In the much-anticipated medium term budget policy statement (MTBPS), the Minister of Finance, Enoch Godongwana, will, like his counterparts at the South African Reserve Bank (SARB), tell us to swallow the hard pill. He will say, referring to austerity, ‘this is a necessary pain for the good of SA’s future.’
The South African Federation of Trade Unions (SAFTU) is pessimistic and hopeless. Our pessimism is borne out of ANC’s disastrous economic policy — an economic policy regime that has embraced the private sector and strive to establish a conducive environment for profiteering and private ownership against public ownership.
The political economy of Ramaphosa’s administration, consistent with the commitments of the ANC to the capitalist class, is that of neoliberalism. It is characterised by budget cuts, defunding of public institutions and corporations, and centering the private sector. Concretely, this programme is encapsulated in the government’s fiscal consolidation programme, through which it aims to cut government expenditure across the public sector – from general spending on service provision to state corporations.
In drawing and implementing fiscal consolidation, the government is listening to the prophets of doom and con artists cum economists at the International Monetary Fund (IMF) and World Bank (WB).
In 2018, the World Bank advised the government to contain “public wage growth and contingent liabilities in SOEs”. In an IMF Country Report for 2021, the IMF recommended a fiscal consolidation to significantly reduce the public investments and general government expenditure. The attacks on the public sector, which we strongly feel are going to be reaffirmed and continued in the MTBPS, are premised on these
wishes by the financial institutions of capitalism and to create a conducive condition for profiteering.
Public sector wage bill and public servant
The reasons for reduced government expenditure on public goods are unfortunately premised on false alarms of the neoliberal propaganda that public expenditure and “public debt” are risking fiscal sustainability. In particular, the attacks on the public sector wage bill are justified on such a basis – adding that the public sector wage bill is crowding out other areas of public investment.
In a presentation to the public service wage negotiations in the Public Service Coordinating Bargaining Council (PSCBC), Treasury categorised above inflation wage settlements as one of the “significant risks” for fiscal sustainability. Because wage settlements are seen as a significant risk deterring government from fighting “fiscal deficit” and achieving their fiscal policy ambitions as recommended by the IMF and WB; government refused to give public servants wage increases that were due to them in 2020, and only gave them 1,5% pensionable adjustment in 2021. In this financial year (2022/23), the government only offers a miniscule 3%.
SAFTU lauds the public service unions for uniting in rejecting the the 3% wage offer. Teachers must defy their unions, which clearly acting in the interests of Treasury, WB and IMF, have accepted the wage offer. We encourage the nurturing of this unity for a protracted struggle for 8% wage increase on the baseline.
Defunding State Corporations
Since the liberal democratic dispensation characterised by economics of neoliberalism, the government investment in the SOEs reduced significantly. Research indicates that government investment in its corporations declined by 41,9% between 1998 and 2001. Even though government expenditure on its corporations picked up in other periods, it always contracted at a particular point when government pursued the neoliberal fiscal
sustainability. In the period before Covid-19 (the most part of Jacob Zuma’s second term – 2014 – 2019), investments in State Corporations declined by 54%.
In the post Covid period, government corporations are not getting significant government investment because of the austerity fiscal policy commitments they have with the World Bank. In fact, such defunding of SOEs today coincides with acceleration to privatise them. The MTBPS is likely not to change this trajectory.
SAFTU urges the working class to fight against the defunding of the SOEs and unite to save and reclaim Eskom and Transnet from being privatised.
Despite government’s commitment to fiscal consolidation, which is likely to continue or deepen the budget cuts for public service and public corporations, SAFTU demands:
● Give public servants 8% wage increase
● reverse the budget cuts, and increase spending in critical areas of service delivery;
● ensure public sector wages are budgeted sufficiently for so that more teachers, nurses, police, correctional officers, social workers and traffic officers are hired;
● invest in infrastructure and equipment for public institutions targeting hospitals, schools, police stations and local government;
● introduce a monthly universal basic income grant of R1,500 for the unemployed and lowest paid workers;
● Build houses and provide sanitation to millions of people living in informal settlements;
● Build infrastructure in rural areas so that school kids will not have to cross dangerously flowing streams and rivers on their way to school;
● introduce a job guarantee scheme so the 12.5 million workers can get the jobs;
● Reverse privatisation, and nationalise the big corporates, big farms, mines, and banks
● Reinvest in the transport system in which the railway system is refurbished, and commuter trains brought back to fare people between towns, and from workplaces to residential areas
● a public works programme on decent wage;
● introduce a wealth or solidarity tax so that the rich pay more tax. Increase the corporate taxes and introduce tax on idling money that is hoarded instead of being invested in the productive sector;
● stop business and cronies from looting up to 40% of the procurement budget,
● stop illicit financial outflows and tax dodging schemes
● do not increase the VAT as it will hit the poor more than the rich.