Making economics and human rights intersect

The 2021 national budget slashes funding in health, education and social grants. Experts think the courts can intervene if it can be shown that budget cuts will affect socioeconomic rights.

Ahead of the 25th anniversary of the signing of South Africa’s Constitution on 18 December 1996, legal experts and economists are deliberating whether the time has come to launch a constitutional challenge against finance minister Tito Mboweni’s 2021 austerity budget. The budget cuts on social spending that Mboweni announced will affect the government’s ability to realise the socioeconomic rights that are enshrined in the Constitution and meet its obligations under international human rights law. 

In January 2015, South Africa ratified the United Nations International Covenant on Economic, Social and Cultural Rights (ICESCR), which calls for countries to use “maximum available resources” and “all appropriate means” to progressively realise the rights it contains. South Africa has a progressive Constitution that includes socioeconomic rights to housing, food, water, education, social security, healthcare, a healthy environment, land and redress for past discrimination, which can be judicially enforced. 

Excluding the right to basic education, which is immediately realisable, the Constitution says “the state must take reasonable legislative and other measures, within its available resources, to achieve the progressive realisation of each of these rights”. The covenant commits state parties to progressively realise rights to work, social security, an adequate standard of living, health and compulsory and free primary education.

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Sandra Liebenberg, a professor of human rights law at the University of Stellenbosch, says there are three concepts of the ICESCR: minimum core obligations, progressive realisation and maximum available resources. In 1990, she says, the UN Committee on Economic, Social and Cultural Rights (CESCR) introduced the concept of “retrogressive measures” into the canon of socioeconomic rights jurisprudence. 

Retrogressive measures are those that reduce previous levels of progress made towards the full realisation of the relevant right. The adoption of such measures triggers a stringent burden of justification on a state party, which must show that there has been careful consideration of alternatives and genuine participation of affected groups. “This doctrine of non-retrogression has been gaining traction in South African human rights law,” she says.

South Africa made gains in the provision of socioeconomic rights during the first 15 years of democracy. A highlight was the increase in the number of social grant beneficiaries – from 2.7 million in 1994 to 13.1 million in 2009. However, the country had a “lost decade” between 2009 and 2019, during which Gross Domestic Product (GDP) per capita (per person) did not grow. There was backsliding in the provision of socioeconomic rights. 

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In a comment on the 2021 budget, Mike Sachs, the acting chairperson of the Financial and Fiscal Commission, said: “Over the last decade or so the services established to ensure the provision of these rights has been under significant budget pressure.”

In a statement Equal Education, a movement working for equality in education, said in response to the budget: “Recently published research shows that government spending per learner on basic education decreased by an average of 2.3% between 2009 and 2018.” In a paper, Mark Blecher and others said: “Adjusting for population growth, real per capita public health expenditure has levelled off since 2012/2013 and, according to some measures, it is decreasing.” 

In its first report on South Africa that was adopted on 29 November 2018, the CESCR launched a scathing critique of the country’s macroeconomic policies. On the austerity measures, it said it was concerned that “these measures have resulted in significant budget cuts in health, education and other public services, and that they may further worsen inequalities in the enjoyment of such rights under the covenant, or even reverse the gains made, particularly in the health and education sectors”. The committee said South Africa’s  fiscal policy did not enable it to mobilise the resources required to reduce the inequalities and that it was not sufficiently progressive in that regard. 

Austerity by any other name

Three times, during his budget speech, Mboweni said: “This is not an austerity budget.” But each of the 250 pages in the 2021 Budget Review refers to fiscal consolidation and austerity. While major developed and developing countries have injected new money – $16 trillion – into their economies in the wake of the pandemic, the budget will deliberately impoverish millions of people by withdrawing R264.9 billion from the economy over the next three years. 

It will slash R163.3 billion from government programmes and R144.5 billion from the public service wage bill. The 2021 Budget Review says: “Over the medium-term expenditure framework (MTEF) period, consolidated non-interest spending will contract at an annual real (after inflation) average rate of 5.2%.” The MTEF period is three years. This will result in a significant deterioration in the ability of the public sector to deliver services.

Sachs said: “Budget 2021 is the first time since the adoption of the Constitution in which a budget tabled by the executive has unambiguously proposed a substantial reduction in the real value of allocations to public services. Neither the budget speech nor the Budget Review makes any reference to the state’s constitutional obligations regarding these matters.”

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The budget announced cuts of R136.2 billion to four categories of social spending – tertiary education (R24.6 billion), basic education (R25.3 billion), health (R50.3 billion) and social grants (R36 billion). Evidence of the National Treasury’s disregard and contempt for its constitutional obligations is found in the decision to cut R24.6 billion from the Department of Higher Education and Training’s budget over the next three years. 

The treasury said the cuts would result in a decline in first-year enrolments because of a R6.8 billion reduction to the National Student Financial Aid Scheme’s (NSFAS) allocation. Although the Cabinet reversed the decision to defund NSFAS, the initial plans to reduce tertiary enrolments for the first time since 1998 were retrogressive and unconstitutional.

In basic education, the treasury says budget cuts will result in a lower number of available teachers and larger class sizes, which are expected to negatively affect learning outcomes.  

