ANC cuts corporate tax and spending

Issue 

By Norm Dixon

The post-budget love-in between big business and the African National Congress government has become an annual ritual in the "new" South Africa. Capitalist spokespeople and their media boosters are falling over themselves to praise finance minister Trevor Manuel's 1999-2000 budget, delivered in Cape Town on February 17.

"The overall net result will be a significant improvement in company profits", enthused the liberal Guardian and Weekly Mail's finance writer, Donna Block.

"Foreign investors were also gratified to see that electioneering was not part of Manuel's budget speech", she continued. A general election is due in April or May.

The biggest generator of boardroom grins was Manuel's unexpected slashing of the corporate tax rate from 35% to 30% — a transfer of R2.5 billion (US$400 million) to profits.

Adjustments to personal tax rate brackets, costing almost R5 billion, also benefit high-income earners. A person earning R20,000 will pay R195 a year less tax, while somebody on R500,000 will take home almost R1500 extra. The poorest — those earning R10,000 and the almost 40% of the work force that is unemployed — get nothing.

The Institute for Democracy in South Africa pointed out on February 19 that the amount transferred to big business would be sufficient to increase pensions by 50% or expand the housing budget by 80%. The government also claims it does not have the R500 million required for compensation for the victims of apartheid who appeared before the Truth and Reconciliation Commission.

Manuel maintained the ANC government's tight rein on spending. With inflation predicted to be 5.5%, overall government spending, after interest payments, has been cut in real terms. Every area of expenditure, except health (up 7.3%) and the justice department, has been reduced in real terms. The budget deficit will be held to just 3.5% of GDP.

Almost 22% of the budget has been allocated to servicing debt, the vast majority of which was accumulated under apartheid.

Anglican Archbishop Njonkulu Ndungane said on February 17 that the budget would not make "a discernible difference to the unemployed or poor people". Such people still bear the brunt of South Africa's huge apartheid debt, he said.

The SA Municipal Workers Union said that allocations to local government indicated a government bias towards privatisation of municipal services.

While defence spending has been increased by just 3.4%, it still absorbs more than R10.6 billion annually. In November, the ANC cabinet approved a R30 billion shopping spree on new weapons, to be purchased over 15 years. The antiwar group Ceasefire Campaign and representatives of 50 non-government organisations on February 13 said the money would be better spent on health, housing and education.

The SA Communist Party welcomed Manuel's budget as "a budget that prioritises social delivery over meeting rigid budget deficit targets. This budget is one more decisive step in the ongoing transformation program of the ANC-led alliance."

However, the SACP added that it was "unhappy about tax relief given to capital and higher income-earning individuals, who, in our view, should continue to make a significant and justifiably disproportionate contribution to the reconstruction and development of our country".