NEDLAC+Community+Constituency+Budget+Summary+2006



=**THE NEDLAC COMMUNITY CONSTITUENCY ON THE 2006 NATIONAL BUDGET **=

As a preliminary point of procedure, we would like to raise the question of how NEDLAC can be involved in a substantive way throughout the budgeting cycle, rather than as is common practice, merely reacting to established allocations. If NEDLAC is to successfully discharge its mandate of promoting consensus around the development of social and economic policies, it is clear that we need to have some engagement with the decision-making process around resource allocation and prioritisation that will affect the implementation of these resultant policies, as opposed to just reflecting on these allocations once they have already been decided on.

In terms of the new resource allocation for the coming financial year, we had hoped that the much heralded ASGI-SA plan would be more specific on how a 6% -or more- growth target will achieve specified development goals of sustainable employment creation, promotion of equality and poverty eradication as part of a comprehensive medium to long-term development plan, together with details of policy and programmatic interventions.

Instead the President advised that ASGI-SA would not constitute such a development framework or a new overarching policy, but rather would provide catalytic impulses for certain limited interventions for accelerated and shared growth and development. Our concern however is that a catalyst is used to stimulate a reaction within a deliberate and clear policy framework and economic trajectory, which is capital-intensive and export-driven and has an in-built duality and inequality.

We also want to register our deep concern at the way in which Government appears to have disregarded the statutory role required of NEDLAC in considering interventions aimed at promoting the goals of economic growth, and we seek to have government’s reassurance that further consultation on the ASGI-SA plan will be located in NEDLAC to ensure substantive consultation (rather than ad hoc reporting to the NEDLAC Trade and Industry Chamber) with all constituencies.

In this vein, we believe that it is imperative to unpack how the proposed accelerated growth is going to be shared amongst all, who are the main beneficiaries of this growth, and how is it anticipated that growth in the formal economy will address the needs of those excluded from its dynamics?

The renewed commitment by government to lead in infrastructural investment needs to be commended and due attention should be given to the mode of implementation. The dedicated R372 billion over three years is a significant commitment from government. However, we would like to raise two concerns regarding the type of projects identified under ASGI-SA. Firstly, the bulk of the projects is capital-intensive and thus limits the scope for massive job creation for those at the semi-and-low skills end. Secondly, public-private partnerships seem to dominate these initiatives, particularly at a local government level, again an initiative that favours capital, such as the Gautrain project that clearly aims to benefit the affluent sections of Gauteng, whilst pretending to provide viable alternatives to the poor and working class communities of Gauteng, but is actually unsustainable due to higher cost of delivery, which in the case is far more than the initially estimated R20bn. We therefore support the Transport Portfolio Committee’s recommendation for the project to be scrapped.

A shared growth path needs to take into account the infrastructural needs of people living in poor and working class communities. For example, addressing the logistics infrastructural needs of the poor, in this case, would mean providing reliable and affordable public transport.

During his Budget Speech last year, the Minister of Finance announced his intention to introduce a national poverty line. Agreement on the measure of poverty is useful for establishing a starting point from which to evaluate and monitor the success of poverty eradication programmes. The definition of a national measure of poverty indicates the aspirations a nation harbours relating to human development and the fulfilment of human potential.

However, to our dismay, despite concerted effort by civil society, we found that the whole process of developing a poverty line has been lacking in consultation and participation. Similar to ASGI-SA, this process has never been referred to NEDLAC. We would like to be assured that this process can be revisited, and that these important debates will still be had.

In terms of service delivery, we are concerned that local authorities are continuing to prioritise cost recovery over the developmental objectives of service provision and the socio-economic conditions of the poor. Merely citing evidence for the period 1994 – 2002, research by the HSRC suggests that as many as 10 million South Africans have had their water cut off and 10 million have had their electricity cut off since the end of apartheid. Furthermore, some two million people have been evicted from their homes for non-payment of service bills.

