The Government has unveiled a total commitment to austerity measures, with Treasury especially targeting our tumultuous municipalities with the most severe budget cuts. The pleas of SAFTU and other organisations of workers and the poor fell on deaf ears. The government refused to listen to progressive forces, and instead gave an ear only to the rating agencies and big business.
Today represents yet another missed opportunity for government to confront the worsening crisis in the economy. Ever greater number are falling into the poverty trap. Statistics show the catastrophic levels of unemployment and deepening inequalities.
But Treasury has turned its back on the poor majority, so as to serve the interests of the tiny community of the multi-millionaires and billionaires. They are smiling today because their wealth is not touched not threatened. The working class will see deeper levels of budget cuts which will worsen their living conditions whilst not helping to grow the economy.
The government is using the wrong instruments to respond to the historic crisis of poverty, unemployment and inequalities inherited from colonialism and apartheid over three and a half centuries. Government is using the wrong measures to respond to the world economic crisis that visited the world in 2008/09, with a repeat global recession now looming.
A sign of insanity is to repeat the same thing hoping to achieve different results. Neoliberalism and austerity have failed and will fail in the future. It doesn’t matter how many times the leadership can be changed, as long they still implement the wrong measurers they will fail.
Specific comments on the budget framework:
- Government still pursues the objective of keeping the debt/GDP at low levels. Yet the debt to GDP ratio is inappropriate as a measure of our ability to solve problems with state programmes. South African debt is not out of control, and no country facing this magnitude of underdevelopment ever embarked on a programme to keep debt to GDP ratio at the current levels. In order to achieve this objective of meeting artificially-low debt/GDP levels, the government is reducing expenditure by R21 billion in 2020/21 and 28,5 billion in 2021/22 mostly falling on goods and services. But if instead, Treasury considered a full accounting of the public sector ‘balance sheet’ to include our state’s mineral wealth, then as the International Monetary Fund admitted in last year’s Fiscal Review, South Africa is the 6th most wealthy major state in the world. It should be our wealth, not our income, that helps Treasury expand expenditure, and those who promote fear of a credit ratings downgrade should take a deep breath and contemplate South Africa’s wealth.
- Macroeconomic policies pursued since the unilateral introduction of GEAR are wrong. No country ever developed by adopting an inflation target as low as the 3 to 6% range (as mandated within the European Unions), by removing exchange controls, by allowing billions to leave through tax dodging schemes including mis-invoicing, transfer pricing and illicit cash outflows. No economy dropped corporate taxes by half – from 56% in 1994 to 28% today – at the time when it needed resources to develop.
- Austerity measures (cutting of expenditure) will not help our economy to grow. You cannot cut public expenditure and reduce levels of investment and then hope that will lead to growth. SAFTU and many others have been arguing for real stimulus package of R500 billion rands to kick start the economy. The American government needed a 750 billion dollar fiscal stimulation to respond the crisis. South Africa is doing the opposite, yet facing our worst-ever poverty, unemployment and inequality.
- SAFTU is appalled that the government is taking steps to undermine service deliver where it matters most, at the local government level. Transfers to the local government will be reduced by a R20,5 billion, including a 3.2 billion from the local government equitable share and a R17.3 billion in direct conditional grants. Treasury admits, “These reductions are likely to affect service delivery, particularly through delays in building infrastructure.” Treasury can continue this arrogant approach because protests against local austerity have often been confined to communities – but our people can see how the austerity is already squeezing our dorpies, and they will not be hesitant in embarking on national protests, against Treasury. This was the same breakthrough that FeesMustFall made when protesting a MTBS in September 2015.
- SAFTU reject the IMF/World Bank like structural adjustment programmes and conditionalities attached to the assistance to Eskom. We remain opposed to the unbundling of Eskom as we are convinced that this is route that will lead us to privatisation of a public good that we strongly believe must be provided by the state.
- SAFTU is extremely worried that the R150 billon rands government need in the next 3 years to satisfy its commitment to austerity and neoliberalism will once again be paid by the poor. We fear that the government will be tempted to once again increase the VAT and punish the poor more through increasing the so called sin taxes come the Budget speech in February 2020.
- We remain opposed to the reduction of the size of government, which Treasury demands not based on any formulae to service our people. Government is short of teachers, police officials, correctional services staff, hospital professionals, etc. Many hundreds of thousands of workers could be hired as part of the ‘Just Transition’, to prepare our physical and social infrastructure for climate chaos. Instead of filling vacancies many years in the making, government announces that it has a bloated civil service and unsustainable wage bill. We will be watching the government very closely going forward to see what will be in what it called the reinvigorated early retirement programme.
- SAFTU remains opposed to the privatisation of SAA. We see SAA forming a very important cog in an integrated public transport system. Government, through its corruption and crony capitalism, nearly collapsed SAA. Just like Eskom, DENEL and many others, SAA were world beaters in terms of service. Now that these companies are bleeding to death, the response of government is to typically sell them to their business friends to be used not to provide a public good but to generate profit and be subjected to the rules of profit logic.
- SAFTU rejects the determination to commercialise basic services including the insistence to stick with the totally failed etolls system in Gauteng. We insist the public transport, energy, education, healthcare, water, environment including the right to clean air, etc are public goods who must be provided the state not for profit but in a manner that guarantees access of the poorest of the poor.
We agree with Minister Mboweni when he says, “our people became poorer. Some lost their jobs. The food cupboards are almost empty.” We agree when he says, “rock the boat! Shake the baobab tree! Do the unusual, disrupt the comfort zones. Get moving.”
Unfortunately he once again indicated left and turned right! SAFTU would have liked to seek the rocking of the boat and shaking of the baobab tree through the following measures:
- A real stimulus package of at least R500 000 that will inject a sense of urgency and turn the wheels of the economy. Without the stimulus we are dead in the water.
- A solidary tax or wealth tax to tax the trillions hoarded by the class of multi-millionaires and multi billionaires
- Reversal of the programme to reduce corporate taxes back to where they in 1994 which is 56%. This will release resources we so desperate need to rebuild our industrial base.
- Change of the monetary policy that have punished and choked the economy. This will include scrapping of the inflation targeting policy of 3 – 6% and reduce interests rates decisively while implementing the ANC national conference resolutions to nationalise the Reserve Bank and change its mandate. This will lead to making money much more cheap and bolster the household and SMMEs expenditure.
- Nationalisation of the mineral resources and land as part of the deliberate strategy to address property and land poverty of the majority
- Taking steps that are practical but in consultation with workers and affected communities to introduce a well-financed Just Transition, to move the economy from carbon to socially-owned renewable. This must be done in a manner that recognises the massive developmental challenges of unemployment which must not – we insist –be exacerbated.
Across the world, austerity programmes are under attack, and states are increasingly subject to full delegitimisation by aggrieved citizenries. SAFTU and our feminist, environmentalist, community and other allies will now embark on an even more committed mission, of telling truths about the way Treasury responds to the mood of Moody’s, not the desperate need of the South African majority.