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In health, the Budget Justice Coalition (BJC),  a network of organisations that seeks to build people’s participation in the budget, says the budget cuts “clearly pose an existential risk of a deterioration in the enjoyment of the right to access healthcare services”. In social development, below-inflation increases for all social grants are retrogressive and will leave recipients with much less than they had last year, the BJC says.

Despite a few landmark judgments that clarified the content of socioeconomic rights, the Constitutional Court has failed to live up to the transformative potential of the country’s supreme law. Millions of desperately impoverished South Africans cannot “eat socioeconomic rights”, as Marius Pieterse, a professor of law at the University of the Witwatersrand, says.

The conservative judiciary is reluctant to overstep the boundaries of the separation of powers and adjudicate polycentric issues, which implicate complex overlapping and interrelated policy choices. But Pieterse says judicial mindset and culture are not the only obstacles to realising socioeconomic rights. He has questioned the “abstract and conceptually empty articulation of socioeconomic rights, which allows for the institutional containment and suppression of the needs they represent”.

Harnessing public money

In a recent book, Radhika Balakrishnan, James Heintz and Diane Elson say the CESCR has not provided a definition or fully elaborated the meaning of maximum available resources beyond stating that it refers to “both resources existing within a state as well as those available from the international community”. 

They say many policymakers and academics adopt a conservative approach, taking the available resources as having been set by policy choices. “The government’s job is then to choose between those fixed resources to realise rights. In practice this means focusing on the national budget, taking the parameters of that budget as given. However, the policy space available to expand resources to increase the enjoyment of rights is greater than conventional economic policy would lead us to believe.” 

The authors say government spending is not limited to tax revenues. Other options include debt and monetary policy. “Monetary policy conducted by central banks, influences the resources available to realise rights. However, the extent to which the mandate and practices of the central bank are consistent with human rights obligations is rarely considered. There is no reason why central banks should not be held accountable to the same human rights principles as other government agencies.” 

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Many central banks also hold foreign exchange reserves to shield the economy against external shocks. “In many respects, these large stocks of foreign exchange reserves represent idle resources,” the authors say. 

Modern Monetary Theory (MMT), a new school of economics that is within the mostly progressive Keynesian tradition, has turned this radical synthesis of international human rights law and economics on its head. MMT rock star Stephanie Kelton says in her book The Deficit Myth that a monetarily sovereign country that prints its own currency, borrows only in its own currency and does not promise to convert its currency into something that it can run out of (such as another currency) cannot be broke or run out of money. 

Such countries can harness the power of their “public money or sovereign currency”. This means that they have no financial constraints on spending. But “every economy has its own internal speed limit, regulated by the availability of our real productive resources. MMT distinguishes the real limits from delusional and unnecessary self-imposed constraints,” Kelton says. Monetarily sovereign countries also do not need to tax first before they can spend. Taxes serve other purposes such as containing inflation or redistribution.

Fighting for liberation

There has been no direct legal challenge to budgetary allocations on the basis of constitutional rights. But the political ground has shifted since the 2021 budget. BJC co-chairperson Busi Sibeko says the budget cuts nominal (before taking into account inflation) non-interest spending for the first time in at least 20 years.

For activists, the reality of the hard austerity has become starker than the soft austerity that took place during the “lost decade”. It is also clear that the government did not mobilise maximum available resources over the past decade and during its response to the pandemic and the lockdown. 

The government did not consider numerous alternative economic policies that could have been used to mobilise additional resources. The Reserve Bank could have funded government spending at no cost or on favourable terms. The country could have looked at the entire SA Inc balance sheet that includes assets of R2.2 trillion at the Public Investment Corporation, idle foreign exchange reserves of R800 billion and government cash balances of R292 billion.

Liebenberg says a court challenge will face a number of legal hurdles. Will courts accept that a budget cut constitutes a retrogressive measure? If so, will they accept that a budget cut is a retrogressive measure before the impact has manifested itself? Did the government intend to bring about a retrogression in the realisation of rights? 

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To counter such arguments she says there is a large body of international literature showing that budget cuts result in a deterioration in public services. A court challenge would be legally competent if it could show that it is reasonably foreseeable that budget cuts would reduce previous levels of access to and enjoyment of socioeconomic rights. Therefore a legal challenge could be made at the time when the state adopts austerity policies. 

Although courts are reluctant to interfere in the state’s budget decisions, Liebenberg says they have also been clear that such restraint “does not imply that such decisions are immune from scrutiny”. There are cases where courts have intervened. “It would be an abdication of judicial mandate to enforce constitutional rights if courts refused to scrutinise budgetary decisions.” 

She says a way out of such judicial dilemmas would be for the Constitutional Court to rule that the treasury should conduct human rights impact assessments before and after making budget decisions and have meaningful public participation in the process. This could require a new policy framework and legislation. “It would open up closed and technocratic budget processes, which are currently unresponsive to rights-based arguments.” 

The time has come to test the constitution’s transformative potential and reduce the power of a National Treasury whose austerity policies will eviscerate the dreams of our liberation and condemn the country to a second lost decade of economic development.

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