The Minister of Finance is expected to announce further austerity measures in the upcoming Medium Term Budget Policy Statement (MTBPS) in an efforts to please the neoliberal masters who still preside over our policies in one form or another. We believe that there is no coincident in the synchronization of the MTBPS on the 30 October 2019 and the Moody’s Rating Agency meeting which is taking place on the 01 November 2019.
In July this year, Treasury instructed all departments to conduct a compulsory budget baseline reduction scenario of 5% in 2020/21, 6% in 2021/22 and a 7% reduction for 2022/23.
If this goes through it will cut public spending (excluding debt servicing) by 3.4% in real terms. This has huge implications for a country where government spending accounts for nearly a third of GDP.
A 3% cut in the budget next year will result in a 1% cut of GDP. This spells disaster for a country that has been battling to grow above 2% per annum for the past five years. This places the country at a greater chance for a recession, especially with a looming global recession.
As we have pointed out before, this austerity programme is the policy choice the government made in response to the world economic crisis of 2008/2009.
From 2016/17 to 2018/2019, the average annual growth in government expenditure (in real terms) excluding interest payments, was 0.3%, population growth was 1.6%. This shows that per capita government expenditure is actually falling. In 2017/18, economic affairs, housing and community amenities, agriculture and public order and defence all saw falls in their expenditure (of -3%, -2%, -3.6% and -0.4% respectively). In 2018/19 the health budget will fall by -0.1%.
Given the scale of the crises faced in sectors across the economy such a situation poses significant risks. In 2010 government spent an average of R17,822 per child (based on the value of the rand in 2017) but this dropped to R16,435 in 2017 and it is projected to decrease further to R15,963 by 2019. This will mean a 10% decline in funding per pupil in the 10 years, from 2010 to 2019.
Austerity has also been conclusively shown to directly undermine economic growth by stifling the economy. Increasing poverty and inequality are also harmful to economic growth.
The excuse most often given for austerity is that South Africa has a serious debt crisis. However, government debt stands at only 53% of GDP, which is well below many other developing and advanced nations; South Africa’s debt is not high by international standards! Rather, South African capital and the South African government have become beholden to rating agencies acting at the behest of international financial markets. Further, the National Treasury plans to rapidly contain debt, allowing it to peak at 56% of GDP. Given the scale of needs faced this is irresponsible and shows the Government’s commitment to neoliberal policies.
The results of this austerity have been devastating. During the first quarter of this year, GDP declined by 3.2%. We are in the middle of the biggest job loss blood bath. Unemployment is now sitting at 38,3% when counting workers too discouraged to keep on looking for jobs, youth unemployment is at 56.4% and 47% of the black African women are unemployed. Poverty continue to rise now afflicting 63% of the population. We remain the most unequal society in the world.
SAFTU and many other working class formations have previously tabled proposals to break this vicious circle of economic stagnation, poverty, unemployment and inequalities. These have been roundly rejected by the government and the employers over many years in favour of what will please the unelected and unaccountable rating agencies.
SAFTU together with other working class formations are convening a Real Jobs Summit on the 05 – 06 November which will culminate into a march to the venue where Presidents Investment Summit on the 07 November 2019 to demand that the government abandon its strategy that has put millions of workers in misery.