in the world a few years ago,” he said.

Highlights from the 2016 budget

In 2016 government planned to:

  • Manage finances in a prudent and sustainable way
  • Re-ignite confidence and mobilise the resources of all social partners
  • Collectively invest more in infrastructure to increase potential growth
  • Give hope to our youth through training and economic opportunities
  • Protect South Africans from the effects of the drought
  • Continuously improve our education and health systems
  • Accelerate transformation towards an inclusive economy and participation
  • by all
  • Strengthen social solidarity and extend our social safety net

Interesting facts from budget 2016:

  • Fuel levy increased by 30 cents per litre,
  • Tyre levy of R2.30 per kilogram of tyre  was introduced
  • The incandescent globe tax increased from R4 to R6 per globe
  • The plastic bag levy increased from six cents to eight cents per bag
  • The motor emissions tax rate increased from R90 to R100 for every gram of emissions/km above a certain rate for passenger vehicles, and from R125 to R140 for double cabs.
  • Excise duties on tobacco and alcohol increased (rates will vary depending on the product imported)
  • Taxing sugar-sweetened beverages: this was proposed as a way of helping to stem South Africa’s grave obesity and diabetes levels. It will be introduced on April 1,2017 but an amount has not yet been stipulated.

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