The most common argument use in favour of cost recovery is that it is necessary to sustain services on a long-term basis. Without cost-recovery, the argument goes; the state will not have funds to invest in future service infrastructure upgrades and extensions. The reality is that cost recovery is a new phenomenon in South Africa and was not practised under Apartheid. Business, for example, benefited enormously in social and economic terms from heavily subsidised municipal services.

Cost recovery also perpetuates inequality between rich and poor. For example, township residents will often pay more for electricity than their suburban counterparts do, despite being in the same city. Residents of Soweto, in 2002, for example, were paying about 30% more per KWh than were residents in the nearby wealthy area of Sandton.

We therefore consider cost recovery as a threat to the poor and, ultimately, to the whole notion of a democratic transformation in South Africa and urge government to undertake a critical assessment of cost recovery that moves into the realm of alternatives to cost recovery. We support the call by COSATU to introduce free basic services for everybody as a broad platform for social protection that supports human and capabilities development.

We are also concerned about government’s commitment to ‘reducing the cost of doing business in South Africa’. The point is that by reducing the costs for Business, these proposed policies are increasing the cost of survival for many millions of already poor people, and are increasing the levels of marginalisation in poor communities.

No matter how it is sanitized, ‘reducing the cost of business’ or ‘restructuring’ basically means cutting the numbers of low paid employees – not cutting the remuneration of executives (this will no doubt be amply padded after a “successful restructuring” has taken place). It is sometimes difficult to see how government is fulfilling its commitment to job creation as agreed to in the Growth and Development Summit, when State Owned Enterprises are so quick to announce plans to retrench.

Part of reducing the cost of doing business of course also refers to reducing the cost of employment, including a reduction in the levels of benefits payable to employees. We have seen in this regard a growing casualisation of jobs. This reduces the security of work both in terms of access to full labour legislation protection, but also it reduces workers’ access to social security, including UIF, medical aids and pensions. At a recent engagement with civil society, the Minister of Finance advised that the only way to reduce poverty is to create jobs. It seems that we need to do a bit more than that. We need to ensure that the jobs that are created are decent jobs, and not survivalist poverty traps.

The ILO has developed an internationally recognised definition of “decent jobs”, or “decent work”. This entails productive work that provides a fair income, security in the workplace, social protection for families, prospects for personal development and social integration, the freedom for people to voice their concerns, to organize and participate in decisions that affect their lives and equality of opportunity and treatment for all.

Against this definition, we are concerned at the emerging indications that government is interested in reducing labour protection for workers in specific sectors of the economy, as this can only leave workers more vulnerable to poor working conditions and any remedy for this. This poses the national question of who is ultimately responsible for the well being of the vulnerable – the state, or the poor themselves? Meanwhile, it is important to note that there appears little to support the widely held belief that low-cost labour will encourage multinationals to relocate job-intensive operations in Africa. Indeed, the dominant belief that low wages and relatively high skill levels are the key determinants of FDI is not borne out of research. Moreover, the emphasis on FDI as a catalyst for growth lets domestic capital off the hook.

Government’s very prevalent use of the notion of a “second economy” resonates strongly with the construct of the former Bantustans that were necessary to support workers’ families and reservoirs of dispossessed peoples. “Second economy” arguments are based on the premise that the mainstream of the economy is working rather well, and government action is now needed to enhance the linkages between the ‘first and second’ economy and, where appropriate, to provide relief, such as public works programmes, to those locked in the ”second” economy. This dualist conception of the economy is misguided because it continues to keep elements of our economy invisible and therefore outside of the mainstream of economic and social debate.

The issues of poverty and unemployment need to be foregrounded as central challenges of economic policy instead of being relegated to the arena of welfare. Surely the acid test of the success of an economy is the degree to which it is able to generate employment and improve the living standards of the population. Relegating these issues to a ‘second economy’ is hardly an appropriate way to integrate unemployment and poverty in the mainstream economic policy.

