SAFTU is appalled by the statement made by President Cyril Ramaphosa who together with other multibillionaires make two ridiculous claims: there is no austerity and the massive public sector wage cuts are justified.
Every South African understands that Government has been slashing real (after-inflation) budgets in sensitive areas such as social grants, local infrastructure, housing, education and health care for five years now, as part of the after-effect of the world capitalist crisis of 2008/09 that had raised the budget deficit to 6% of GDP and cut 1.5% off South Africa’s GDP.
ANC Led Alliance Austerity Programme
In the three years between 2016/17 and 2018/2019 the average annual growth in government expenditure (in real terms) excluding interest payments, was 0.3%, population growth was 1.6%. This shows that per capita government expenditure is actually falling.
In 2020-23, we face even greater austerity, as Treasury admitted last October that “real [inflation-adjusted] main budget non-interest spending grows at 1.2 per cent in 2020/21, 0.1 per cent in 2021/22, and -0.2 per cent in 2022/23.”
The current austerity regime poses many threats to workers and communities, not just the 1.4 million civil servants who face R161 billion less in their pay checks. There is an additional R100 billion in austerity for those depending on social spending and other state services, including education spending down by 1.9% in real terms; health care by 1.2%; and the police by 2.8%. Again, since population growth is about 1.55%, these cuts are even more substantial in per person terms. https://www.businesslive.co.za/bd/opinion/2020-03-02-neva-makgetla-robbing-peter-to-pay-paul-is-not-an-effective-funding-strategy-for-soes/
When austerity reduces funds for government employment, there is a severe danger of cuts to front-line services like nursing. There are spending cuts anticipated for essential social and economic infrastructure spending such as schools and roads. This has the potential to further undermine service delivery and increase anger and social fragmentation. All of this would increase poverty, inequality and unemployment.
Austerity directly undermines growth by stifling the economy, since demand declines.
The excuse most often given for austerity is that South Africa has a serious debt crisis. However, government debt stands at only 62% of GDP, well below many other developing and advanced nations. South Africa’s debt is not high by international standards! The critical measure of debt is as a percentage of the state’s total assets, and even the IMF shows that among countries with reliable data, the massive natural resources in South Africa owned by the state means there are only five other countries considered to have a healthier public sector balance sheet.
Public Sector Balance Sheets, 2018 (% of GDP)
Source: IMF (2018)
Rather, the South African government and its corporate backers have become beholden to credit rating agencies acting at the behest of international financial markets, with no regard to the welfare of the masses of people.
The real danger regarding debt lies in two crises: South Africa’s extremely high relative interest rate (among major countries, only Turkey, Argentina and Pakistan pay a higher rate in international markets), and government’s debt guarantee exposure to state owned enterprises, Eskom in particular where the exposure is R350 billion. Because Eskom’s R450 billion in current debt levels are unsustainable, with a R250 billion write-off requested to achieve a R200 billion debt that can be serviced, urgent intervention is needed in solving Eskom’s crises, in part the product of state capture and maladministration.
One critical question is whether the vast majority of debt owed to lenders who knew about the Hitachi-ANC corruption – especially the World Bank, African Development Bank, China Development Bank and BRICS New Development Bank – is truly the responsibility of South African taxpayers and electricity customers. We ask whether lender liability should be invoked, to pay for what is obviously an Odious Debt on the corruption-riddled Medupi and Kusile power plants. In addition to Hitachi, another 10 contractors are being investigated by the Special Investigating Unit for corruption worth R139 billion at Medupi alone.
Robbing Peter to pay Paul
There has been no change in the overall socio-economic crisis, despite the euphoria within the ruling class about the elevation of one of their own to the highest office in the land. The 2019 recession just announced confirms the need for a U-turn in policy direction.
The media owned by the multibillionaire class has been heaping praises on Ramaphosa and generating excitement about a New Dawn, a prosperous future and punishment of corrupt Zuma-era officials.
Yet there is every indication that the status quo will remain intact, and many aspects of life are getting worse. SAFTU warned that apart from more coherent ordering of words, there isn’t going to be any real change between the Cyril Ramaphosa and Jacob Zuma when it comes to economic policy.
In the run-up to the ANC national conference, Zuma publicly instructed the Minister of Finance Malusi Gigaba, to show him progress on plans to cut government spending by R25bn and raise taxes by up to R15bn, following the ratings downgrade to junk status by Standard & Poor. This was how they aimed to raise money to pay for “free education”.
This instruction underlined the correctness of the SAFTU founding congress resolution that neither of the factions of the ANC will change the direction followed by the ANC for the past two decades. This also exposes how hollow Jacob Zuma’s talk about ‘radical economic transformation’ really is. There could not be a less radical and less transformative solution to the country’s economic crisis, than the massive public spending cuts and tax increases which he demanded from the Treasury.
Austerity measures are typical medicine, which right-wing governments prescribe for the working class to force them to pay the price for a crisis of a monopoly capitalist system and a government, which has collaborated with that class.
SAFTU warned that the ‘fiscal gap’ in the way Zuma was proposing would make the budget cuts already foreshadowed by the then Finance Minister Malusi Gigaba, even bigger and makes the tax increases even greater.
The tax rises hit the poor directly through PAYE deductions and the 7% increase in VAT, which we all pay every time we buy something.
SAFTU accused Zuma of “robbing Peter to pay Paul” to fund his proposal for free tertiary education for families on annual incomes of less than R300, 000, which is estimated to going to cost R40bn. ’Peter’ was robbed of R25bn previously budgeted for school building programmes, municipal infrastructure, passenger rail transport and provincial roads, with the remaining R15 to come from higher taxes.
