The Wealth Redistribution Machine That Is South Africa’s National Budget

The budget can be read through various facets. One of the most important is wealth redistribution, with the lion’s share of spending (and borrowing) going to free and subsidised services. Understanding the extent of that requires some quick budget math.

Yesterday, the Minister of Finance, Enoch Godongwana, announced that the government would raise around R2.3 trillion in tax and other revenue this year.

Over R800 billion of this will come from income tax on individuals, over R500 billion will come from VAT, and under R400 billion from tax on company profits. About R100 billion will come from import tariffs and the like. The balance would come from other sources.

The government will, however, spend roughly R2.7 trillion or roughly R400 billion more than it earns. That latter figure will be borrowed – implying a borrowing requirement of around R1 billion per day.

In terms of how it spends the R2.7 trillion, roughly a third or over R800 billion of the amount will go to paying staff costs for civil servants. Almost a trillion will go to social welfare and the provision of free or subsidised services to people. The great majority of expenditure, therefore, easily around two-thirds, goes to salaries and free or subsidised services for poorer South Africans. Just less than R400 billion would go to buying goods and services, much of which is spent to sustain patronage networks.

Roughly R400 billion will go to paying the interest on the debt the government has incurred to afford such spending, and interest spending is now a bigger amount than spending on education, health, or policing.

Only around R200 billion would go to capex spending.

The biggest single expenditure line item is on basic education at around R350 billion (universities get a separate R150 billion). That is followed by social security at R330 billion (and another separate over R100 billion for social security funds). Health gets R310 billion. Community development, which is for free or subsidised services, gets just under R300 billion. Add those up, and you're back near the lion’s share of spending that goes to subsidized jobs and free or subsidised services.

A serious question is what kind of country South Africa would be if this level of transfer from people and firms who make money to those who don’t was not maintained. The lazy cliche would be to say the country will collapse into anarchy. A more thoughtful answer is that by redirecting more spending to capex and reducing borrowing the country would become very rich quickly and stabilise. What there can be no doubt of though is that South Africa is a welfare state in which working middle-class people and entrepreneurs carry the bulk of society on their shoulders.