When analysing the 2012 Budget it is important to look at how South Africa is going to change systemic problems, rather than throwing money at the problem. FEDUSA is in favour of increasing the budget deficit to 4.6% of Gross Domestic Product (GDP) in the short term with the plan to reduce the deficit to 3% of GDP over the 2014/15 period with public debt set to stabilise at about 38% of GDP.

While FEDUSA welcomes the Finance Minister’s projected economic growth rate increase from of 3.6% in 2013 to 4.2 % in 2014, the excessively high unemployment rate of 23.9 per cent remains a great concern.

“It is evident from the Minister’s R1.1 trillion budget; that infrastructure development, employment creation, higher growth and poverty eradication are at the heart of this year’s recovery and growth plan. FEDUSA is committed to taking hands with our social partners in Organised Labour, Organised Business, Government and Community to ensure the implementation of the New Growth Path (NGP) and National Development Plan (NDP) growth strategies,” commented FEDUSA General Secretary Dennis George.

INFRASTRUCTURE

FEDUSA is cautiously optimistic of the Government’s R3.2 trillion national infrastructure programme, with particular reference to the R262 billion in transport and logistics projects, however the sources of funding need to be specified in greater detail.

“While a mixture of tax finance and cost recovery have been outline as a way in which the national infrastructure plan is to be funded, FEDUSA is looking to private investment and other sources of funding so as to not pass on the burden of costs to the commuting public in the near future. In addition we have to improve on infrastructure implementation and delivery. Last year only R178 billion was spent out of a planned R260 billion, on infrastructure projects and this must improve,” said George.

“Also, a lot is being said about new infrastructure but, as deliberated by our 5^th National Congress in November last year, Government has proven to be extremely weak at maintaining the often excellent infrastructure inherited from the previous regime.  You just have to take a short drive in cities to see the decaying parks and public spaces, non-functioning traffic lights and dirty streets and sidewalks.  Our Congress made it clear that Government can do much more to give jobs to poor people who will be able to fix these fairly simple problems,” he added.

GAUTENG FREEWAY IMPROVEMENT PROGRAMME

FEDUSA is aware that the total debt associated with the (GFIP) project is R20 billion and welcomes the Government’s contribution of R5.8 billion towards reducing the toll road debt. We note with concern the Minister’s announcement that despite public protest, the Gauteng tolling system is said to be implemented from 30 April 2012.

“While we welcome this pledge, it also seems quite clear that the hefty increase in the fuel levy (20 cents) is intended to counter-balance this investment.  Irrespective of the currently revised amount of 40c per km for light motor vehicles and maximum cap of R550.00 per month, FEDUSA will therefore continue with its Section 77 application at NEDLAC. This is not just about the expense being passed on to workers, but also the lack of a safe and adequate public transport alternative.  Once again a European model is being implemented in South Africa, with proper contextual and impact studies being conducted. Government makes the same mistake by simultaneously determining the price and formulating the policy. FEDUSA made it very clear that the toll road system needs an independent regulator, Government cannot be the player and referee at the same time,” commented George.

SOCIAL WAGE

FEDUSA appreciates the significant designation of an extra R3.5 billion to the expansion of the community work programme, which will increase the potential number of people employed in 2014/2015 to 332 000 from the 90 000 in March 2011, and simultaneously contribute to providing better community-based social services such as early childhood development and home-based care.

The additional R4.8 billion provided for the expanded public works programme is acknowledged positively, however this increase in budget allocated to the programme does not guarantee that the programme has created in the past, or will create going forward, the measurable transfer of employable skills, and sustainable employment for those participating therein.

Although the expenditure allocated to education was only briefly outlined, FEDUSA welcomes particularly the R850 million allocated to improving university infrastructure, including student accommodation facilities.

Of the additional R12.3 billion allocated to the improvement of health services over the next 3 years, the most significant is the R968 million that has been made available for the provision of anti-retroviral treatment at the CD4 threshold of 350, which FEDUSA sees as integral to improving the overall health of our citizens.

