SAFTU’s expects hell from the Medium-Term Budget Policy Statement

The South African Federation of Trade Unions has no confidence that the Finance Minister’s first medium-term budget speech (MTBPS) will do anything other than deliver another budget like those of all his predecessors – dictated by big business, international financial institutions, the credit ratings agencies and the pro-capitalist media.

In fact based on what he has been saying after his appointment, the federation predicts that Tito Mboweni’s speech will not just be another defence of ‘business as usual’, crafted to boost confidence in the minds of the business community that their investment will be safe and bring them even more profits, but will be a consolidated attack on the working class and the poor, which is already underway.

This view is based on both his record as Governor of the Reserve Bank, a founding member of Mboweni Brothers Investment Holdings, chairman of NAMPAK, an international advisor of Goldman Sachs International and a non-executive Director for South Africa at the BRICS Development Bank, and by his recent Kadar Asmal memorial lecture to an ANC branch meeting on 20 October.

He will represent the monopoly capitalist class, of which he is now a member, and whose interests will dictate his approach. He will seek to reassure the very people who are responsible for the huge levels of unemployment, poverty and inequality, which is ruining the lives of the big majority of South Africans.

His class’s priorities were made clear in the lecture when he said that “a strong focus was required on what action was needed to win the confidence of rating agencies and investors in different sectors to help create jobs”.

We fear the speech will totally fail to acknowledge the extent of the catastrophe which has led to South Africa having one of the world’s six highest levels of unemployment at 37.2%, leaving almost 10 million workers with no job, appalling levels of poverty, almost zero economic growth and the most unequal society in the world.

Women and youth continue to suffer most. The rate of unemployment amongst women is 7,5 percentage points higher than that of males and youth unemployment stands at an outrageous level of 53.7%.

Nor will it accept that the cause of this crisis is the failed policies of ANC governments since 1994. It will offer no way out of this quagmire and certainly not the kind of fundamental economic transformation that is required.

On the contrary he is trying to shift blame for the crisis on to its victims, as seen in his reference in the lecture to “the exorbitant public sector salary bill in the wake of an unabated demand for service delivery”. So it is the poor who are responsible for the economic crisis, with their unreasonable demands for better service delivery, which is costing business so much of their profits to try to satisfy!

He has thus virtually admitted in advance that his will be yet another austerity budget, with no more money, or even less money, for education, public housing, healthcare, service delivery or social grants.

He also made clear that he will go for the reduction of staff in the public sector. Eskom, he said provocatively, needed to shed about 30 000 jobs. “They are broken, their salary bill is so big.”
The Minister is shooting from hip and falling over himself to please the capitalist class and the rating agencies. It is intolerable for a Minister to talk about cutting thousands of jobs without consulting the unions in that sector. Eskom is not bloated as he suggested. Its main financial problems are not the fault of the workers, but the corruption and looting and the Power Purchase Agreements signed by the government.

The Renewable Energy Independent Power Producers (IPPs) are making millions from Eskom, which is buying electricity from the IPPs for R2.14 per kilowatt-hour and selling it at 89 cents. The Minister of Finance must deal with this issue before taking about job losses.

Evidence that job cuts in the government service are clearly still at the centre of his agenda is found in his statement that “we should be making sure that we do not a have a situation where R8 out of every R10 goes to salaries in public sector. Then you are left with R2 for other services, to fix a clinic or hospital.” Again where does the Minister get his figures? Why is he telling a lie?

This shows his bias at its worst. A report in July 2018 by the Public Service Commission showed that 129 306 posts in the public service were vacant. That’s almost 10% of the total staff. Yet Mboweni’s solution is likely to be an austerity budget to further cut the money to fill those vacancies and reduce staff levels even further.

Mboweni and the class he serves don’t have to face the consequences of these budget cuts. They have long contracted out of the public service. Their children are in private schools whilst according their own reports, 91% of the township schools are dysfunctional with over 80% with no libraries and laboratories.

They don’t have to experience that of the patients sent to their death from Life Esidimeni, as they form part of the 17% who use private clinics and hospitals. They don’t know what is means to be told there is no police van available as they live behind high security fence walls with panic buttons linked to the armed responses of the security companies.

As SAFTU said when Mboweni was appointed, his speech will give him “the opportunity to reverse a succession of austerity budgets which are making an already horrendous situation for the majority of South Africans even worse”. More austerity cuts in staff will lead to an even faster degeneration of the availability and quality of service delivery.

We can only hope that he has not forgotten the scandal, when at least 144 patients died and 28 remain missing, following the transfer of 1700 mental health patients out of Life Esidimeni facilities into ill-equipped and mainly unlicensed NGOs, which Justice Moseneke referred to in his arbitration report as “death traps” and “sites of torture”.

This was done to save money and keep within budgets. Appalling though this case was, it was just an extreme example of the cruelty inflicted on poor patients in public hospitals, clinics and community healthcare. Despite the dedication of underpaid and overworked staff, patients face long queues and overcrowding, and dirty buildings which have even led to deaths from multi-drug resistant bacterial infections.

Rather than cut even more from these budgets, SAFTU insists that more money must be budgeted to upgrade hundreds of dilapidated schools and hospitals, employ more teachers, doctors and nurses and step up the fight against drug lords and gangsters.

