Medium Term Budget Policy Statement: Follow the Pavement Placards for People Centred Budgets

By Liepollo Pheko · 29 Oct 2010

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Picture: Kool_skat_kat
Picture: Kool_skat_kat

Driving past several Johannesburg traffic light intersections, one is constantly reminded of how unequal this country is. “Please Help. I need bail money for my cat,” says one board held up by a beggar. A recent one read, “Help me out. Need money for some weed, to pay my hooker and settle my beer bill.”

They are eye catching and humorously worded, but the intent and concrete realities contained on those placards are desperate and require urgent intervention.

As Minister of Finance, Pravin Gordhan, presented the Medium Term Budget Policy Statement (MTBPS), one wondered the extent to which these placard-carrying people were consciously considered.

Examining and responding to the questions posed by the men and women with babies at traffic light intersections requires a people centred budget management perspective, made instrumental through a progressive ideological prism.

Next to the constitution of a nation, its budget could be the most important policy instrument for achieving sustained economic and social outcomes. This, perhaps, explains why in recent years the budget has assumed greater prominence with increased democratization, civil society participation and the desire to respond to the challenge of poverty.

Gender discrimination has remained pervasive in many spheres of life worldwide, including in South Africa. According to the United Nations Research Institute for Social Development, if there is one thing that has emerged from the last three decades, it is that growth and development do not occur without the significant participation of women. This is true both in the market and the informal/deregulated economy. Without sufficient and proactive attention to women, growth does not lead to permanent, stable and irreversible progress in gender equity.

Did the MTBPS respond to this?

Since the 1990s, the Medium Term Expenditure Framework (MTEF) has been presented as the main solution to help integrate public policies in budgets. The MTEF is the projected three-year expenditure cycle that derives from the MTBPS. To simply understand the difference between the two, the MTBPS deals with the policy, while the MTEF deals with the resources to realise these policy objectives.

According to the World Bank Public Expenditure Management Handbook, the MTEF is, “A top-down resource envelope, a bottom-up estimation of the current and medium-term costs of existing policy and, ultimately, the matching of these costs with available resources. The matching of costs should normally occur in the context of the annual budget process, which should focus on the need for policy change to reflect changing macroeconomic conditions as well as changes in strategic priorities of the government.”

Thus, the MTEF is anything but people centred. The MTEF is, in fact, the successor to the dreaded PRSPs (Poverty Reduction and Relief Strategy Programmes), which is the successor to the bitter pill that was the Structural Adjustment Programme, which demanded fiscal discipline in the face of growing social strife.

South Africa is not obliged to follow these prescriptions, but has willingly submitted itself to the pursuit of corporate biased, austerity measures. This is at the heart of the problem facing our budgeting and policy-making processes.

At the same time, it is clear that the global economy is still reeling from the financial crisis. This crisis is multi dimensional, having affected economic and social development as well as peace and security. Conspicuously, the financial crisis brought with it a threat to human rights, most notably perils for women who wear the face of poverty.

An enlightened approach to the financial crisis would focus on measures that not only seek to revive financial markets and enable the flow of credit in the short term, but also ensures an adequate flow of funds to bolster developing countries’ economies to take care of their most vulnerable who in many parts of the world, including South Africa are female and often rural.

Thus, a gender sensitive, pro-poor, pro-human development fiscal stimulus package geared towards agrarian reform as well as industrial-service development is a critical component of state budgeting.

But Minister Gordhan spoke about agriculture and agro-processing, mining, the green economy and tourism without iterating a word about how to buffer small scale subsistence farmers, the majority of whom are women.

The sort of agrarian reforms women require include preferential access to local and domestic markets; access to start up grants and low interest loans to enable the purchase of equipment, seeds and land; a requirement that local retailers utilise a percentage of local women’s produce; and subsidies to protect women farmers against drought, destruction of produce by pests and other spoilage.

At a broader level, reforms targeting women should include a clear plan to capitalise sectors where women are more prevalent and to protect jobs in these sectors. Women need support for an enabling environment that will allow those who are producers and entrepreneurs to access research and development funding. Women also need less onerous collateral requirements. Finally, it would be crucial to secure support for women employees through transport subsidies, subsidised childcare and flexible working hours.

In a country where single women head a majority of African households, these are simple solutions to optimise women’s participation in the labour force.

But existing support is patchy, not well publicised and often poorly administered.

Hence an analysis of gender relations and gender asymmetries in access to resources and opportunities must be a critical input into the design and implementation of both macroeconomic and development policies and budgets. 

However, the MTBPS was completely gender neutral.

While conceding that the government is off track on health care, child morality, maternal health, gender equity in education, quality education for all learners, access to water -- and that the most economically vulnerable are still bypassed, Gordhan managed to avoid any concrete measures other than improved service delivery and better monitoring and evaluation, as a response.

This is underwhelming, vague and illustrates a lack of considered thought.

An injection of funds is necessary to ensure food security and access to essential public services. This must be complemented by the relaxation of budget deficit provisions around public expenditure and a cessation of conditionalities that constrain the governments’ ability to engage the necessary fiscal, monetary and trade policy flexibility to stabilize the economy. Such actions are important for preventing serious injury to the domestic economy and to protect the most vulnerable.

Minster Gordhan has instead pursued the path of foreign investment and export orientation. The MTBPS speaks about relaxing currency exchange flows in the hope that this will depreciate the Rand. It offers enticements to encourage speculative behaviour on hedge funds, pension funds and share portfolios. Thus, militating against long term fixed investment. Minister Gordhan also suggests currency swaps to curb the Rand’s volatility. All this, however, offers a range of contradictions because relaxing exchange controls actually opens the Rand to the risk of volatility.

Developing countries, like their developed counterparts, should also have access to the necessary funding to bolster local labour markets through long-term labour absorbing programmes.

Even though Gordhan talks of reforms on strengthening financial systems, these measures are outward looking. Using interest rates mainly as a tool to lower currency rather than as part of stimulating a capital intensive, development orientated growth path can be a hazardous instrument. All the more so for a government that intends to create five million jobs over five years using the tried and failed model of the expanded public works program.

In the midst of an assertive labour force, fluctuating commodity prices, a tough Rand, rumours of nationalisation and concerns about a draconian erosion of constitutional freedoms, which could impact on citizens’ right to know how money has been spent or where they are on a housing list, “pointers for Pravin” are myriad. My free one: “Follow the placards. They lead to your priorities.’’

Liepollo Lebohang Pheko is Executive Director at NGO/think-tank, the Trade Collective and is Africa co-convener of the World Dignity Forum.

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16 Sep

Budgets and Placards

Amazing that the MTEF has been so under scored by poor expenditure, corruption and complete lack of accountability. Bizarre that despite all these instruments, most people are falling out of the politcal and social net. Where to beloved country? Thanks Liepollo for a great piece. Missed it the first time.

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