Social and economic policies and programmes should both focus on bringing marginalised workers from the informal economy into the economic and social mainstream, thereby reducing their vulnerability and exclusion. The informal economy can also not be developed without sufficiently restructuring the formal economy that has been structured on an apartheid foundation, with a new dedicated focus on export-oriented production which heavily relies on highly skilled capital intensive production methods. We have seen no indication in ASGI-SA concerning a restructuring of the distribution of the formal economy, which we believe represents a serious weakness in policy deliberations to date.

The practice in government is that social service departments focus on fighting poverty while the economic departments, with a few exceptions, see their role as driving exports and economic growth. In this context, social programmes do not explicitly prioritise economic engagement by the poor. Meanwhile, economic strategies do not aim primarily to restructure the ‘formal pole’ of the economy to overcome marginalisation and poverty.

Government needs to view the informal economy as an integrated and growing part of our economy and recognise existing linkages between the formal and informal aspects of the economy and develop a coherent policy to inform programmatic support for informal economy activities.

The national budget should drive government programmes that can make the formal economy more inclusive, on the one hand by giving the poor greater access to resources, skills and other services, and on the other by guiding the economy toward sustainable employment creating activities.

Whilst welcoming the announcement by the Deputy President to expand the Public Works Programme beyond its original targets, we have serious concerns about the type of public works schemes which are poorly paid, short-term interventions (3-6 months), with no job and skills retention or transfer. Current programmes do little to ensure the stability of resources, once a project is gone so are all the resources. Meanwhile, the majority of participants, general workers on EPWP will receive life skills training important but not relevant for employment, not even self-employment, especially where participants lack the necessary tools.

To this end, we would like to call for a holistic performance assessment of the Expanded Public Works Programme (sometime during this year) in terms of its impact on the livelihoods of participating communities, and the ability of such programmes to bring about the anticipated social, economic and labour market benefits. We propose prolonged and integrated public works schemes that are supported by appropriate social safety nets for addressing the fundamental objective of poverty reduction and unemployment.

Government sometimes sees the small business sector as the panacea for South Africa’s employment and growth problems with the DTI charged with developing and implementing policy for the SMME sector. The government’s 1995 White Paper on small, medium and micro enterprises distinguishes four categories of SMMs: medium enterprises (assets of about R5 million), small enterprises (employ between five and 50), micro enterprises (involving one owner and one or two employees), and survivalist enterprises (activities by people unable to find a job). However, whilst the document outlines concrete proposals for the small, medium and micro categories, the Paper is mute on support strategies for the survivalist category. This omission continues in government’s ASGI-SA plan, whilst placing much emphasis on the need to expand the Small, Medium and Micro enterprises, it provides no clear plan to support survivalist enterprises. Research shows that current national support programmes offer little in the way of support for survivalist enterprises and rural SMMEs.

Finally, we believe that there is much benefit to be had in the adoption of a medium term growth and employment creation strategy, such as a comprehensive ten year plan, from now until 2015. This would also coincide with our international obligations in terms of the MDGs. Rather than set out piecemeal short term programmes such as we now have access to through Government’s Programme of Action, the ten year plan should be developed to include industrial policies, social policies including targets and implementation strategies for housing, education, as well as increased social assistance for everybody. Industrial policies must be linked to appropriate skills development, and short term importation of skills from abroad if necessary. Tax cuts should be halted, on the understanding that increased collection of revenue will be allocated directly into the priorities identified in the ten year plan. The export orientation of our economy needs to be balanced out with some protectionist policies to promote the development of local businesses, which will increase employment and reduce the cost of importing inputs.

It is imperative that both the monitoring and evaluation of all projects under ASGI-SA are transparent and inclusive so that all South Africans can feel that they are part of the plan to achieve a better life for all. Quoting Steven Friedman, senior researcher at the Centre for Policy Studies, he says that we will only achieve an effective government which is active in fighting poverty if we recognise that we cannot achieve this unless citizens are more involved.


 * For further information contact:**


 * Ibrahim Steyn**
 * Research and policy coordination**
 * NEDLAC Community Constituency**


 * 011 328 4215**
 * 083 285 7079**


 * Isobel Frye**
 * NALEDI Senior Researcher**


 * 011 403 2122**
 * 084 508 1271 **

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