SAFTU rejects the 2021-22 Budget Statement presented on behalf of the ANC government by the Minister of Finance. It is a typically arrogant and business-as-usual Budget, ignoring overwhelming evidence that neoliberalism and austerity have worsened our country’s already-intolerable levels of poverty, unemployment and inequality.
Just yesterday StatsSA issued a damning condemnation of the government’s dismal record on providing employment during the pandemic: during 2020 a net 1.4 million of us – an extraordinary 8,5% of employed workers – lost our jobs. These included nearly 11% of the Eastern Cape’s and 10% of Gauteng’s workers. Sectorally, 13% of craft workers lost their jobs, along with 11.5% of domestic workers. This failure to address the most important challenge facing our country – unemployment, and with it poverty and inequality – will be remembered forever, as the betrayal of the ANC’s historic mission simply to satisfy Treasury’s neoliberal ideologues.
Despite this failure, the government is sticking to its guns! It seeks to build a primary surplus by 2024 by imposing austerity. Moreover, Treasury is even cutting the corporate tax rate, while having the gall to claim, as did the Finance Minister, “Our R6.2 trillion spending envelope over the Medium-Term Expenditure Framework gives expression to the Economic Reconstruction and Recovery Plan. This is not an austerity Budget.”
It is indeed, because when inflation is accounted for along with the budget cuts, this is a budget representing unnecessary stinginess and, in some cases, extreme austerity.
- Universities will face Treasury’s demand that “Fees Must Rise” while students justifiably will return to protesting for Fees to Fall.
- With the Equitable Share grant falling, municipalities will necessarily default even more on their payments to workers and creditors (including Eskom), and fail to maintain acceptable service levels for residents.
- The housing budget is so short of funds that the Minister has returned to apartheid-era “toilets in the veld” site-and service projects.
- Water and sanitation systems are breaking, without funds for repair, much less expansion of lines to people in desperate need.
The Treasury has also unveiled its sabotage of the 2020 “R500 billion fiscal stimulus” regularly announced by President Cyril Ramaphosa with great fanfare. It is telling that the 2021 Treasury statements don’t mention that stimulus, because their data unmask Ramaphosa as telling fibs.
From the government’s 2019-20 spending of R1.486 trillion (on all items aside from interest on the debt), the 2020-21 level would have been R1.535 billion had it simply kept up with inflation of 3.3% this past year. The actual spending was R1.571 trillion, representing a real spending increase of just 2.3% during this pandemic year, at a time the GDP was falling 7.2%. So, the actual fiscal stimulus was R36 billion, not R500 billion.
(Moreover, the idea that as part of that supposed stimulus, bank loan guarantees to businesses worth R200 billion would be taken up has already been shown as a fanciful dream, since only around R20 billion appears to have been lent under this scheme.)
In other words, South Africa’s Treasury has done next to nothing to provide net fiscal support – spending above and beyond that already budgeted – to an economy during the worst suffering in memory. It is a shameful abdication of duties, making this government one of the most irresponsible on earth, all in the name of fiscal discipline.
Looking forward, if we assume another 3.3% inflation this coming year, added to last year’s spending of R1.571 trillion (not including interest payments), then even without any fiscal stimulus, spending should amount to R1.623 trillion. But Treasury expects to spend just R1.552 trillion (on non-interest items). So, this year we face R71 billion in net cuts – i.e., austerity.
This austerity is unnecessary because rich South Africans and the corporations are undertaxed: they live and operate here within the most unequal economy in the world in terms of income, an economy much more unfair today than a year ago. Firms operating here regularly record among the top five profit rates on earth, according to the IMF. So, for Treasury to “agree” with the rich and corporations not to tax them more – and indeed to lower the primary corporate tax rate to 27% (recalling that in 1992 the same rate was 52%) – is a decisive show of Treasury’s bias.
The Finance Minister claims that “getting our fiscal house in order is the biggest contribution we can make to support our Economic Reconstruction and Recovery Plan.”
But that plan had all manner of ambitions – not least is hiring 800 000 workers to assist in income generation for the working class, in essential areas including healthcare, education support and public works that are vitally needed to restore pandemic-related losses and improve our capacity to withstand a third wave of Covid-19 this winter.
