Big shift to social spending belies unions' claims
The government has fulfilled its promise to revise budgetary priorities. SVEN LUNSCHE looks at the ways in which the money is being allocated
The 1998/99 Budget is the first in SA's history to provide a three-year timetable. A closer analysis of the trend confirms that the ANC government has met its promise of reprioritising state spending towards social services.
Jac Laubscher, chief economist at Sanlam, says the shift towards social spending is "striking", pointing out that 60% of non-interest expenditure in the Budget - an amount equal to R102-billion - was devoted towards the social ministries (housing, education, health and welfare).
The shift has come at the expense of economic services, which in 1998/99 face a cut in their allocations to R17.1-billion from R18.9-billion in 1997/98, and defence, whose budget since 1995/96 has fallen from R11.6-billion to R11-billion this year. However, Manuel continues to give more funds to the other protection services, particularly the SA Police Services, whose budget this year is R14.1-billion, up from R9.3-billion four years ago.
The trend towards increased allocations to social spending shows no sign of abating. The three-year forecasts show that spending on social services will increase by an average 3.2% in real terms from 1998/99 to 2000/01, with spending in health rising 5.8% and education 3.4% a year.
At R46.8-billion in 1998/99 - 16.3% up on 1997/98 - education has surpassed interest payments as the largest single spending item in the Budget. The health budget was raised by a staggering 24.2% this year to R25.1-billion.
The figures provide the government with much-needed ammunition as it confronts Cosatu's allegations that it presents Budgets for Business. Nothing could be further from the truth although the unions have a point when they say the spending does not always mean real benefits for the poor.
The poor efficacy of the education budget - pupils seem to be getting fewer school books despite ever-increasing budgets for their departments - is largely out of Manuel's control.
However, he does have the power to arrest one key expenditure trend that contributes to poor delivery of social services, namely the rise in the salary bill at the expense of capital expenditure on school buildings, clinics, etc.
The figures for 1998/99 make particularly depressing reading. Total personnel spending at R83.3-billion is up almost 13% on the previous year, accounting for more than 53% of non-interest expenditure.
Manuel's Budget review also reveals that government is experiencing increasing pressure from rising personnel spending.
Personnel spending is projected to rise 6.9% and 5.8% over the next two years, still 2.9% real growth a year.
Manuel admitted the trend was worrying but said government was obliged by regulations under public service agreements and labour legislation.
Rising salaries have forced government to cut back on capital expenditure. In 1998/99 capital costs have been cut from R14.8-billion previously to R14.4-billion. Even more worrying is that until 2000/01 capital spending will decline by 2% a year in real terms.
This, warns stockbrokers Huysamer Stals in their analysis of the Budget, "bodes poorly for future growth".
That is putting it mildly. The cutback in capital expenditure will result, among others, in fewer schools and clinics being built.
Manuel counters that the percentage figures do not paint the true picture in that public-private partnerships and capital programmes by parastatals "are increasingly replacing the direct spending on infrastructure". However this applies only to areas where parastatals operate - namely electrification by Eskom and phones by Telkom, among others. The schools and hospitals still have to be built by government and there is less and less money available for that.