The South African state's 2012 budget
By the ruling class, for the ruling class
Once again much media fanfare has broken out in aftermath of the South African state’s budget speech. The business media in particular have fallen all over themselves to highlight how the state will be spending billions of Rands on infrastructure and the development of ‘Special Economic Zones’, supposedly to create employment and help the poor to find a job. Much too has been made of the state spending over 50% of the budget on social services. Most of the messages, whether from the state or mainstream media or even SACP politicians, therefore have been about how the budget is intended to help the poor and drive job creation. Like a missionary of old, we are told, the Minister of Finance, Pravin Gordhan, has given hope to the dispossessed and has extended a hand to the most marginal sections of society through the budget. Of course, Gordhan, the media, the state, ANC and SACP politicians are lying through their teeth when they declare that the budget was developed for the benefit of the poor and workers. Like missionaries of old, the state, the politicians and media are trying to create illusions to blind the people to reality.
Do states really exist to help the poor?
States, including the post-apartheid state, have never undertaken actions that are purely aimed at assisting workers and the poor; unless they have been forced to through class struggle. As such, people including the SACP, make a fundamental mistake when they believe that the state is either a neutral entity or that its actions – including the South African state’s budget – are intended to further the interests of the working class. When one examines the historical role of all states, it becomes evident that they are not entities that are controlled by or for the benefit of all; they are rather a central pillar of ruling class power (the ruling class being comprised of state managers and capitalists). As a consequence, they are structured purposefully in a hierarchical manner in order to carry out their main function of protecting and furthering the interests of the ruling classes. They are, therefore, a defender of the class system and a centralised body that necessarily concentrates power in the hands of the elite. This is so even under a Parliamentary system like South Africa: an elite few – including Pravin Gordhan - make decisions, instruct others what to do, and enforce those instructions through the state
Indeed, the anarchist Peter Kropotkin long ago pointed out that the state is the ultimate protector of the privileges of the ruling class. Through its executive, legislative, judiciary and policing arms the state always protects minority ownership of property (whether private or state-owned), and tries to squash any threat posed to the continuing exploitation and oppression of the working class. All states everywhere have also always intervened in the economy in favour of the ruling class. As noted by Kropotkin:
“the state has always interfered in the economic life in favour of the capitalist exploiter. It
has always granted protection in robbery, given aid and support for further enrichment.
And it could not be otherwise. To do so was one of the functions – the chief mission – of
The budget is an intervention for the ruling class
The South African state’s 2012 budget, far from being pro-poor, provides some insight into how states intervene in the economy and society for the benefit of the rich and powerful. While the South African state and media claim that the proposed infrastructure development outlined in the 2012 budget is about creating employment opportunities; nothing could be further from the truth. The infrastructure projects discussed in the budget, which involve the state spending R 3.2 trillion over the next few years, are mainly aimed at building or upgrading power stations, ports, and railway networks. Private companies will be contracted to deliver this. Once completed, giant corporations that are involved in the export industry will be the beneficiaries. By having access to more efficient roads, railways, ports, and cheap electricity their profits will be increased. On the whole, therefore, the infrastructure development is aimed at making the South African capitalist economy more efficient; to the benefit of multinational corporations that are exporting raw materials and finished goods. Pravin Gordhan in parts of his budget speech even made this explicit when he said, “improvements are being made to economic infrastructure such as ports, roads and electricity generation to cater for the needs of business”.
The main goal, therefore, is not to provide infrastructure for the working class; but rather infrastructure to aid capitalist corporations increase their profits. The much touted job creation that is to supposedly accompany these infrastructure projects, therefore, should not be foolishly seen as the primary objective of the state’s plans. The companies that stand to benefit from the infrastructure projects will also be seeking to maximise profits. To do so, they will try and employ as few workers as possible, pay workers as little as possible, and work them as hard as possible. This means employing people will also not be the main goal of these private companies. They will, in fact, want to employ as few people as possible to extract as much profit as possible. This means the state plan’s when it comes to infrastructure, were not really aimed first and foremost at benefiting a mass of workers or the unemployed, but the corporations building the infrastructure and those that are going to use it.
The bias of the budget towards the ruling class can also be seen in the plans to create “Special Economic Zones”. “Special Economic Zones” are a euphemism for export processing zones (EPZs). Across the world, EPZs have been advantageous to corporations. Corporations that invest in them have received huge tax breaks and have been exempted from labour laws. Naturally, this has had a detrimental effect on the workers in these EPZs. By design they have no legal rights, they usually can’t form trade unions and can be fired at will. The South African state’s 2012 budget too reveals how favorable local “Special Economic Zones” will be to investors. For instance, the 2012 budget stated that “tax relief is under consideration for businesses that invest in these zones, including a reduction in the corporate income tax rate”.
Tax relief for large corporations has been a major theme of the South African state’s policies since the ANC got into power. In 1994 the tax rate for corporations in South Africa was 48%. This has since been lowered by the state to 28%; thereby ensuring greater profitability for corporations. The 2012 budget not only offers promised tax relief to potential investors in the Special Economic Zones, but also eliminates secondary taxes on corporations and replaces it with a withholding tax. In addition, pension funds, which in the context of South Africa are giant companies that are involved in speculation, will also be exempt from tax on the dividends they receive. While investors are promised potential tax breaks if they invest in projects like the Special Economic Zones, Value Added Tax (VAT) has remained unchanged at 14%. This is not an accident as VAT is mainly a tax directed at workers and the unemployed.