FEDUSA will be closely monitoring the National Health Insurance (NHI) pilot projects, which have been allocated R1 billion. FEDUSA is of the opinion that such pilot projects differ very little from those of the district health system implemented post-1994 which failed, and therefore would appreciate clarity on how government proposes to ensure our expenditure here will be productive and successful.

The rollout of the public health system depends on quality staff and FEDUSA will specifically monitor the upgrading of the 30 nursing colleges and rebuilding of tertiary hospitals. Our focus will be on the provision of quality healthcare and the sufficient training of healthcare professionals.

FEDUSA also acknowledges that Minister Gordhan’s speech does not provide further insight as to how the NHI will affect all citizens and what the funding model would encompass, and also makes no reference to an open consultation process that we believe is integral to successful implementation of such a social health plan. FEDUSA demands that government pursues worthwhile social dialogue with all social partners, including all partners of organised labour, to ensure that the path taken for the NHI is one that is beneficial to all South Africans.

We appreciate the overall increase of expenditure on social grants from R105 billion in 2012/2013 to R122 billion in 2014/2015, including the R60 rise in the monthly state old age pension from R1140 to R1200  per month for those over 65, and from R1160 to R1220 for those over 75. The increases however don’t seem to take into consideration the rate of inflation, and are quite dismal when compared to the expenses related to both foster care and child support. We are furthermore concerned about the dependency of 16 million South Africans on social grants. Poverty and dependency in this regard, should be alleviated primarily through job creation, so as to release the pressure of social grants on the national budget.

“On the other hand”, George warned, “we must be careful of not becoming a welfare state.  FEDUSA firmly believes that social grants should be linked to improving the lives of people and not merely giving them stipends to continue existing in misery.  As the saying goes, we must not just give them fish to eat, but rather teach them how to become fishers themselves to provide for their families.  Thus, once again, employment creation is at the heart of poverty eradication”.

PUBLIC SECTOR REMUNERATION

FEDUSA raises our concern with the budget provision of a 5% salary increase without pay progression in the public sector. This concern stems from Statistics South Africa’s announcement today that inflation is measured at 6.3%. In an environment where food, fuel and administrative prices will increase with more than inflation, the 5% budget allocation is questionable. The proposed salary adjustment will make a mockery of public sector collective bargaining. We can only foresee a very difficult negotiation session in the Public Service Co-ordinating Bargaining Council, which might end up in a major strike.

CARBON TAX

South Africa has ambitious economic goals – to add 5 million jobs by 2020 by sustaining real GDP growth at around 7% annually – but it also wants to reduce greenhouse gas emissions by 34% over the same period. The two objectives are hard to reconcile.

In December 2010, Treasury published a discussion paper on a new carbon tax with the intention on announcing its design in the 2012 national budget. The budget speech announced that the carbon tax will be subjected to a new revised policy paper process in 2012. FEDUSA will eagerly await clear tax proposals on the carbon tax as a tax instrument.

Part of the rationale for a carbon tax is to induce behaviour change among polluters so as to help South Africa to reach its Copenhagen pledge to a 34% reduction in emissions by 2020. India and China have, however, committed to reduce only their energy intensity. Their absolute emissions will still increase by 300% and 500% respectively by 2020. This means that South Africa’s total emission savings in 2020 will be replaced into the atmosphere by China’s in about 60 hours.

Treasury’s view, as put in a presentation to the stakeholder discussion forum on the carbon tax last year, is that the overall impact of a carbon tax depends largely on how government recycles carbon tax revenues as well as the availability and affordability of greener technologies.

Its own modelling suggests that when carbon tax revenues are offset by decreasing other direct or indirect taxes like the VAT rate, the net impact would be to shave only 0, 005% points off annual GDP growth. If the tax revenue is used to increase government savings and investment then it could even produce large positive gains in economic growth.

NATIONAL GAMBLING TAX

The introduction of the National Gambling Tax on the 1^st of April 2013 as a uniform provincial gambling tax is a welcoming revenue creation option announced. The taxation of the National Lottery is also long overdue.  We trust that the Tax Administration Bill promulgation will ensure greater efficiency on tax administration.

