AIDC Statement: Budget shows lack of urgency and nothing new on the New Growth Path

[Mark Weinberg @ AIDC]

The Alternative Information and Development Centre (AIDC)

Statement on the 2011/12 Budget

The 2011/12 budget tabled this afternoon by Minister Pravin Gordhan represents continuity in Government’s approach to economic policy to economic development. Great emphasis is placed on “macro-economic stability”, fiscal prudence and monetary policy directed to keeping inlation within the 3 – 6% band. Yet, these orthodoxies of economic policy is precisely what has hampered an effictive response to the tremedous socio-economic challenges confronting our society and contradict the idea that South Africa has entered a New Growth Path. 

Further evidence of this is the refusal to consider exchange rate and capital controls that could go a considerable way in stabilising the present volatility of the Rand. It is surprising that a government which wants to pursue a New Growth Path sticks to the discredited dogma of free capital flows. Comparative countries like Brazil, South Korea Thailand etc. have seen it necessary to protect their economies from the storms of financial speculation.

In spite of jobs and decent work having been brought to the centre of policy concern in government and in the President’s State of the Nation address, the Minister offers very few initiatives that will make a dent into South Africa’s unemployment crises. The Minister is not very confident of government’s proposed job creation projects  only envisaging an annual 2% growth in employment. Unemployment currently is over 24%, using official figures or nearly 40% when taking into account discouraged workers. The main initiatives consist of a R20 billion tax incentive directed towards big corporations able to undertake between R200-R900 million mega projects or R30-R550 million for giant “expansions” and “upgrades”. These tax grants are destined for capital intensive big private corporations already drowning in money. It is completely wrong to depend on private sector investment for job creation, especially on the scale needed to deal with the depth of our unemployment crisis. Big corporations are driven by another logic, i.e. profit maximisation and not social values. The R5 billion youth subsidy scheme is controversial as it is likely to undermine wages and lead to a further division of the labour force. 

The R2,2 billion allocated for “environmental employment programmes” is something that needs to be amplified in the coming period especially towards funding climate jobs 

If Gordhan’s “R9 billion over 3 years job-fund” was not less than one tenth of the Eskom/Transnet R950 billion program, then the Community Works Projects (CWP) and Expanded Public Works Programme (EPWP) would not only offer “job opportunities” but decent work. The work already being done without pay by thousands of community health workers would then be recognised by the government. They should be paid a living wage for their invaluable contribution to the lives of the majority. 

What is required is a state driven economic and social infrastructure programme for wage-led development of domestic industry and employment. This could be achieved through a massive housing programme, as an example, that could mop up youth unemployment on a dramatic scale. 

Instead the budget speech talks of a “decades-long transformation” and thus displays a lack of urgency. Events in Africa and the Middle East suggest that ignoring youth unemployment is a recipe for social instability. Although Gordaham calls for extraordinary measures, he and his government has failed to rise to the occasion. 

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For more information contact Thembeka Majali on 021 447 2525 or 083 595 3934, email them...@aidc.org.za