Read on Twitter
As we head towards the #budget @TitoMboweni announced the government intends to introduce #ZeroBasedBudgeting (ZBB)- the notion that budgets are justified from scratch- to radically cutback on spending. What does this mean?
A thread:
A thread:
When the RDP was introduced in 1994, the notion of #ZBB (while not mentioned in the RDP doc.) was used at the time to convey the idea that apartheid budgets couldn’t serve as the baseline, but that new budgets needed to be constructed by the democratic state.
A relatively conservative section was controversially inserted on macro economic policy & budgeting- a discussion for another time.
https://omalley.nelsonmandela.org/omalley/index.php/site/q/03lv02039/04lv02103/05lv02120/06lv02126.htm
https://omalley.nelsonmandela.org/omalley/index.php/site/q/03lv02039/04lv02103/05lv02120/06lv02126.htm
Apartheid budgets were designed to serve a minority of the population- the majority were excluded from various services/ infrastructure, or got inferior services. #ZBB in the RDP era meant budgets would be developed based on needs of the whole population-constructed from scratch.
So #ZBB in this context was a radical idea which envisaged a major expansion of provision. But notion of #ZBB is now being used to mean the opposite: a sweeping reduction of spending based on the view that ‘we have run out of money’; we are in an unsustainable fiscal position; &
that we are heading towards a ‘sovereign debt crisis’ which will push us into the arms of the IMF. The economic logic of radically cutting back spending in the midst of unprecedented economic contraction is fundamentally flawed. Governments around the world are doing the opposite
The roots of our debt problem lie in economic stagnation (GDP contracting), not spending per se. But I won’t go into this debate now. I want to examine the notion that #ZBB will justify a radical reduction in budgets.
This notion assumes: - 1. that budgeting on the basis of real needs (as opposed to ostensibly bloated budgets) will result in reductions- & not increases- in budgets; 2. #ZBB will result in elimination of massive wastage in government programmes, & corruption.
It is actually likely, if done properly, #ZBB based on needs, will result in significant budget *increases*, given deficits in provision of services, infrastructure, & personnel in departments, provinces & localities. Eg There are up to 200k staff shortages in the public service.
If you ask the question for a department or area- what is the minimum we need to properly run schools, hospitals, police stations, local governments etc?- the result in most cases will be that there is the need for an *expansion of budgets* in almost every area.
This because: the legacy persists of major shortages & inequities in provision of infrastructure & services to the majority of poor working class communities;& pursuit of conservative fiscal policies has been exacerbated over the last 5+years by the imposition of harmful cutbacks
In the era of #COVID, the shortage of resources to provide adequate healthcare is glaringly obvious. The lack of adequate facilities, equipment, medication, and health personnel has been brutally exposed, & is going to become more apparent as the pandemic deepens.
The shortage of tens of thousands of health care workers is the direct result of austerity, as govt has failed to fill vacancies, or has frozen positions. On the impact of austerity on health see https://iej.org.za/funding-the-right-to-health/
Or take the example of norms and standards in education: @Equaleducation has fought for national standards to be implemented in all schools- in relation to infrastructure, water sanitation, etc. See https://equaleducation.org.za/2018/07/19/statement-victory-for-ee-and-sas-learners-as-court-orders-government-must-fixthenorms/
There is a common view that the education budget is massive, and that the issue is not a shortage of resources. But the above reality questions this. Further the undoubted fact that wages have risen as a proportion of spending is not as simple as many think.
Nic Spaull in a recent comprehensive paper, shows that real per-learner spending in South Africa has shrunk by -2,3% between 2009 and 2018, with much higher figures in some provinces.
Failure to maintain real spending means that wages (80% of costs) have increasingly crowded out other spending. Conclusion- not that salaries shouldnt have increased, but there is a disconnect between budget allocations and wage agreements. https://nicspaull.com/2020/06/19/new-paper-the-race-between-teacher-wages-and-the-budget-2008-2018/
Austerity budgets- real cutbacks in per capita spending- have retarded implementation of court decisions which have ruled failures by government to provide school/ other infrastructure are unconstitutional.
The question is: what budget is needed to progressively realise the socio-economic rights contained in our constitution? New budgets based on needs (or #ZBB) will see a significant increase in budgets for health and education provision.
Similar conclusions would be reached for policing, the provision of social security etc. Nor is it possible to argue that key other areas of state expenditure, such as infrastructure, is bloated, given critical shortages in housing, economic infrastructure & so on.
The 2nd argument advanced is that #ZBB will result in elimination of large wastage in government. International literature- below-questions whether #ZBB is an effective tool to achieve this.Its doubtful whether #ZBB will help in addressing corruption. Other instruments are needed
Certainly theres a need for reprioritization of spending, elimination of waste, shifting of spending from high paid bureaucracy to frontline service delivery etc. @IEJ_SA has proposed such an approach for the reconfiguration of the public service here https://twitter.com/NeilColemanSA/status/1055012567872143360
Ironically, state cutbacks have made a major contribution to failure to spend effectively. The legacy of GEAR and other fiscally conservative policies, have done this in various ways: excessive contracting out of state functions (which promotes private sector corruption); but
also rollovers/ failure to spend budgets because of lack of capacity (not because of too many resources). Failure to properly resource and capacitate the public sector has perverse effects.
International literature questions whether the #ZBB tool is helpful, & points out a range of perverse or unintended consequences both in the public & private sectors. https://www.investopedia.com/ask/answers/051515/what-are-advantages-and-disadvantages-zerobased-budgeting-accounting.asp and https://doi.org/10.1353/rhe.1977.0005 https://muse.jhu.edu/article/645517/summary
So @tito_mboweni @TreasuryRSA & @CyrilRamaphosa , think carefully before you embrace austerity- driven #ZBB & impose it on SA. Its fiscally illogical, economically irrational, & will have perverse & unintended consequences.
There is an urgent need to have a serious conversation about what type of budgeting and fiscal policy we need as we rescue, recover and build the ‘new economy’ the President has spoken of.