BUDGET CREDIBILITY, FINANCIAL MANAGEMENT AND CORRUPTION

The credibility of South Africa’s budgeting is becoming suspect in the light of repeated overspending by Departments and fraudulent transactions. In the subsequent three fiscal years up to 2011 / 2012 (the Jacob Zuma / Pravin Gordhan era) revenue was close to the initial target but government expenditure was on average 22% higher than first estimated.

Excessive expenditure is a political issue that needs to be dealt with as part of the political process. The lack of visible, general support for the sanctity of the budget process is lamented. Government’s apparent failure to embrace Treasury’s proposal that South Africa adopts a set of fiscal rules to enforce fiscal discipline is a concern.

The key measures announced in the budget speech dealing with financial management and combating corruption entails new regulations pertaining to tender programmes, limit variations to orders, and directives on all disclosures. FEEDUSA welcomes the measures pertaining to the multi-disciplinary approach in dealing with fraud and corruption.

“We feel that the appointment of the Chief Procurement Officer responsible for monitoring Government procurement is a step in the right direction addressing the Budget credibility of all departments and specifically the failing provincial procurement system,” said George.

RETIREMENT FUNDING TAX PROPOSALS

It is now 5 years since then Finance Minister, Trevor Manuel announced the broad framework for retirement fund reform. At the time South Africa had a budget surplus and there was wide support for the reforms, which would ultimately give pensions to the entire population. Manuel promised that a national pension fund would be introduced by 2010. This process has been stalled for the past 2 years, as the process is now being driven by the Department of Social Development punting a regime which is not as kind to the private sector as Treasury’s initial proposals.

The reform of the tax treatment of contributions is to take effect in 2014 according to the Budget Review. FEDUSA previously indicated the process should be a fully consultative process amongst social partners within NEDLAC.  The principle of encouraging citizens to voluntary savings is welcomed. The voluntary lifetime limit of R500 000-00 is a concern and needs further clarification. FEDUSA will study the details and comment in our budget submission on the 28^th of February 2012.

THE TAX RELIEF FOR SMALL BUSINESSES

The tax provisions and the announcements made for small business tax regulatory framework is welcomed and would result in a greater framework attracting foreign direct investment. Small business is the engine room for job creation and making it easier to run a business by reducing tax burdens is a welcoming move.

In conclusion, FEDUSA would like to echo the Minister’s call for professionalism, hard work and commitment to value for money to ensure successful project and service delivery in 2012.

“South Africa still faces severe problems of mass unemployment, underemployment, poverty and inequality. Though its fiscal policy, our Government can make significantly contributes to employment creation and poverty reduction by shifting the composition of government spending, increasing the tax-financed level of government spending and increasing the fiscal deficit over the short term,” explained FEDUSA General Secretary, Dennis George.

The International Monetary Fund (IMF) reported in its forecast that South Africa will achieve a GDP growth of 2.4% in 2011, 3% in 2012 and 3.7% in 2013. These low growth projections are a direct result of the global economic recession particularly evident in Euro Zone countries and United States of America, with the IMF estimating global GDP at an annualized rate of 3.5%.

The Minister of Finance announced in his Medium Term Budget Policy Statement (MTBS) that South Africa’s deficit will increase to 5.5% of GDP in 2012 before declining to 3.3% in 2014/15. Government predicted that our revenue will decline and government debt will increase to about 40% of GDP by 2015. Although Statistics South Africa reported that about 365 000 jobs were created during 2011, FEDUSA notes with concern that the consumer price indices for all urban areas have increased from November 2011 to December 2011 by 2% to 6.1%.