His statement proved that he was never serious about this promise and that ‘Paul’ would ever see his R40bn. Even if it went ahead, because of the R25bn cuts, students, workers and the South Africans as a whole, will suffer from worse service delivery, more lob losses, more delays in implementing the national health insurance system, and deeper poverty and hunger.
To quote the working class Summit declaration of 2018
“Government and employers are hell-bent on taking away workers’ rights and cutting their living standards through savage austerity budgets, increases in VAT, fuel levy and transport costs, a poverty national minimum wage, amendments to labour laws to disarm organised workers by undermining their right to strike and render workers powerless as well as the latest move to declare bus drivers and educators as essential-service workers.
Casualisation, outsourcing, privatization and deindustrialization are all on the up despite victories in cities like Johannesburg Metro and certain universities. Government and employers are hell-bent on taking away workers’ rights and cutting their living standards through savage austerity budgets, increases in VAT, fuel levy and transport costs, a poverty national minimum wage, amendments to labour laws to disarm organised workers by undermining their right to strike and render workers powerless as well as the latest move to declare bus drivers and educators as essential-service workers.
Casualisation, outsourcing, privatization and deindustrialization are all on the up despite victories in cities like Johannesburg Metro and certain universities.”
President Zuma left the scene and was replaced by a multibillionaire after an intense mobilisation by COSATU and the SACP.
The 2020/2021 budget show that the government has cut a 1% from the public spending. It should be remembered that the public sector makes a third of the GDP, so that a 1% cut has a huge impact on growth. The level of investment by the private sector has also plummeted, with a devastating fall in private sector investment in our country. Minister Mboweni who today also denies that the budget speech cuts the expenditure also stated that “non-interest spending declines on average over the MTEF in real terms”.
There will be what he calls a ‘net down adjustment’ of R156.1 billion over the next three years. The total budget cuts of the baselines and wage bill is a massive R261 billion.
After slaughtering the working class by implementing an austerity programme mixed with a dose of Thatcherism, the head of the government simply denies and assured the turkey that she has nothing to fear from a Christmas lunch.
SAFTU and many others have condemned in the strongest terms the possible cutting of R160 billion over the medium term. Government has the gall to suggest that it even wants to pull out of the existing pathetic agreement it rammed down the throats of the public servants with COSATU unions.
Government goes further to make a statement that it won’t be employing more workers in the public service. Already we know that:
1. Khehla Sithole, when releasing the crime stats that showed that the murder rate has reached unprecedented levels where 58 persons get killed a day on average, indicated that if South African were to follow the world standards it would mean that it must employ 62 000 more police officials.
2. The national norms and standards dictate that there should be one correctional service officials for every 30 prison inmates, and that when transporting suspects to courts there should be one official for one suspect and two officials against one dangerous criminals. These norms are not adhered to. There is currently one per 60 inmates in the prisons, where almost daily, correctional service officials are subjected rape, stabbings, etc by the inmates.
3. The norms and standards published by the department of education state that there should be one educator for every 35 to 40 learners. Yet everywhere the reality facing educators is there are more and more learners in classes.
4. The South African Health Systems Trust’s SA Health Review 2016 pointed out that there is a dire shortage of dentists in the public sector with around 1,100 practicing throughout South Africa, the situation is worst in North West where there is only one dentist for every 50 000 people. Although public sector doctors are also in short supply, at least there are over 13 600 of them in the public sector. But again, expect to wait in a long queue in the North West, which has 21,3 doctors per 100,000 people (nine below the national average). The Review paints a picture of massive differences in the quality of health services between provinces. The Eastern and Northern Cape, Free State, Mpumalanga and Limpopo continue to deliver below par services, while the Western Cape’s health service is head and shoulders above other provinces in almost all indicators. Free State is the only province that has fewer doctors in 2015 than the previous year – losing a massive 177 doctors in a single year (now down to 539 doctors for the entire province).
5. Medical specialists are in shortest supply in Limpopo (1,5 per 100,000 people), while if you need counselling it’s best if you don’t live in Mpumalanga, which only has one psychologist for every 100,000 residents. “There is a crisis of unprofessional behaviour, poor staff motivation, sub-optimal performance, and unacceptable attitudes…”
6. According to Ebrahim-Khalil Hassan Independent Public Policy Researcher, (2017), government data identifies nearly 200 000 vacancies in 2016. It is notable that vacancies ‘dropped’ by 120 000 from 2012 to 2013, which suggests that there was a removal of many posts from Departmental organograms (not that there was a massive recruitment drive ), thus technically ‘removing’ the vacancies.
7. Hassan and Miriam Altman, Executive Director, Centre for Poverty, Employment and Growth Human Sciences Research Council (2010: 42) estimate that vacancies and skills shortages may be far greater than the 200 000 figure – up to a million, quoting the Public Service Commission from 2007. Further, expenditure ceilings, freezing of posts, etc over the last several years have reduced the number of vacancies being filled.
8. The 2018 Budget Review states that the ‘compensation ceilings’ of government were reduced by R10 billion in 2017, and R15 billion in 2018, i.e. imposing effective cuts to the wage bill. This worsened in 2019 to massive R162 billion. Fiscal austerity is also squeezing out other forms of expenditure, on which public servants rely (medicines, infrastructure, books etc), as the envelope shrinks. Crisis measures such as the employment of temporary teachers, compromise the quality of delivery.
President Ramaphosa and the multi billionaires don’t have to worry about all this calamity. They have billions in their accounts and are the owners of the R1,4 trillion that they are refusing to invest in the economy. They have not only contracted out of the public service, they actually own private schools, private prisons, private hospitals and clinics and private security firms which provide excellent services to 1% of the population. In order to massage their big egos and to pull wool over the eyes of the unsuspecting members of the public they are engaging in intellectual dishonesty in order to sleep at night with their hollow conscience.