SAFTU POST BUDGET REFLECTIONS

The South African Federation of Trade Unions (SAFTU) is disappointed that Finance Minister Enoch Godongwana continues to obey the International Monetary Fund’s austerity instructions dating to mid-2020, by amplifying fiscal consolidation and therefore cutting the inflation-adjusted budgets of nearly every part of the state. While raising the budget for subsidising corporations via the Economic Affairs cluster, he is cutting basic education, health, social development, correctional services and support for the state-owned enterprises (SOEs) that serve poor and working people. 

Treasury is now the main reason for what is widely understood as state failure. The ANC is facing a possible electoral defeat. About two thirds of the citizens no longer participate in the electoral system as their hopes of a better life has been dashed by successive governments since the introduction of neoliberal economic programmes in 1996. Despite starring a possible defeat, the ANC government simply refuses to accept that their Structural Adjustment Programmes encapsulated in structural reforms have dismally failed the economy and has deepened the marginalisation of the poor majority. 

This year’s Budget is not a Peoples Budget as none of the working class and marginalised poor demands have been considered. It is a continuation of the market led budget.

This year’s inflation is projected at 4.9% and for the following two years, at 4.6%. The National Health Insurance pilots will lose already-inadequate resources. Community development will suffer drastic cuts, according to Godongwana: “The R47.7 billion net decrease is due to a R9.6 billion decrease in the local government equitable share and a R5.2 billion decrease in the provincial equitable share. The informal settlements upgrading partnership grant for provinces is reduced by R7.2 billion, the human settlements development grant is reduced by R5.2 billion and the municipal infrastructure grant is reduced by R3.1 billion. The integrated national electrification programme (Eskom) grant is reduced by R5.6 billion and the Passenger Rail Agency of South Africa’s rolling stock fleet renewal programme is reduced by R6.1 billion.”

The budget contains no Basic Income Grant, and indeed 28 million people who receive various social grants will progressively lose out to inflation. For example, an anticipated 13.8 million Child Support Grant recipients – fully two thirds of our children who are living in poverty (with parents earning less than R63 600/year) – are budgeted to receive R93 billion in 2026/27. While that amount is up 9% from current levels, the consolidated three-year inflation rate is anticipated to be 14.7% between now and then. And South Africa’s birth rate is 1.9%, with an even higher rate among our lowincome citizens. So, unless reversed, on a per person basis, the average poor family with children will lose 7.5% of their real grant each year under Godongwana’s austerity regime.

Worse, Godongwana projects “the discontinuation of the COVID–19 Social Relief of Distress Grant. This termination is expected to see a reduction in the total number of grant beneficiaries, from an estimated 27.8 million in 2023/24 to 19.7 million in 2026/27.” This completely contradicts the promise made on February 8 by President Cyril Ramaphosa in his State of the Nation Address. This is what President Ramaphosa said:  “In the midst of the pandemic, we introduced the special Social Relief of Distress (SRD) Grant, which currently reaches some 9 million unemployed people every month. We have seen the benefits of this grant and will extend it and improve it as the next step towards income support for the unemployed.” Godongwana has killed it, with no replacement budgeting for the 8.1 million he counts (or 9 million Ramaphosa counts, or the 10+ million who received the grant a year ago before conditions tightened) – and a vague promise that in April we will be told more about social security restructuring (but R33 billion in cuts to the SRD in 2025). 

Treasury should urgently raise the level of Child Support Grants to the Food Poverty Line of R760, or better, to the point where a nutritious food basket can be acquired for children each month: calculated at R827. SAFTU continues to call for a monthly Basic Income Grant at the Upper Bound Poverty Line of R1 558 – and indeed that line should be increased to what we and University of Cape Town SA Labour and Development Research Unit scholars believe would be a more appropriate measure of poverty, at R65/day, or R1 950).

As one reflection of Godongwana’s failure to invest in our future, the nominal budget of the Department of Basic Education will grow by 4,7% in the Medium-Term Expenditure Framework (MTEF), which in inflation adjusted terms, represents an increase of zero. But South Africa’s birth rate is 1.9% annually, so in effect on a per student basis, Godongwana is imposing a substantial cut of 5.7% on our learners, at a time intellectual skills are vital for a society undergoing rapid technological change. 