During the FEDUSA 5^th National Congress, leaders firmly expressed their disappointment that seventeen years into democracy the Government has failed to both maintain and invest enough resources in our county’s infrastructure. “To date the Government has failed to provide adequate infrastructure spending in the areas of rail, water, roads, ports, communication and social infrastructure in the forms of universities, hospitals, nurses homes, clinics, libraries and schools. Of additional concern is that prior to the President’s announcement to host an Infrastructure Summit, the Government has failed to provide and coordinate a workable and implementable infrastructural plan for the Social Partners in Organised Labour, Organised Business and Community,” commented George.

FEDUSA is cautiously optimistic about the interventionary role that Government has expressed it wishes to play in the economy to further the interests of workers and the poor to create an economic environment together with the Social Partners that is conducive to faster economic growth and greater labour intensive growth. FEDUSA is of the firm view that the Government’s recently announced economic interventions can rapidly contribute to faster Gross Domestic Product (GDP) growth. These interventions must involve increased injections of government spending into the economy without increasing its tax revenues.

FEDUSA demands that the Minister of Finance builds on the solutions presented by our President in his State of the Nation Address (SONA) where President Zuma clearly states higher growth and job creation [is needed] to reduce and ultimately eradicate poverty and inequality.

The FEDUSA leadership look forward to participating in the Presidential Infrastructure Summit with potential investors and other social partners that will be held later this year. FEDUSA is of the opinion that the Presidential Infrastructure Coordinating Commission has an important role to play pertaining to time sequencing of the key infrastructure projects which will stimulate private sector investment in order create more consumption spending, more net exports, and more investment itself will all contribute to GDP growth, and faster GDP growth in turn stimulates investment.

FEDUSA is pleased with the projected Job Fund allocations of over R1 billion for this financial year however believes that Organised Business will need to play a far more engaging role if South Africa wishes to effectively bolster its manufacturing sector. The President revealed in his SONA that of the R20 billion worth of incentives under Section 12(i) of the Income Tax Act, only seven projects with an investment value of R8.4 billion has been approved to date.

“It is imperative for the private sector to play an innovative and proactive role in rebuilding South Africa’s industrial base. FEDUSA would appeal to the Minister of Finance to explain the reason for this seemingly slow take up of incentives. Is Organised Business uninterested, or is the application process riddled with red tape and delays? And what progress is being made regarding job creation through the Industrial Development Company (IDC) R10 billion fund?” questioned George.

FEDUSA welcomes the new procurement regulations aiming to strengthen industrial projects and manufacturing within the clothing textiles, canned vegetables, leather and footwear sectors. “If the Social Partners are truly committed to the National Growth Path Accord on local procurement targets of 75%, FEDUSA is confident that these industries will add exponentially to economic growth and job creation.

We are also cautious about the President’s announcement to amalgamate small business institutions such as Khula Enterprise and the IDC’s small companies fund into one major entity to be launched this year. “This amalgamation cannot be a new structure with the same problems. Small, Micro and Medium Enterprises (SMME’s) can directly assist in our fight to create higher economic growth through decent job creation,” stated George.

FEDUSA’s Budget Wish list:

1. Tax will be payable only on income above R65 000 for taxpayers below 65 years of age and R95 000 for those older
2. A third rebate of R3 000 per year is proposed, increasing the tax threshold for taxpayers aged 75 years and older to R105 261
3. An increase in the annual tax-free interest income to R30 000 for individuals below 65 years and to R40 000 for individuals 65 years and older
4. Tax-free lump sum benefit upon retirement to increase to R350 000
5. Capital gains exclusion amounts for individuals and special trusts to R23 000 annually, on death to be increased to R250 000
6. Increase all winnings above R25 000 to 20% withholding tax
7. So-called sin taxes must see an increase including; 10c increase on 340ml cans, 20 c increase on bottles of wine, R3.00 increase per bottle of spirits and R1.00 increases per pack of cigarettes
8. Allow more training costs to be tax deductible, this will increase capacity building and on the job training
9. Every company that registers increases in employment numbers should get a specified tax deduction per taxable employee registered for the first year of every increase
10. All first time employees, who get less than 25% the official minimum wage in their sector should get all taxes back if they register as a tax payer in the first 24 months of such employment
11. Introduce a first month tax-free to all new employees registered for the first time for tax.
12. Allow bursary repayments to be tax deductible
13. Extend UIF period to a maximum of 10 months if worker is retrenched with up to 50% of salary being paid out per month
14. Introduce a “super tax” of 45% on taxable earnings of over R1,2 million per annum (R100 000 per month)
15. Increase all taxable earning thresholds with the inflation rate each year so that no bracket creep takes place as a result of inflation
16. Increase medical aid deductions by at least R150 per member
17. Increase the R1800 in back dated pension / retirement funds payments to R6000 per year

