The South African Federation of Trade Unions (SAFTU) notes the National Budget tabled by the Minister of Finance, Enoch Godongwana, on 23 February 2022. The budget is lowlights center around the austerity we firmly oppose: major cuts in state spending.
In reducing government expenditure, Treasury has dashed the demands SAFTU had firmly put forward in its previous statements, and which it submitted to parliament on the day of Budget Speech.
In tubulated form, let us show how Treasury has dashed our demands
1. On the reversal of budget cuts, and an increase on spending in critical areas of service delivery. The state has on the contrary, cut expenditure on social goods and services from 33.2% to 31.5% of GDP.
If spending were to keep pace with inflation, the current 2021/22 year’s R2.077 trillion would be R2.367 trillion in 2024/25, or 14% higher. (Inflation is estimated at 4.8% this year, 4.4% in 2023 and 4.5% in 2024; the average of which is 4.5%) Instead, spending is projected to be 2.281 trillion, which means the budget will be 3.6% lower than a break-even level taking inflation into account. Health, basic education, South African Police Services (SAPS), courts and prison got below inflation average increases for the next three financial years. Even worse, social development, home affairs and public administration got nominal decreases (-3%, -4.3% and -1.5%), and when we factor the average inflation rate of 4.5% in the same period, these reductions are far higher (social development – 7.5%, home affairs – 8.8% and public administration 6%) than how they look.
2. On ensuring that public sector wages are budgeted sufficiently, so that more teachers, nurses, police, correctional officers, social workers and traffic officers are hired
Treasury has budget insufficiently for the public sector wage bill. In fact, it has affirmed its commitment to the reduction of the public sector wage bill, suppressing the wage bill at an average of 2.1% per year from 2019/20 until the end of the Medium Term Expenditure Framework (MTEF) period in 2024/25. The security cluster, including police and correctional service will get a 1% increase in compensation for the rest of the MTEF, 1.9% is benchmarked for the basic education workers, 2.5% for community development workers and 1.1% for the healthcare workers.
Consequently, these cuts in wages will continue to result in headcount reduction in these departments. (Treasury also acknowledges this in the Budget Review). This means, they will not hire more teachers, nurses, police, correctional officers, social workers and traffic officers as SAFTU has firmly called for.
3. On investing in infrastructure and equipment for public institutions targeting in particular hospitals, schools, police stations and local government.
Though there are above inflation increases in the budget for higher education infrastructure, municipal infrastructure grant and infrastructure of health institutions, there are important infrastructure grants that have been affected by massive cuts such as the school infrastructure backlog grant and equipment for clinics and hospitals.
This means Treasury wants the 17,832 schools (out of a total of 23,276 schools in the country) that do not have libraries, to continue having no libraries; the 19,840 schools to continue having no natural science laboratories, and computer centres not to be built for the 15,584 schools that do not have them.
4. On introducing a monthly universal basic income grant of R1,500 for the unemployed and lowest paid
Taking cue from the State of the Nation Address (SONA), the MTEF affirmed that Social Relief of Distress Grant (SRDG) will be extended by a year, at the measly rate of R350 per month.
5. On public works programme premised on decent wage
The average compensation (in wages) for the economic development sector, under which Expanded Public Works Programme (EPWP) and Community Works Programme (CWP) are located, is set to increase by 4.1% in the MTEF. That is slightly below inflation increase, and as such, amounts to a reduction in the context of the buying power.
Most EPWP workers earn varying wages in different provinces, but most (if not all) of these wages are below the Upper-Bound Poverty Line of R1 350. The Minister did not reveal any intentions or plans to improve the wages of EPWP workers.
6. On stopping illicit cash outflows and tax dodging schemes.
Minister Godongwana mentioned that they are clamping on the illicit trade of tobacco. This is in tandem with demands of the campaign of our affiliate, Food and Allied Workers Union (FAWU). Attempts to deal with the illicit trade are therefore welcome.
However, he said nothing about clamping the illicit financial flows. Multinational Corporations are engaged in tax dodging, mispricing and base erosion that cost our country R400 billion annually. This is a loss to our GDP and tax revenue.
7. On introducing a wealth or solidarity tax so that the rich pay more tax and introducing wealth tax.
Instead, Minister Godongwana lumped the workers and their employers in one category of tax – on personal income tax. As a result, Treasury has let the superrich off the hook with their super riches.
In addition, he affirmed the reduction of the corporate tax which was taken in 2021 already, from 28% to 27%. The corporates are let off the hook too, because, this will raise their confidence to invest in the economy according to the neoliberal treasury. This is despite the fact that they have embarked on one of the longest investment strikes – in which by 2017, had resulted in them hoarding R1.3 trillion. This amount must have increased, maybe even doubled since then.
8. On overhauling the economy and create one based on the need to address unemployment, poverty, and inequality.
Our economy is a neo-colonial outpost; an outpost for the extraction of raw materials. The trade liberalisation brought by neoliberalism renewed the status of South Africa as a neo-colonial outpost, whose economic policy was to be dictated by imperialist financial institutions.
The investors on the JSE are resembling gamblers in a Casino, and thus engage in speculative investment with the aim of making quick cash. It is for this reason that their investment in this country is not long-term, and accordingly, cannot create jobs.
Further, as evidenced in the budget cuts, the desire to replace government in the economy with the private sector affirms the neoliberal form of our economy. These are the vestiges of an economy that requires overhauling.
If we calculate our recent annual population growth of 1.3%, then starting in 2022 with 60.88 million residents, that will rise to 63.28 million by 2024, a 3.95% increase. So per person, the budget is due to shrink 7.55% in real terms over the next three years.
The main area of spending that is being gutted is social development, which mainly consists of funding the country’s desperately-needed grant system. This category is being pushed down from current levels of R352.7 billion to R322.2 billion by 2024/25. If during the next three years, inflation is 14% and population growth is 4%, then that budget should be R418.2 billion. With a R96 billion cut, 27% of current levels, it’s apparent that Treasury aims to squeeze our poorest residents
Schools, hospitals and correctional services will continue to lack infrastructure and experience reduction of the headcount. History has taught us that such is a recipe for poor services and general demoralization amongst the public servants.
As SAFTU, this does not surprise. It is because the ANC is committed to neoliberal capitalism. There is only one answer to this crisis of capitalism and continued budget cuts that are being implemented at the service of the neoliberal financial institutions; that answer is mass mobilization to fight back.