DURBAN - FINANCE Minister Tito Mboweni’s Budget of “hope” will bring minimal relief to workers and the poor while giving a much-needed boost to the private sector, according to worker unions and economists.
The Congress of the South African Trade Unions (Cosatu), a civil society organisation and two leading economists were reacting to the Budget statement delivered by Mboweni yesterday.
Mboweni kicked off by saying he was not without hope that strategies outlined to make SA a winning country would succeed.
“Today I want to leave you hopeful and outline how we will leave this economy in better shape for those who come after us,” he said.
Cosatu spokesperson Sizwe Pamla, however, pointed to, among other things - corporate tax cuts, public sector wage increase freeze and below-inflation social grants increases - and described the Budget rather as “a slap in the face of the most vulnerable people in the country”.
Pamla slammed the announcement of a set of multibillion- rand job creation programmes for the youth and public sector employees, arguing they would fail to yield tangible job creation results since they lacked clear targets.
Mboweni unveiled that R83.2 billion had been cumulatively made available for the public employment programmes since the 2020 Special Adjustments Budget.
“We are now augmenting this by R11 billion for the Presidential Youth Employment Initiative, taking the total funding for employment creation to nearly R100 billion.”
Mboweni announced R6.3bn for the extension of the special Covid-19 social relief of distress grant until the end of April 2021, a support that Pamla said should be in place for as long as the disease remained, so that it would help the many unemployed people to survive.
“This Budget is giving more to the private sector through the corporate tax cuts, but giving very little to the most vulnerable people in our society,” said Pamla.
Mboweni announced that the corporate income tax rate would drop to 27% for companies with years of assessment, starting after April 1 next year. “This will be done alongside a broadening of the corporate income tax base by limiting interest deductions and assessed losses. We will give consideration to further rate decreases to make our tax system more attractive,” Mboweni said.
Adjusting social grants, Mboweni upped the old-age grant, disability and care dependency grants by R30 to R1 890, while a R30 hike brings the war veterans grant up to R1 910.
The R10 hike in the child support grant shifts it to R460, while a R10 increase for the foster-care aid makes it R1 050.
Researcher Julie Smith, of the Pietermaritzburg Economic Justice and Dignity group (PMBEJD) said the 1.6% increase for the old age grant was even less than the current headline inflation rate or the projected inflation rate for the year.
“The government is not providing pensioners with an annual increase on the old age grant to allow them to be on a similar standard this year as they were last year so it's taken a decision to make pensioners poorer,” she said.
Similarly, Smith said the government has also failed to provide mothers with an inflation-related increase. The child support grant increased by 2.2%, she said.
“The outcome will be that children will not be properly nourished and this undermines all of the investments in education because hungry kids can’t take in the education that they're given and it also means that children will get sick, more often, for longer and more severely,” said Smith.
University of Zululand based economics Professor Irrshad Kaseeram, agreed that the Budget would exert a heavy load on the general public.
“The social grants have been increased by about R10 which is well below the inflation rate of 4.5%, which means the increases are below the cost of living expenses,” Kaseeram said.
He commended the 5% raise on the tax bracket, saying it translated into a tax cut across the board, throwing an extra R700 a month in the back pocket of workers earning above R87 300 a year.
Kaseeram had a positive view about the marginal tax relief for corporates, saying it was a surprise and a bit of a respite given the decimation of most business earnings as a result of the pandemic.
Stellenbosch University economist Professor Ingrid Woolard echoed the sentiments that the “budget is less pro-poor”.
“I wasn’t expecting the above-inflation adjustments for fiscal drag or the reduction in corporate income taxes. The increases in social grants were below inflation and the fuel levy increases will result in the prices of all goods going up. So this Budget is less pro-poor than we have seen in the past.”