Yet Treasury aims to cut the public sector wage bill by R303 billion in the next three years, a profound attack on the state’s ability to hire needed staff. This comes after Treasury’s reneging on the three-year wage bill last year, in search of savings – a strategy that public sector unions have taken to the Constitutional Court and that will continue to attract our protests given that most state civil servants – not fat cat managers whom we do not defend – are struggling members of the working class.
The Finance Minister claims, “fiscal prudence is the best way forward. We cannot allow our economy to have feet of clay.” But with the private sector and parastatal corporations still sickly and refusing to invest in the real economy, Treasury’s austerity regime will ensure that the economy will continue to have feet of clay. Already corporate tycoons are hoarding R1,4 trillion rands in addition to shifting up to R400 billion through illicit cash outflows and mispricing, aggressive tax dodging schemes exposed by Judge Dennis Davis and outright stealing 35 – 40% of our procurement budget. The corporates are not reciprocating the Treasury’s foolish attempts to embark of a trickle down approaches to development. They not only regarded by the PwC as the second most corrupt in the world but they should rate as the most self-centered and selfish in the entire capitalist world.
The Finance Minister is worried that “High government debt levels increase the cost of borrowing across the economy.” It is true that if borrowing increases, so does the cost of servicing the debt – unless interest rates are dramatically reduced, as progressive economists and trade unions have long demanded.
In 1995, the Reserve Bank’s main interest rate – and international rates – were first ratcheted up, due to then Governor Chris Stals’ exchange control liberalisation, which aided capital flight by white apartheid beneficiaries who were the main wealth holders. If capital controls were tightened and Illicit Financial Flows – in the range of R150-350 billion annually Treasury admitted in 2019 – were halted, the interest rates could come down. (To illustrate how little Treasury is doing, only R2.7 billion in illicit revenues were recovered by the tax authority in 2020 according to the Budget Review.)
On a different plant
The government leaders live on a different planet. In the Finance Minister’s world, “we have mourned the passing of nearly 50 000 of our fellow South Africans as a result of the Covid-19 pandemic.”
But in our world, the deaths of 100 000+ South Africans – a figure arrived at by including what are termed “excess deaths”, entirely attributed to Covid-19 but not reported as such due to the decrepit health monitoring and Home Affairs systems – mean Mboweni’s undercount of mortality and associated misery is more than half the reality.
In our world, unemployment levels making us the worst in the industrialising world constitute the greatest threat to our stability, but Treasury insists that the supposed 800 000 jobs in the public service announced last year are once-off, to be forgotten as soon as possible.
In our world, the levels of poverty have reached at least two thirds of the citizenry, using the Upper Bound Poverty Line. And yet the increase in social grants ranges from only R10 to R30 per month. For women caregivers of children, this increase is 2.2%, while official inflation has been 3.3% and for poor people the extremely high electricity, food and transport price hikes mean the rate is certainly much higher. For the elderly the grant increase is 1.6%. For foster care, less than 1% – all far lower than inflation.
SAFTU and its allies including the C19Peoples Coalition, Cry of Xcluded and the 147 working-class formations which assembled in Soweto for our summit in July 2018, have called for the introduction of a genuine Basic Income Grant (BIG). That should replace the tokenistic R350 special unemployment grant. We note that notwithstanding the President’s promise to, at minimum, discuss a BIG, Treasury is mum on this demand.
In our world, we desperately need the speedy introduction of the National Health Insurance, and again note with disgust Treasury’s continuing sabotage.
SAFTU calls on the working class to intensify the programme of mass mobilisation that started today to force government to:
- Overhaul the country’s socio-economic policies, to move away from narrow chasing of profits, into meeting the needs of society for jobs at a living wage, food sovereignty, housing, healthcare, education, clothing, energy efficiency, climate crisis adaptation, etc.
- The fiscal and monetary policies must change to so the state has resources to lead development of our society and thereby “crowd in” private investment, since transferring income to the poorest has a much greater “multiplier” especially for locally-produced goods and services. This is the only way we can rebuild our manufacturing base and reindustrialise our economy again.
- Announce a moratorium on job losses and provide a real stimulus package to replace this awful austerity budget at the same time accept there can be no recovery without relief measures to support the poor.
To succeed, the working class and all our allies – patriotic South Africans who witness such brutal neoliberalism, state and corporate corruption, and uncaring arrogance in the ruling class – must unite, for we have nothing to lose except our chains.