We will therefore see an even worse problem of ‘culling’ the ill-prepared students in the two years before matric, a rate of drop out that in 2022 was 31.8% (i.e., learners entering Grade 10 who could not complete), soaring to 36.1% in 2023. And at a time, graduates with good marks are applying to the country’s jammed universities and being rejected in record numbers because of lack of spaces, Godongwana is cutting the higher education budget by 2,2% (i.e. R27.5 billion over the medium term, mainly to the National Student Financial Aid Scheme), virtually guaranteeing a new round of #FeesMustFall protests. Other departments will experience the same fate. For instance, the health department’s budget will decline by 1,3% in real terms in spite of a 1% increase in population, so on a per person basis, -2.3%; social development will decline by 2%; arts, culture and sports will fall by 4,1%; judicial and correctional services will decline by 0,2% even at a time prosecutorial capacity is so weak that scores of politicians named by the Zondo Commission have not been investigated by the ANC-ruled state. State security and defence will decline by 2%, yet the deployment of SANDF troops in the eastern Democratic Republic of the Congo and Cabo Delgado in northern Mozambique – which will mainly benefit super-exploitative mining companies and Western fossil fuel firms – are budgeted for R3.4 billion extra. Home Affairs, a department that is marred by human resource incapacity and the troubles in modernising and rudimentary digitisation, will suffer  a staggering real decline of 9,8%.

Aside from cutting budgets to the poor, the greatest impact of these declines is projected to be in the procurement of equipment and machinery, compensation of employees and building of infrastructure for the public institutions managed under these departments. 

The wage bill and public servant cut-backs

In trying to contain spending on wages, Treasury is unwilling to accommodate recruitment of new public servants across all public institutions. The suicidal freeze on new employees began more than four years ago, and was amplified in cost containment measures from August 2023. Reduction of the headcount of state employees through natural attrition has, with the hiring freeze, led to the permanent closure of posts. No wonder the citizenry is enraged at poor service delivery.

For example, the annual report of the Department of Home Affairs shows that out of 18 456 posts, only 7 398 (40%) are filled. The Correctional Services vacancy rate grew to 37% by 2022/23. In the 2022 MTBPS, National Treasury showed that government departments excluding the department of education had a negative growth in the number of public servants.

This general reduction in public servants has created public servant to population ratios that are terribly inadequate: educator-to-learner, 1:31 in basic education; policeto-population, 1:413; nurse-to-patient, 1:224; doctor-to-patient, 1:3198; and social worker-to-patient, 1:5000.

Infrastructure backlogs

Though we welcome that 14,6% will be allocated to infrastructure in hospitals and clinics over the MTEF, we argue this is not sufficient, given that healthcare inflation typically outstrips the general Consumer Price Index (again, at 14.7% consolidated, after 4.9% price hikes this year and 4.6% in the next two years).

There remain severe infrastructure backlogs across the public sector. Institutions of government such as schools, hospitals and clinics, as well as all the municipal infrastructure that requires urgent strengthening for climate-change adaptation and resilience – so as not to again suffer Durban’s fate, of sewage systems destroyed in the torrential rains of April 2022 that not only killed 500 residents but that also has left E.coli washing up in lethal doses across the city’s vitally-important beachfront.

The severe lack of infrastructure as a result of austerity and corruption has caused overcrowding in school classrooms, lack of ablution facilities in some schools, libraries, etc. Out of 22 597 public schools in basic education, 635 still use generators for electricity. Despite repeated incidences of learners drowning in faeces at schools in Eastern Cape and Limpopo, 3932 schools still use pit toilets; 16 714 are without basic libraries; 18 671 are without laboratories; 14 949 are computer centres and 9733 are without sports facilities. In spite of the problems presented by infrastructure backlog in basic education, the National Treasury proceeded to cut R257 million from the school infrastructure backlog. 

In other words, the more than 80% of the population using public healthcare, public education and other public services facilities will still be disadvantaged from receiving quality services due to lack of infrastructure, and even equipment. 

Taxation

SAFTU welcomes no increase to the Personal Income Tax and the Value Added Tax. However, we express our deep concern against the unwillingness to address the corporate tax undercharging (from Special Economic Zone rates of 15% to a standard 27%, compared to the 52.5% corporate tax rate in 1992), and to have a higher income tax (and to introduce a wealth/solidarity tax) for rich people in what is the world’s most unequal society. For working-class and middle-class South Africans and for all 61 million of us who pay Value Added Tax, urgent relief is needed – whereas the rich should pay a much higher share given the burden we all have, of maintaining their standards of living in opulence.

The 2024 budget remains an austerity budget, and thus will continue the old trajectory of declining public services across all spheres of government, from local government to state owned companies.