I’m sure some of our wealthier Grahamstown citizens were left muttering angrily about the communist membership of our Finance Minister after the recent national budget announcement. The increases in capital gains tax, tax on dividends and tax relief that skewed towards lower income earners would not have made them happy.
I’m sure some of our wealthier Grahamstown citizens were left muttering angrily about the communist membership of our Finance Minister after the recent national budget announcement. The increases in capital gains tax, tax on dividends and tax relief that skewed towards lower income earners would not have made them happy.
On the other hand, those in the townships who depend on social grants are just treading water, having had their small benefits simply adjusted for inflation. Public servants, who are mostly not well off, have been told to keep their expectations for pay rises low.
We should, however, applaud the sound financial management that the budget represents. It’s no small feat in such uncertain times to continue to inject billions into poor communities through social grants, increase spending on infrastructure, and not raise income taxes or VAT.
There’s not much that's directly positive or negative in the budget for residents of this small but important city, however. We’ll have to wait for the provincial and municipal budget to get a better idea of the local situation. Indeed, the Finance Minister made little mention of municipalities in general, which is not surprising given their appalling mismanagement.
According to the Auditor General in June last year, of 237 municipalities and 49 municipal entities audited, only seven municipalities and 10 municipal entities received clean audit reports. Makana was not one of them.
Overall spending announced in the national budget, particularly the massive spending on power stations, ports, roads, railways, and dams, among other things, should lay the groundwork for higher economic growth in the years ahead.
The infrastructure spending itself will create jobs, many of them temporary during the construction phase, but the big hope is that this spending drive revs the engine of the economy and gives us a better chance to speed up growth.
For instance, one of the reasons South Africa has not cashed in the boom for commodities like iron ore is that we couldn’t ship the stuff out fast enough.
Grahamstown is perhaps more plugged into the national economy through the university and the National Arts Festival than other parts of the Eastern Cape. Yet some of the infrastructure spend could boost Grahamstown. At least some of the promised billions to be spent on projects at Coega should find its way here, surely.
According to Eastern Cape premier Noxolo Kieviet earlier this month, R50 billion is being put into infrastructure and industrial development, around R20 billion of which is going to “position the Port of Nqura as a continental trans-shipment hub.” She did not, however, say how much has already been spent, or over how many years in the future this will be spent.
A feature of all government speeches is that the sums sound a lot more impressive because they are aggregate sums to be spent over a number of years. President Zuma announced in his State of the Nation speech earlier this year that Transnet would spend “R300 billion in capital projects,” over the next seven years.
That is around R43-billion a year, which is still a lot of money, but doesn’t sound so impressive.
Actually, some of the amounts to be spent on particular projects are frighteningly large, such as the R300 billion for nuclear power stations, though this project will be completed in 2029. At least one of those nuclear power stations should be in the Eastern Cape, probably in the Port Elizabeth area.
The nuclear power station project, environmentalists will be interested to know, is described in the Budget Review as in the final stages of consideration before financial proposal can be determined.
Many of the big projects, including those mentioned in the Eastern Cape premier’s speech are in the feasibility or even in the concept stage. It’s not certain how many of these projects will get off the ground and how soon, but the drive is there to put right the underinvestment of previous years when the obsession was to drive down public debt.
The drive to invest in capital projects is linked to spending less on other things like wages, so that public debt does not get out of hand. How will the public sector unions handle Treasury’s determination to stop the wage bill that has reached more than two-fifths of government revenue escalating even further?
The mini-budget in October last year seemed to pre-empt wage negotiations by proposing a 5% cost-of-living increase from April. Pre-empting negotiations is not popular with unions.
The answer is in the Budget Review, which points out that the State could pay employees substantially more – but employ fewer of them. That’s what the ruthless capitalists have been doing for years, by agreeing to big wage hikes at the same time as retrenching.
Apparently it takes a communist to pursue this strategy in the public sector in South Africa.
