The Standing Committee on Appropriations invited the Parliamentary Budget Office (PBO) to give its overview on the Second Special Appropriation Bill, writes Abel Mputing. The Bill aims to deal with the immediate socio-economic impact of the Covid-19 pandemic on South African society, as well as the civil unrest that took place in July.

The Chairperson of the committee, Mr S’fiso Buthelezi, said the bill provides urgent funding allocation to government functions dealing with these impacts. The PBO’s main task was to provide a background on the bill and what the members of the committee must take into account when dealing with it.

According to the Director of PBO, Dr Dumisani Jantjies, fiscal consolidation, such as the discontinuation of the R350 social relief grant, has had a negative effect on poor households. This, coupled with the rising rate of inequality, unemployment and poverty exacerbated the social instability we recently experienced. The government’s fiscal consolidation has also had an impact on its ability to invest in the economy. This, in turn, has had negative impact on employment creation and government’s ability to intervene in upholding socio-economic rights of South African citizens.

In the PBO’s view, fiscal consolidation is limiting growth, could reverse socio-economic gains of the past, break the social compact and increase socio-economic instability. Economic growth can be stabilised by “investing in poor households. And this role can’t be left to the private sector. It’s government mandate to do so to boost the economy.”

 There seems to be a realisation of this anomaly, said Head of Policy at PBO, Dr Nelia Orlandi, because the Second Appropriation Bill seeks to restore the R350 grant to alleviate the distress of poor households. But what is more urgent is the appropriation of R500 million for the 700 000 caregivers.

Interrogating the PBO’s critical stance on government fiscal consolidation, a member of the committee, Mr Oscar Mathafa, wanted to know if National Treasury has enough funds for social welfare programmes. Dr Jantjies responded that social stability is an investment. “As a country, we need to have trade-offs and see if tax expenditures are utilised to deal with issues of inequality, unemployment and poverty rather than enriching those already rich.”

In addition to that, he said, “we are finalising our discussion paper on the basic income grant, which will make our position clear on the pros and cons of such a social relief.”  

While there are calls for government to use expenditure to drive growth and address poverty and unemployment, there are departments that still underspend their budget. Another member of the committee, Mr Zola Mlenzana, asked if under-expenditure demonstrates loopholes in the Appropriation Bill. Dr Orlandi replied: “There nothing wrong with the bill. The members of the committee need to know which instruments to use to hold those departments accountable.”

She cited the Budget Review Report as one such instrument. “This report provides the committee with the budget analysis of each department, its Auditor-General Financial Statement, and information linked to its Annual Performance Plan.”

On ailing state-owned enterprises (SOEs), the Chairperson asked what privatisation would do to SOEs. “Will that enable them to fulfil their economic and developmental mandates?” he asked. Dr Jantjies replied that the PBO is working on identifying their whether their mandate is economic or developmental. Once it has determined this, the PBO will be in a position to say if they should be privatised or not.

The PBO’s Deputy Director of Economics, Dr Seeraj Mohamed, intervened. “It’s critical to decided which SOEs should and should not be privatised. There are state entities that play a critical developmental role that should not be considered for privatisation. But also there are those that can be privatised without compromising the government developmental agenda.

 The PBO wants the committee to use the mandate conferred to it by the Constitution to appropriate and to make amendments to the budget to ensure that it deals with inequality, unemployment and poverty in a systematic manner informed by socio-economic realities. It seeks to empower the committee to extend government expenditure instruments to inject funds to poor household so that they can swell public and private economic activities, said Dr Mohamed.

“Given the declining private sector investment in the economy since the advent of economic recession in 2008, government has to take a lead in shoring up economic growth and ensuring there’s redistribution income and wealth to deal with challenges of inequality, unemployment and poverty that are the mandates of government than of the private sector.”