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‘Not a budget for the poor’ – Mixed reactions to Gigaba’s budget speech

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Finance Minister Malusi Gigaba delivering his 2018 Budget Speech. Picture: Elmond Jiyane
Finance Minister Malusi Gigaba delivering his 2018 Budget Speech. Picture: Elmond Jiyane

Finance Minister Malusi Gigaba’s unpopular maiden budget speech has been met with mixed reactions.

Opposition parties, social service organisations as well as ordinary South Africans have lambasted it as “anti-poor”, while some in the business fraternity have applauded the increase in value-added tax (VAT) as a move that will restore the country’s fiscal health through boosting investor and business confidence in the country.

Prior to delivering his speech, Gigaba expressed that “this year’s budget was a way out of economic stagnation for South Africans”.

However, this has been seen as mere lip-service as the minister later went on to present a budget which, according to social services organisation Pietermaritzburg Agency for Community Social Action (Pacsa), “does not respond adequately to the economic crisis as experienced by millions of black South Africans”.

Reactions to VAT increase

On April 1, South Africans will be waking up to a higher VAT rate for the first time since 1993.

Building up to the budget speech, predictions were already rife that the minister would be raising VAT in an attempt to curb the widening budget deficit which was further exacerbated by the announcement of free tertiary education (to qualifying households) by former president Jacob Zuma last year.

Gigaba, however, clarified that the decision to increase VAT should not affect disadvantaged households as they would be shielded from this burden through increased social grants and basic commodities not being affected by the VAT increase.

But Pacsa director Mervyn Abrahams said “the increase in social grants has not compensated households living on low incomes, nor the 52 cents per litre increase in the levies on fuel which will reverberate throughout the economy and make all goods and services, especially food, more expensive and increasingly unaffordable”.

READ: Why VAT had to be increased

“We expected the budget, if it is framed in terms of a society which values human dignity, to have responded directly to the economic crisis by finding ways to put more money into more people’s pockets through increased social spending and higher wages, thereby responding to the immediate affordability crisis faced by millions of households,” added Abrahams.

Community and membership-based organisation Equal Education said the budget “places a disproportionate burden on the poor, in order to plug a shortfall that is a consequence of the destruction of state institutions, including the South African Revenue Service (Sars)”.

“Gigaba has been complicit in the ruin of the economy, and he now opts to hike VAT in a bid to fix it,” said Equal Education.

Banking Association South Africa managing director, Cas Coovadia, however begged to differ saying “the decision to increase VAT was an important signal that government is willing to take unpopular decisions to restore the fiscal health of the country. This will further boost investor and business trust and confidence”.

Equal Education said instead of VAT being increased, Gigaba should have opted to increase corporate income tax which “would result in a revenue of billions of rands, and would not put strain on poor and working class families in the way that an increase in VAT will”.

READ: 10 things you need to know about budget 2018

Proposed allocation towards education

Another bone of contention that preceded the budget speech was the question on where the money for the free education promised by Zuma would come from.

In addressing this, Gigaba announced that R57 billion would be re-allocated to fund fee-free higher education for poor and working class students over the medium term.

This makes higher education and training the fastest growing line item on the budget at 13.7%.

The minister also explained that the National Student Financial Aid Scheme (NSFAS) will remain the primary vehicle through which this fee-free tertiary education would be rolled out.

Equal Education “welcomed this reinvestment in NSFAS because it means that the responsibility to fund this sector remains with the state, as opposed to the pro-privatisation models proposed by the Heher Commission: the Income-Contingent Loan Model (ICL) and the Ikusasa Student Financial Aid Programme (ISFAP)”.

READ: Fees fall all over the budget

The community organisation however criticised the slashing of basic education funding, saying “the crises in our schooling system – early grade reading proficiency, infrastructure, safety, and scholar transport – means that attention to spending on basic education, and implementation of programmes should increase annually, especially until historic backlogs are remedied”.

According to Economic Freedom Fighters' national spokesperson Mbuyisen Ndlozi, the allocation of R19 billion towards fee-free higher education is inadequate to fund the massive need.

“According to projections by the Parliament Budget Office, the estimated cost of study for all needy students is R83 billion this year alone.

"In essence, to fund higher education for all poor, academically deserving students, we need to radically expand universities to accommodate over 2 million students that need to access higher education,” said Ndlozi.

Political responses

The EFF, who boycotted the budget speech after their attempts to persuade President Cyril Ramaphosa to remove Gigaba as finance minister, still maintained their stance and wanted Gigaba out with immediate effect.

“We further view his budget as committed to the protection of capitalist accumulation which has not led, over the past 24 years, to any meaningful investments,” said Ndlozi.

DA leader Mmusi Maimane said, “the budget hammers the poor and is a legacy of Jacob Zuma’s disastrous management of the economy of South Africa”.

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