SAFTU demands that there but be no more “robbing Peter to pay Paul” to fund, for instance, paying for the promised free tertiary education for families on annual incomes of less than R340, 000, by cutting the funds previously budgeted for school building programmes.

The federation demands the insourcing of the jobs of community healthcare workers, early childhood development practitioners, Drop In Centre staff and the EPWPs, and all other outsourced workers, who are all being exploited when their jobs are permanently needed.

Mboweni’s likely answer is that government cannot afford any of this extra spending and that it cannot collect higher taxes from its citizens. “We are aware of the massive challenges facing the ANC,” he said, “but… government operates on a basis of revenue it collects from tax and allocates to departments, provinces and municipalities. There is no other source of funding for the government; it does not own a printing press. So this idea to demand from government to produce money – from where?”

He accused those who demand more money for service delivery of giving little thought to where the money would come from. “Let’s look at what we can demand from our government and also be cognisant of how the system works. In a low economic growth environment, tax collection always goes down. So that means, if we have a growth rate of 0.8%, you can’t expect tax collection to be higher.”

In the country with the highest level of inequality in the world, it is outrageous to say that more money cannot be raised from the super-rich elite who own and control our economy. They make billions in profits and bonuses. That is where the money must come from for the social spending, which is so urgently needed, through shifting the burden of revenue collection on to the shoulders of big business.

New taxes, such as the wealth, solidarity and land taxes, must be introduced, together with taxes on the more than trillion rands hoarded by business. The current VAT increase, which falls mainly on the poor, must be reversed.

Money must come too from the overhaul of SARS, which has lost R48-billion in revenue as a result of the corruption and maladministration uncovered by the Nugent commission of inquiry. That amount alone would have raised the same amount of revenue as the recent VAT yielded!

Revenue must also come from taking decisive action to stop financial outflows, money laundering and tax evasion and from recovering the money stolen through corruption and fraud.
According to data released by Global Financial Integrity, between 2002 and 2011, South Africa lost a cumulative R1, 007 billion to illicit outflows, i.e. more than a trillion rand.

Corporations use aggressive tax planning and profit shifting, known as Base Erosion and Profit Shifting to dodge tax. The Davies Tax Committee estimated that this cost the country a further R50 billion a year. The AIDC provided vivid research on this practice when they exposed how Lonmin was transferring R400 – R500 million a year to their subsidiaries located in tax havens.  What their research showed is much more serious and consequently even more relevant for SAFTU: corporations like Lonmin are not just evading tax but are involved in systematic wage evasion.

When a company illegally moves, for example, R100 million to a tax haven, SARS loses R28 million because the tax rate for corporations is supposed to be 28%. But for us as workers the bigger loss is the remaining R72 million (R100 million minus R28 million = R72 million) which has effectively been taken off the wage bargaining table.

If all these measures were to be announced in the MTBPS we could begin to raise the money for immediate urgent improvements in service delivery.

SAFTU rejects the false argument for cutting public spending – that South Africa’s level of debt relative to GDP is dangerously high. In reality its debt/GDP ratio is relatively low. In December 2017 it stood at 53, far lower than many other countries, including the UK, at 83, USA at 105, France at 97, Greece at 179 and Japan at a massive 253.

In the longer-term however, if we are to raise the funds we need, there has to be a fundamental restructuring of the economy, on to a new growth path, which replaces the failed policies of Mboweni’s predecessors.

They all refused to transform the economy from the one we inherited from the years of colonialism and apartheid, based on the export of natural resources, to be turned into manufactured products and then imported as finished goods, rather than building a strong South African manufacturing sector.

This was made even worse through dropping trade tariffs, opening our economy to the “chilly winds of international competition”, to quote one of the forebears of neoliberalism in our country, Mr Trevor Manuel, and embarking on a neoliberal economic strategy which began with GEAR and the National Development Plan, into which the government is still locked and which forms the framework for successive budgets.

Economic strategy must be based not on the dictates of credit ratings agencies and global big business, but on the implementation of the economic clauses of the Freedom Charter, which said:

  • The national wealth of our country, the heritage of South Africans, shall be restored to the people;
  • The mineral wealth beneath the soil, the banks and monopoly industry shall be transferred to the ownership of the people as a whole;
  • All other industry and trade shall be controlled to assist the wellbeing of the people;

Central to this economic transformation must be the democratic nationalisation of the financial industry, the mines and key manufacturing monopolies so that the government can ensure that the new growth path leads to rapid economic growth and thus generates more income for the Treasury

Austerity budgets can then be replaced by expansionary budgets to end the two-tier provision of education and healthcare, provide free and quality service to all South Africans and begin to transform the lives of the majority and build an equal society and abundance for all.

Tragically however there is no chance of the Finance Minister offering any such way forward. He is stuck in the failed class politics, which have led to our current socio-economic disaster.

Only mass pressure and protests in the streets will liberate the working class and bring about lasting change. SAFTU, with its allies in the movement launched at the Working-Class Summit, are committed to mobilising the fight back and a mass campaign to end the exploitative capitalist system and replace it by a new democratic socialist order.

The SAFTU Special Central Committee has called for a three days mass stay away in response to this assault of the living standards of the poor. We are convening the meeting of the Working Class formations to take these discussions forward. Statements no matter how articulate will continue to be ignored until the poor vote on its feet.

That is the only way, in which the country’s wealth will be planned, controlled and shared by the working people and not a super-rich elite of exploiters.

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