Will KZN spend its money wisely?

2010-03-02 00:00

KWAZULU-NATAL Finance MEC Ina Cronjé’s first post-election budget dubbed Spending Your Money Wisely reaffirmed the African National Congress’s commitment to the notion of a developmental state — one that centralises control, promotes the individual’s dependency on the state and, in doing so, leads to profligate public spending. The economic recession and the province’s unprecedented fiscal crisis demand that this year’s provincial budget addresses inefficiencies at the heart of this distorted project.

As distasteful as it may be to ideologues in the ANC, even their nanny state is funded by economic activity of the private sector through taxation. As things stand, our corporate and personal income tax rates are increasingly uncompetitive. High tax rates restrict economic growth by discouraging investment in new businesses and hinder the creation of new, labour-saving goods.

The current tax regime is also overly punitive. Those who contribute most to the fiscus, namely the suburban middle classes benefit the least from the services government funds from the common purse. When these taxpayers require access to quality healthcare, education or even safety and security, they have to supplement these services privately.

By contrast, those who should benefit most from the public funding, namely the rural and urban poor, continue to be patronised as passive victims of the past without opportunities to shape their own destiny and participate actively in the economy where they could, in turn, contribute to its sustainability.

Similarly, the existing labour legislation is progressively raising the cost of work without addressing productivity. It elevates the employee’s rights even if their application puts the employer out of business.

Such policies are anathema to sustainable job creation. With taxation and labour laws beyond the scope of the provincial government’s competencies, Cronjé should be looking beyond them to tackle the structural unemployment in KZN, where the recession has hit labour-intensive workforces harder than in other provinces.

The budget needs to outline concrete plans to attract and retain investment in KZN. It needs to review the regulatory environment by reducing the cost of doing business in our province and by cutting red tape to encourage companies to relocate here.

The budget should move away from the Expanded Public Works Programme whose “job creation” lacks dignity, sustainability and rationale beyond short-term government objectives such as the upcoming Fifa Soccer World Cup. The budget should also consider a package of targeted incentives for small businesses for every new worker hired.

To restore the province’s fiscal stability, the budget must counter the culture of extravagance and excess. For many years, the ANC government behaved as if money were no object. Under the strain of a multi-million rand overdraft and the economic meltdown, Cronjé was forced to look for ways to plug the holes.

To her credit, she has set clear targets that cabinet and government departments have to meet to reduce their expenditure. However, what Cronjé did not do was to indicate what

action would be taken against fellow MECs and government

officials if these targets are not met.

Implicitly, the budget needs to tackle the culture of noncompliance with rules. As Cronjé continues to defend the constitutional right of politicians and civil servants to run businesses, the door for institutionalised corruption remains wide open.

The prospect of disciplinary action in the public service is no deterrent as these procedures routinely drag on without a successful prosecution in sight and offenders are suspended on full pay. With a backlog of unresolved cases, the cabinet should prop up this year’s budget by setting up a centralised mechanism to drive disciplinary processes.

Without transparency in recruitment and auditable performance assessment, many noble initiatives spelled out in previous budgets never took off the ground. Similarly, the government’s tendency was to take on too many responsibilities that should have been left to individuals and businesses. It is no wonder that it has overspent and faltered. Our hope this year is for a provincial budget that creates sustainable jobs, rewards hard work, promotes fairness and stimulates economic growth, not government expansion.

• Roman Liptak MPL, is the Inkatha Freedom Party KwaZulu-Natal spokesman on finance.

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