The state also revealed in the 2012 budget that it believed further electricity tariff hikes were needed: this on the back of massive price increases over the last few years. Considering that most large corporations have long term deals with the state, whereby they receive electricity at stable and extremely low prices, the rises in electricity prices will be mainly directed at the working class. Parts of the budget too make it explicit why the state wants higher electricity prices. Gordhan said higher prices were needed so that ESKOM, which has been expanding its capacity for the benefit of its corporate clients, can repay its debts. Gordhan, when discussing the electricity sector more broadly, also noted that ‘independent power producers’ had been successfully tendered to provide 1 200 mw of electricity in the country. This in essence was a revelation that electricity in South Africa had been further privatised. No doubt the state’s push for price hikes was also about furthering the profits of these corporate ‘independent power producers’.
The manner in which states intervene in the economy for the benefit of corporations is also evident in the plans announced for the financial sector in the 2012 budget. It was outlined in the budget that “cross-border investments in and out of South Africa” would soon be simplified. Meaning, the state will be making it far simpler for corporate investors to transfer money in and out of South Africa; for their benefit. Linked to this, such measures would also make it easier for South African-linked corporations to invest in other African countries. In fact, the 2012 budget commits the state to help both private and state-owned South African-linked companies expand further into Africa. The reason why South African-linked companies like investing in African countries is because labour is extremely cheap, environmental laws are lax, and the local states tend to cover up or even assist investors in carrying out abuses on communities and workers. The South African state is, therefore, not only willing to facilitate the exploitation of workers in this country; but across Africa. Such actions are the actions of an imperialist!
It is clear many of the provisions in the 2012 budget are aimed at assisting corporations and are riddled with neo-liberalism. As such, the South African state’s budget has been developed by a section of the ruling class for the ruling class.
But what about the welfare provided by the state?
Most main stream media outlets of course don’t see that the budget is really in the interests of the rich and powerful or they are reluctant to admit it. Rather, as stated, much has been made of the fact that the 2012 budget allocated over 50%, of the R 1 trillion that the state plans to spend, to social services. This includes providing resources for housing, child grants, pensions, healthcare and education. Many people, including some on the left, believe that in doing so the state has good intentions. Certainly, it is better to live in a state that provides some welfare than one that provides none; but the reasons why a state provides welfare should not be overlooked.
The fact is that capitalism creates the need for welfare. In exploiting and oppressing people, capitalism will always generate and maintain a situation whereby some people have very little. Linked to this, the fact that a minority of people under capitalism have a monopoly over the means of production, through property rights that the state enforces, leads to a majority of people being dispossessed. Capitalism as a system also needs a section of the population that is poor and that is willing to sell their labour cheaply. As Errico Malatesta argued:
“property allowsits owners to live from the work of others and therefore depends on the existence
of a class of the disinherited and dispossessed forced to sell their labour to the property owners
for a wage below its real value.”
Unemployment too is part and parcel of capitalism. Due to the fact that capitalists want to maximise profits, they attempt to hire as few people as possible to bring down costs. They also mechanise production to ensure fewer workers are required and profits can be increased. The Russian anarchist, Alexander Berkman highlighted this:
“Capitalism is not interested in the welfare of the people. Capitalism, as I have shown before, is
interested only in profits. By employing less people and working them long hours larger profits
can be made than by giving work to more people at shorter hours…the harder and more
'efficiently' you work and the longer hours you stay at it, the better for your employer and the
greater his profits. You can therefore see that capitalism is not interested in employing all
those who want and are able to work. On the contrary: a minimum of 'hands' and a maximum
of effort is the principle and the profit of the capitalist system.”
Because capitalism is aimed at maximizing profit, production itself under capitalism is also skewed towards producing products for those who have money. Thus, luxury products are produced for the rich, who have money; while the basics needed by the working class such as housing, public hospitals and public transport are, in fact, under-produced. The reason for this is that providing products directly for the working class tends not to be that profitable, as this class has few resources. Therefore, under capitalism there is a relative over-supply of luxury items for the few; and a under-supply of basic necessities for the majority.
All of this means that capitalism generates the need for welfare by denying a majority ownership over the means of production, by exploiting workers, by creating unemployment, and by skewing production in favour of the desires of the rich. The state in order to maintain class rule and a semblance of stability has to intervene to alleviate some of these problems that capitalism generates. If it did not, it would become evident to the working class how unfair the rule of the elite really was; and the possibility of revolution would be opened up. Thus, states provide some welfare to try and maintain the status quo – defined by the ruling class exploiting the working class. States too don’t want society to completely disintegrate, as the ruling class would then be deprived of its source of exploitation and wealth. As such, welfare is a painkiller that is aimed at trying to get the working class to accept class rule, capitalism and the state system. The welfare provision in the South African state’s budget too is a painkiller, designed to try and ensure that working class does not question exploitation, oppression, and growing inequality.
