Balancing fiscal responsibility and social equity

Dr. Reneva Fourie

THE tabling of the National Budget is one of the most crucial aspects of government functioning, as it sets the framework for fiscal policy and resource allocation for the upcoming fiscal year. On 12 March, following a failed attempt to present the budget on 19 February, the National Treasury proceeded to table the National Budget in Parliament despite facing rejection from several political parties. 

A critical point of contention in the recently tabled budget is a proposed 0.5 percent increase in the Value Added Tax (VAT). Critics argue that this modest increase exacerbates an already high cost of living, particularly for low-income households. However, it is essential to recognise the efforts made by the government to mitigate the negative impact on vulnerable communities. 

The proposed increase in VAT, significantly lower than the initially suggested 2 percent, reflects a conscious decision to balance revenue generation with social considerations. Furthermore, a large proportion of core food products consumed by most South Africans remains within the basket of zero-rated items. The proposed expansions to this basket now include canned vegetables, dairy liquid blends, and animal organ meats, key dietary staples for poorer communities. This indicates a commitment to ensuring that essential goods remain accessible to those who need them most.

The budget thus reinforces a strong commitment to enhancing social welfare. The decision to retain and even increase social security grants showcases the government’s recognition of the economic challenges many citizens are facing. These grants serve as lifelines for countless households, offering essential support against poverty and hunger. Additionally, the budget outlines initiatives to ensure that underprivileged communities can access electricity and water at no cost while striving to improve healthcare and education standards. Overall, it reflects a clear understanding that economic policy should focus on growth and address the disparities that impede equitable progress for all.

A key focus of the current budget is enhancing revenue generation through improved tax collection mechanisms. The allocation of resources towards identifying and targeting 156,000 taxpayers who are either unregistered or have failed to file returns despite engaging in substantial economic activity is a significant step. Effective tax collection ensures the government has the resources to fund essential services, infrastructure, and social programmes. Additionally, efforts to manage illicit financial flows are equally critical to combat corruption and ensure public funds are utilised effectively.

The budget also displays an ambitious commitment to public infrastructure spending, projecting an investment of over R1 trillion in infrastructure over the next three years. Such a substantial commitment is essential for fostering inclusive economic growth and creating jobs. However, for this investment to yield the desired results, funds must be directed toward creating and expanding public job opportunities within the network industry rather than primarily incentivising the private sector. Past experiences have shown that while private sector involvement can be beneficial, it often leads to minimal resource contributions on their part compared to the benefits they reap from state support. Therefore, a more balanced approach emphasising public job creation is necessary to address the structural unemployment plaguing many South Africans.

Moreover, while the budget outlines debt relief measures intended to stabilise Eskom, the state-owned energy utility, it raises questions about its long-term viability. The mandate for Eskom to purchase power from Independent Power Producers without price regulations and the ongoing unbundling process – inhibiting cross-subsidisation – may further destabilise an already volatile electricity sector. This heavy reliance on private sector involvement is concerning, considering the history of inefficiencies and corruption that have plagued South Africa’s energy landscape. As the new National Transmission Company in South Africa seeks to expand transmission lines, its dependence on the private sector could compromise the stability and integrity of the electricity supply.

Compounding these challenges, the increasing privatisation of strategic sectors poses significant risks to national security. The push towards privatisation leads to unaffordable tariffs and jeopardises the government’s ability to maintain control over essential services. Inadequate maintenance and substandard infrastructure spending exacerbate this issue, with projects frequently delayed, abandoned, or left unfinished. These delays impact a broad spectrum of initiatives, from housing and health facilities to transportation and water services, resulting in substantial financial losses for taxpayers.

To address these prevalent issues, more stringent accountability measures must be implemented. Introducing severe punitive actions for service providers who deliver poor quality work, miss deadlines, or fail to complete projects can help ensure more efficient use of public resources. Implementing performance-based contracts and monitoring systems can create a culture of accountability, ensuring that government projects are executed effectively and efficiently.

While the Budget may not be perfect, it is in the best interest of South Africa for all political parties to support its adoption. Approval of this budget is not merely a political formality but an essential cornerstone for achieving national stability. Implementing government programmes should not be stymied by political manoeuvring, as such delays only hinder progress and exacerbate existing economic challenges. A functional government remains paramount as political debates continue around vital policy issues. 

Political point scoring at the expense of governance has far-reaching implications, projecting an image of instability that can undermine investor confidence and erode public trust. Political leaders must recognise the profound and lasting impacts of their decisions on both the present and future generations. They must prioritise sustainable economic solutions, which focus on long-term stability and environmental responsibility, rather than getting bogged down by narrow partisan agendas that may offer only short-term benefits. 

In South Africa, achieving the aspirations of economic advancement and social equity requires a collective commitment to cooperation across diverse sectors of society. This involves engaging government officials, businesses, civil society, and citizens in a collaborative effort. Through these unified efforts, South Africa can pave the way for an equitable future where prosperity is shared, and every citizen has the opportunity to thrive.

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’.