Budget with care and compassion
Data released this week has brought home a crushing realisation: formany of its citizens, SA is a harsh and desperate place to live. In July and August, 16% of households went to bed hungry; and 42% of the working-age population are now jobless. Employment levels are what they were in 2009, with a decade s worth of job growth destroyed in six months.
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Between 2.4-million and 3-million people have lost their jobs. This is the tragic story of SA s lockdown told by two important
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surveys: the Stats SA quarterly labour force survey and the National Income Dynamics Study Coronavirus Rapid Mobile
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survey (Nids-Cram), a rich panel survey of the same set of respondents, undertaken and analysed by a large group of academic economists and social scientists.
There is some good news: the social welfare measures that the government stepped in with to mitigate the loss of income during the lockdown were reasonably effective and reached 4.3million people. While the Nids-Cram researchers believe that an even larger number of people 6.5-million who qualified for
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the grant based on their socioeconomic status did not receive payments for a variety of reasons, the reach the government achieved in a short space of time was impressive.
Had the government not topped up old-age and child-support grants and not introduced a R350 benefit for the unemployed, more people would have suffered. In the early stages of the lockdown, 47% of households reported running out of food before the end of the month, a proportion which dropped to 37% by June.
Hunger levels are now significantly higher than pre-Covid levels. When the same question was asked in the Stats SA community survey in 2016, a total of 16% of households in the metro areas and 28% of rural households reported running out of food before month end.
But the R350 grant and the top-ups are for six months only and end in October. This raises a difficult question: as employment is expected to make a slow recovery, and looks likely in some sectors to result in permanent losses, what can be done about the crisis of hunger? There is now an important debate within the government and lobbying from civil society organisations to extend some of the additional social welfare measures. The debate comes as the Treasury is putting together the medium-term budget policy statement, which will be tabled towards the end of October.
While SA was in trouble before the Covid-19 shock, we are now heading for a GDP-to-debt ratio of 81.8% by March 2021. Few economists believe the government will achieve its goal of keeping it below 100% in the next four years. The government s active scenario premised on huge cuts to the public sector
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wage bill is for the ratio to stabilise at 87.4% in 2023/2024.
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It is imperative that the Treasury arrest the debt trajectory. The debt burden is unsustainable not only because it consumes an ever greater portion of resources, but also because it has reached levels the domestic debt market will not be able to support. To fund the deficit, foreign capital flows are becoming essential. But the Covid-induced economic crisis caused many to flee and those that remain are demanding an increasing premium on purchases of government debt.
All of this underlines the scarcity of financial resources and the terrible folly of many of the decisions taken by this government over the past decade. That the government still considers, in this context of elevated hunger and joblessness, that SAA is a project worth saving beggars belief. That corruption continues to consume vast amounts of government expenditure is unforgivable. That the state, which consumes large amounts of resources to pay its employees competitively, delivers so little with so few consequences is an abuse of power.
The impending spending decisions in the medium-term budget are of the utmost importance. These decisions must be weighed with great care but also with compassion.
BUT THE R350 GRANT AND THE TOP-UPS ARE FOR SIX MONTHS ONLY AND END IN OCTOBER