Grassroot critics of government’s macro-economic policy – Growth, Employment and Redistribution (Gear) - have recently been receiving different signals.
First, there was the statement by the ANC National Executive Committee (NEC) in October (see Shopsteward vol 7, 6&7), on the need to adjust the targets set out in GEAR. Then came media headlines reporting on government’s revision of its 1998/9 deficit target.
On November 3, the Minister of Finance – Trevor Manuel -- tabled an Adjustment Appropriation Bill in Parliament. By tabling this Bill, the Minister was asking parliament for more money than the amount he had asked for in March 1998 when he had first tabled the budget. Historically, Bills for budget adjustments are tabled a few weeks before the next budget is tabled. This allows the Ministry of Finance to legalise what is acceptable over-expenditure on the part of departments.
Unlike in previous years, this fiscal year the Minister of Finance decided to present the Adjustment Appropriation Bill three months before the new budget for 1999/2000 was tabled.
This Bill enabled Manuel to increase the planned shortfall between government’s revenue this year and its expenditure from the R23,5 billion projected in the budget earlier this year, to R25,9 billion. Manuel also adjusted other targets such as the growth rate, interest on debt and expected taxes.
When government unveiled Gear in 1996, the government said that it would ensure that in 1998/9, the shortfall between its revenue and expenditure would be 3,5% of the Gross Domestic Product (GDP). This target was confirmed in the budget announced in March of this year. But with the increase of the deficit to R25,9 billion, the target has now increased to 3,9% of GDP!
Some of those who are against Gear, have delightedly interpreted governments’ changes to its Gear targets as meaning that government is abandoning Gear. Opposition parties too have interpreted these signs as the diluting of Gear. But the Anc and government remains firm that Gear is still intact and that there is an emerging "intra-Alliance consensus" on macro-economic issues.
What are we to believe?
Numbers change, but policy remains!
For many of Gear’s opponents, deficit targets have been one of their biggest criticisms of the macro-economic strategy. Critics view the targets as arbitrary and yet very damaging on social spending - many communities have been at the receiving end of cuts in the health, education, transport, housing and public works budgets.
But Gear is not just about deficit targets. Its other pillars are:
If you look closely at statements by both the Anc and the Ministry of Finance you will find that while the numbers have changed, the pillars outlined above are still intact.
Changing targets - for better or for worse?
Before one welcomes the decision by the government to relax its tight grip on spending it is important to look at what the extra money will be used for. It is also important to look at what the implications of the adjustments are, for the government’s three-year budget plan.
An impression has been created that the extra money that has been asked for will be spent on the poor. If one looks at the adjustment estimates, a contrary view emerges. From the total amount that is being requested, R1,2 billion goes to servicing the debt. This is in addition to the R43 billion budgeted for servicing debt in this year’s budget!
These are the other adjustments:
Not all of this money will be spent in the remaining months of the fiscal year. A significant part of it is for overspending that has already occurred in provinces and national departments. Not a single cent goes to job creation! All that has been agreed at the Jobs Summit, from government’s side, will be financed within the constraints of the budget tabled in March 1998.
But government’s adherence to a tight fiscal policy is revealed when one looks at what is planned for the next three fiscal years. In addition to asking for extra money for 1998/9, the Minster of Finance issued a Medium Term Budget Policy Statement. This outlines government’s estimates of its spending for the next 3 years, its levels of tax, levels of borrowing and the division of revenue between the spheres of government.
To come up with three-year estimates, the Ministry of Finance agrees on economic trends such as rates of economic growth and inflation for the coming years.
According to the three-year framework announced at the beginning of November, the economy is to grow at 2,0%; 3,0% and 4,0% in 1999/2000; 2000/1 and 2001/2 respectively. The GEAR target of 6,1% growth by 2000/1 has been abandoned!
In line with its commitment not to "crowd out" private investment, government expenditure as a percentage of GDP is to decrease from the revised 31% of GDP for 1998/9 to 29,5% for 2001/2. The implications of this for social services such as education, health and welfare, is that their budgets will be cut. Education is to see a R300 million cut in 1999/2000. The reduction will increase to R1,2 billion in the following year. The health budget is to be cut by R100 million and R700 million in the next two years. The cuts for welfare will be R100 million and R200 million for the two coming fiscal years.
The social implications of these reductions will be enormous. According to the Medium Term Budget Policy Statement, to reduce the spending in education:
With all these social spending cuts, what is to happen to the agreement reached at the Jobs Summit to investigate the implementation of a comprehensive social security system to cover the unemployed and the poor?
Long live GEAR!
What other targets have been adjusted and what haven’t?
From all the statements by government officials it seems that the government and the ruling party have agreed to selectively change the targets in GEAR, while remaining committed to the framework of the policy. To calls for a change of policy, the government’s response is: Long live GEAR!
Dinga Sikwebu
Numsa National Education Co-ordinator
