Already SA companies are investing approximately R200 billion offshore benefiting a tiny handful of individuals. Taxing these investments would produce significant state revenue.

We expect the capitalist class to push for greater tax cuts from Manuel. We have seen tax revenue growing by an average of 17% increased revenue collection, which reflects efficiency gains by SARS, rather than a structural change in the economy. Over the past 3 years, government has given this bounty away in personal and corporate tax deductions: R73 billion during the period 1995 - 2004 and approximately R28 billion since.

The rationale for this largesse seems to be to encourage increased investment by local and international capitalists and to facilitate a retail boom. There has been growth in this area although we have seen with the current credit crunch that much there has been a significant disinvestment of hot money. The credit boom of the past few years is also at an end as the Reserve Bank raises rates as it attempts to combat rising inflation.

Trevor Manuel has reminded us that the government’s mission is not better dividend yields, but social progress. He has thus remarked:

“The budget numbers and the monthly price trends and trade statistics fuel the decisions of market participants for whom 45 minutes is a trading horizon and the long term ends on Friday afternoon. But social progress has to be measured decade-by-decade and generation-by-generation.”

By these very words, the government is condemned as having failed. Fourteen years of ANC rule have failed to dent unemployment let alone of halving unemployment and poverty by 2014 in terms of the Millennium Development goals that the government ascribes to. The social indicators present a horrendous picture: unemployment of 40%, 60% of the population living in poverty, the Gini co-efficient indicating that South Africa is the third most unequal country in the world, the HIV/Aids pandemic claiming thousands of lives each year and leaving families even more destitute, the housing crisis intensifying, service delivery shortcomings, etc.

Gear’s promise was that it would have generally beneficial results. It placed affirmative action in the centre with the aim of developing a black bourgeoisie through land distribution to commercial black farmers and state assistance to black entrepreneurs. This was to be facilitated by joint ventures with established capital that was primarily white owned. This mix of policies was to deliver higher rates of economic growth that would result in improved living standards for the most majority and so end mass unemployment and poverty. Instead we have found the following:
 55 per cent of unemployed and 32 per cent of employed said they were unable to afford food;
 54 per cent of jobless and 43 per cent of employed could not afford basic services;
 46 per cent could not afford rent or bond payments;
 68 per cent earn less than R500 per month whether working, self-employed or unemployed;
 86 per cent are looking for work; and
 1 in 8 among self-employed said they earned enough to live on.

Infrastructure spending offers a good example of the problems faced by our society. Government has undertaken significant reforms in terms of household infrastructure. The Municipal Infrastructure Grants consolidates grants from national to local government for household infrastructure, as well as provides for the provision of free basic services. The current projections show a steady increase. Similarly, spending on housing and land will probably see an increase. Thus government can rightly claim that it is attempting to improve access.

The problem is that spending levels are not nearly sufficient to meet the increases due to a combination of population increases, urbanization and household splitting. Moreover, even with the budgeted money there is a huge problem in terms of the quality of spending. Building private houses on the peripheries of townships is accepted as a significant problem, and the government should re-orient itself away from unrealisable neo-liberal objectives of privatising housing delivery to the creation of nationalised housing stock.

The central problem facing household infrastructure is that spending does not translate into assets, which people can utilize to exit from poverty. Consequently the poor are unlikely to benefit from the attempts to boost economic growth. The other channel through which they might benefit is as a consequence of growth, meaning that once growth kicks in, jobs will be created, more taxes will be collected and more investment will flow. This is sometimes called the ‘trickle-down’ channel as poverty eradication is reliant on economic growth. Being dependent on trickle-down mechanisms in a highly unequal country, like South Africa, will replicate rather than change social conditions. That is the fundamental reason why current spending proposals on economic infrastructure aimed at ‘reducing the cost of business’ must be rejected. Government’s attempt to play catch up for the years of underinvestment under GEAR is simply inadequate. There is spectacular or progressive about the investments. The hope that these investments will trigger private sector investment is doubtful given the past record in investments.

The thrust of government policy in rail expansion is to cheapen the cost for business of moving goods for export rather than to link working class communities to the rail network. In the energy restructuring process of establishing Regional Electricity Distributors (REDs) the concern is about efficiency improvements for business, without an adequate focus on lowering household tariffs and supply.

There needs to be increased spending on infrastructure in schools, improving the quality of housing delivery, more robust land redistribution and the introduction of the Basic Income Grant of R100 per month per adult that will reduce poverty by between 10 - 15%. The calculated costs of this programme amounts to R28 billion annually. This would be a far more useful use of increase fiscal revenue than the granting of tax breaks to the rich.

Once again we find government refusing to use its power to uplift the poor. The current budget surplus of 0.6% could reasonably expand to a deficit of 5% that would free up billions of rands for social development. The government adopts a stance on deficits that aims to use fiscal policy to support the business cycle.The neo-liberal orthodoxy that Manuel and the SA government swear by promotes the interest of capital at the expense of the working class.

South Africa does not have redistributive systems capable of breaking the poverty and inequality traps in our society. Redistribution systems to break the embedded poverty should be at the centre of fiscal policy. Instead the budget framework continues to increase spending and increases the tax: GDP ratio, as it aims to promote the development of capitalist profitability, completely contrary to redistributing wealth. Business has called for a return to a Tax:GDP ratio of 25% outlined in GEAR. We reject this call and demand a higher share of tax to fund the needs of the working class today.