“As FEDUSA looks forward to the Minister’s Budget Speech, we recognise that many of our country’s problems are structural in nature and cannot be addressed over night. A shift in macroeconomic policy towards a greater focus on employment creation under the direction of the Industrial Policy Action Plan (IPAP2) and New Growth Path (NGP) will go a long way in addressing the structural inequalities inherited as well as setting a good platform for collectively working together to make South Africa the country we want it to be,” concluded George.

“Chapter 7 of the Constitution makes no provision for municipalities to control and run local passenger railway operations. Unless the Government wishes to make legislative changes to our Constitution, metropolitan railway services should remain under the jurisdiction of PRASA,” explained FEDUSA General Secretary, Dennis George.

FEDUSA is concerned by this seemingly unilateral decision that Government has taken without entering into any consultation with Organised Labour. “Our Federation is yet to be officially informed of any such decisions, yet out members are the people that are going to be affected. A venture of this nature will have serious implications for FEDUSA members at Metrorail with specific reference to provisions made under the Labour Relations Act, retirement funds and other statutory bargaining matters,” outlined George.

FEDUSA has requested a meeting with the Minister of Transport, Sibusiso Ndebele, to clarify how this transfer is being proposed to take place, which workers and current structures will be affected and what the foreseeable impacts this decision will have on workers in the transport sector.

“Our organisation could not believe that a South African journalist was dismissed, detained and deported from Qatar simply on the grounds of his HIV positive status,” said FEDUSA General Secretary, Dennis George.

The journalist, who wishes not to be named, underwent medical tests in order to attain his work permit, but was not informed of the nature of the tests, or informed of the results. On discovery of his HIV positive status his employer, Al Jazeera, ensured he was detained in Doha State Prison, dismissed and immediately deported. The journalist was only informed of his status upon returning to South Africa.

FEDUSA is both shocked and concerned about this humiliating violation of human rights and will join the protest outside of the Al Jazeera offices to show its support for the intervention of the ITUC in this regard.

The applicable laws in Qatar do not align with international standards, and rather than promoting non-discrimination in recruitment and continued employment on the grounds of HIV status, they do not prohibit discrimination or dismissal on such grounds. The laws of Qatar allow the detainment and deportation of any individual who may be a threat to public health. The ITUC has written a letter to the Emir of the State of Qatar and to the Minister of Labour of Qatar urging the government to ensure that they introduce the necessary policies to extend protection to workers on the grounds of real or perceived HIV status.

FEDUSA’s HIV/AIDS and sexually transmitted infections (STI) workplace policy, adopted at our National Congress in 2008, acknowledges that HIV and AIDS are “surrounded by ignorance, prejudice, discrimination and stigma” and that “in the workplace, unfair discrimination against people living with HIV and AIIDS has been perpetuated through practices such as; pre-employment HIV testing, dismissals for being HIV positive and the denial of employee benefits”.

“It is therefore one of our primary objectives is to promote equality and non-discrimination between individuals affected and infected with HIV/AIDS. FEDUSA believes this incident must be brought to an international audience and pressure applied for Qatar to change is discrimination policies and the journalist reinstated,” said George.

Despite numerous letters and appeals, the government of Qatar and the management of Al Jazeera have not yet responded, for this reason there will be a picket outside the Al Jazeera offices in Johannesburg today to hand over a memorandum outlining the demand for re-instatement and a formal recognition of the violation of the aggrieved journalist’s rights.