Linked to the above, states always try to make propaganda mileage out of the fact that they provide welfare. When states deliver welfare they claim to be acting as the servants of the poor and workers; while in reality they facilitate their exploitation and oppression. It is this duplicity that led Malatesta to argue that the state: “cannot maintain itself for long without hiding its true nature behind a pretence of general usefulness; it cannot impose respect for the lives of the privileged people if it does not appear to demand respect for human life, it cannot impose acceptance of the privileges of the few if it does not pretend to be the guardian of the rights of all”. Via its policies, including the 2012 budget, the South African state is attacking workers and the poor; whilst handing out some welfare so that it can claim to be their defender. As such, one of the central goals of welfare in South Africa is stop people from identifying the state for what it is: an instrument of exploitation and oppression that furthers the interests of the ruling class. In terms of this hypocrisy the South African state is no different to any other state and, as such, it is well versed in art of politics: lying and deceiving.
The fact is, however, that the South African state hands out the bare minimum when it comes to social services and welfare. In the 2012 budget, child grants were set at an abysmal R 280 a month; while pensions were set at just over R 1 100. This is well below the real poverty line in South Africa. Likewise, although the budget for education and healthcare looks large; when it is broken down to the level of how much will be spent on each student or patient, it is a pittance. Hence, South Africa’s state run hospitals and schools remain drastically under resourced. In some schools the pupil to teacher ratio is well over 50:1; while in many hospitals patients sometimes have to sleep on the floor, bring their own bedding or provide their own food. The 2012 budget won’t alter this.
The aim, therefore, of the South African state appears to be to hand out just enough to stop people from fundamentally questioning the imbalances and inequalities that define the country. The black working class continues to be heavily oppressed and exploited, with the vast majority of township residents living in abject poverty, but the state tries to pretend that it serves this section of the population by highlighting the social services it provides; when in reality this programme is extremely limited. Linked to this, the gap between classes is also growing. Thus inequality between the elite – including both black and white – and the working class – including both black and white – has continued to increase. In fact, South Africa is statistically the most unequal society on earth and it is no accident that the current levels of welfare spending have not, and will not, dent this.
To make matters worse, much of the money spent on social services by the state is siphoned off by state managers and private contractors and consultants. The growing privatisation of social services and welfare in South Africa has also opened the door to further corruption. This is evident, for example, when one examines ‘public’ housing. The state tends to outsource the building of ‘public’ housing to private companies. To maximise profits, these companies use the cheapest possible material and they build each unit in the fastest possible time. The result is that tiny houses are built, which often collapse after a few years. Because the welfare system in South Africa and globally operates within the confines of capitalism, it is mostly the private service providers that benefit. They milk the system by attempting to extract as much as money as possible. State planners and policy makers also receive large salaries, and kick backs for tenders. In the Western Cape, for example, the Premier’s Department – which produces nothing tangible – has a budget which is a full third of the size of the Province’s housing budget. Thus, the ruling class disproportionately reap the benefits of the welfare industry, whether through high salaries, contracts or kickbacks.
The reality is that the working class in South Africa directly contributes most of the resources that make up the budget through paying VAT. Added to this, workers produce all the wealth in society. This means even the taxes of corporations that go towards the state’s budget are derived via extracting surplus value from workers. Without workers, machines could not be built or run; services could not be delivered; and profits could not be extracted by bosses. In the light of this, the working class should be furious that their wealth is being taken from them, not only at the point of production but through state taxes, and it is being used via the budget to once again benefit the ruling class.
It is also in the light of the fact that the working class produces all of the wealth in society, that workers and the poor should not see welfare provisions in the 2012 budget as a favour, a gift or charity; but a right. Indeed, workers and the poor should be mobilising to demand greater welfare and better services from the state. They should be demanding that the resources available in the state’s budgets for social services are expanded and expanded. The state and capitalists have stolen from the workers and the poor, via exploitation and taxes, and demands should be made on these thieves.
It is highly important that workers and the poor win reforms in the here and now. These struggles for immediate gains should be used to try and improve people’s lives, build confidence, build working class pride, and strengthen working class organisations. Ultimately, the battle to win reforms has to turned into a revolutionary counter-power that can eventually fundamentally challenge the state and capitalist system. As such, if everyone is to have a decent house, electricity, water, healthcare, good community facilities, and real control over their lives, then the state and capitalism have to be ended, as these systems exist to dominate, oppress and exploit people. In fact, a fight will have to be eventually waged to ensure that all the companies delivering services, like housing, water and electricity, become the collective property of everyone and are run along the lines of workers’ self-management. Thus the struggle for reforms are the building blocks on which a struggle for a new world can be built: a world with no states and capitalism, no bosses and politicians; and no hierarchies. Only in such a world will it be possible to democratically run communities and the economy, via assemblies and councils, so that all wealth can be socialised and the needs of all met. The importance of the struggle to transform the fight for reforms into a revolutionary movement cannot be under-estimated. Without it, the cycle of state budgets being designed by the ruling class for the ruling class, with workers and the poor getting the crumbs, will not be broken.