South African Budget Tackles Social Reform

SOUTH Africa's $31.5 billion annual budget has focused attention on the urgent need for political reform and joint management of the economy. The proposed budget, released last week, is likely to be the last budget devised by whites for a population dominated 5-to-1 by blacks. It sought to lay the basis for a process of social upliftment through economic growth. But what it could not hide was that economic apartheid, in areas such as social welfare pensions and state spending on education, would outlive political apartheid.

Limited growth prospects were highlighted by a deepening recession and a 1 percent decline in the gross domestic product, compared with a 2 percent growth rate in 1989.

"The government was unable to put its money where its political mouth is," said a Western diplomat. "But at least it moved in that direction."

Most economists felt the budget, through concessions to industry, had achieved a desirable balance between being redistributive - mainly through heavier taxation of whites and the new system of a value-added tax - and stimulatory.

Finance Minister Barend Du Plessis set as the theme of the budget "equity, growth, and stability," insisting that only economic growth could ensure political reform. He sought to achieve equity through a modest increase in social spending - up from 36.5 percent to 38.2 percent of the budget.

"You can't fault the finance minister's intentions," says Frederik van Zyl Slabbert, co-director of the Institute for a Democratic Alternative for South Africa. "He pressed all the right buttons within the severe restraints he faced."

Mr. Du Plessis seeks growth by stimulating the manufacturing sector and stability through increased spending on an expanded and modernized police force. But he was criticized by the African National Congress for not going far enough on social spending and for failing to meet black aspirations. ANC criticism was based on the fact that the budget didn't achieve immediate racial parity throughout the economy.

"One has to look at this against the background of the political process where the trend is towards dialogue and joint management committees," says Dr. Van Zyl Slabbert. He says that if the ANC and other black groups are not part of formulating the next budget, it will be a signal that the political process is running into serious trouble.

Once the ANC is part of this process, it will have to take joint responsibility for setting budget priorities. "They would then begin to understand the complexities of managing social policy and their involvement would help drive the process of joint management," says Van Zyl Slabbert.

But the ANC rebuffed government efforts to consult informally about the budget. "We cannot take joint responsibility for government decisions because we do not have joint authority," said Tito Mboweni, ANC economics department spokesman.

Independent economist Azar Jammine has estimated that it would take annual expenditure equaling half the budget again, about $17.6 billion, to create racial equality. It is estimated that between $2.4 billion and $3.4 billion will be saved annually by eliminating the bureaucratic duplication of apartheid.

The government has already created the Independent Development Trust with an initial $800 million for funding low-cost housing, providing basic facilities on state land for the homeless, and building schools.

It is also urging the $88 billion life insurance and pension industry to make available $9.3 billion annually for social spending through government agencies, such as the Industrial Development Corporation and the Development Bank.

Duncan Innes, a labor policy adviser to corporations, said the budget's limitations showed the state did not have the capacity to make up the accumulated racial imbalances of the apartheid era. The private sector would have to play a major role in this process, but there would have to be a reciprocal commitment from the ANC and black trade unions to improve productivity.

"Unless there is movement toward a social contract between workers and employers, the resources will dry up, and there will be a private sector backlash," Mr. Innes said. There has been an eight-fold increase in social spending by South African corporations since United States companies began disinvesting in 1982. It is nearing $400 million a year, he said.

The budget moved closer to racial parity in social welfare pensions and increased spending on black education by 24 percent to $1.2 billion. The government also cut defense spending by $334 million (9 percent), but the savings were pumped into the expansion and modernization of the police force, which showed a huge 53 percent ($592.6 million since last year) budget increase.