MTBPS Response: This Budget will tear society apart.

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Finance Minister Enoch Godongwana has presented a terrible three-year budget plan. The impact of the Mid Term Budget Policy Statement (MTBPS) will no doubt be ‘more Julys’, more powder-keg explosions that tear the society apart and more taxpayer money spent on a security apparatus instead of addressing the root cause of our misery. 

Godonwana’s main priority seems to be a so-called ‘primary budget surplus’, which he aims to achieve as early as 18 months from now, in the 2023-24 budget. This is why Treasury is intensifying its austerity attack on social programmes, especially health, education and social grants. We hoped the July crisis would spur the adoption of a Basic Income Grant at a living wage, but the opposite is clear: the tokenistic R350/month will be cut off in March 2022 with no indication in this three-year budget that Godongwana will fund any further support.

The MTBPS speaks of economic growth, but itself admits a shocking internal contradiction to its own logic: “Although sizeable fiscal support continues in developed economies, many developing economies have begun to reduce support as fiscal space narrows, which may slow their recovery”. We insist that, instead, South Africa’s extremely uneven, unsatisfactory recovery from the ultra-harsh lockdown be speeded up!

The budget planned for 2022/2023 is almost 3% less in real terms than the budget provided in 2019/20. The harshest of the reductions in non-interesting spending in the three years ahead will take place next year. Some of the most significant spending reductions – in real terms (taking into account inflation) – over the next three years include:

  • health care cut by more than 13%, in a context of a health crisis,
  • basic education cut by 8.9%, and
  • social grants cut by more than 15%.

In addition, Treasury’s unconstitutional attack on the public sector wage bill continues. Total compensation of employees is planned to be reduced from 34.2% of GDP in last year’s budget to just 30.6% by 2024/25. This is not a strategy to freeze wages, but far worse: to cut wages and cut jobs. 

There will be 60 000 less workers in the public sector in 2025. Among the nationally employed they will mostly be police officers (18 400 less three years from now). The provinces will have to cut some 38 000 jobs. This will mainly hit health care workers and teachers. Already there are more than 40 000 vacancies in the health sector alone. 

The austerity agenda squashes any possibilities for a just recovery from the pandemic, and it means the fourth and maybe fifth wave will once again create unnecessary chaos in our public health system. 

Worse still, despite paying lip service to the need to combat climate change, the budget will mean more reliance on fossil fuels, for example the revenues from coal exports. The International Monetary Fund’s September 2021 report on fossil fuel subsidies shows that already nearly R800 billion annually is provided by the South African state both directly and by neglecting the ecological, health and socio-economic costs of coal, diesel in the emergency generators, methane (mainly through Sasol) and oil consumption. 

We will see continued dependence on export dependency notwithstanding a highly volatile world economy. One of the most dangerous elements is Eskom’s destruction, through the liberalisation of the energy sector and Transnet’s imminent corporatisation of the ports and rails. This further delays any prospects of a deep, genuine just transition that addresses the intersecting climate, energy, transport and unemployment crisis. Instead of the privatisation, corporatisation and outsourcing that have fostered such extreme procurement corruption and service delivery crises, we desperately need the insourcing that, for example, students and low-paid casual workers won in the universities in #FeesMustFall struggles from 2015-17.

In spite of the deep crisis of hunger, joblessness and deep inequalities, government is failing us. Many social and labour movements still demand a permanent basic income grant, and Godongwana promises the exact opposite! 

The fact that the country already has 27.8 million grant recipients (almost half the SA population) when including beneficiaries of the Social Relief of Distress grant (9.5 million) is not due to laziness or entitlement. The problem occurs as a result of government’s failure to invest in creating millions of decent jobs, in a context of capitalism’s ever-narrowing relevance to the vast majority, leaving 44% of the working age population unemployed. 

There are alternatives to austerity. In order to simultaneously address the intersecting ecological, socio-economic and economic crises, the country must embark on a low-carbon reindustrialisation programme and create millions of climate jobs. 

We insist on a public pathway for the rapid development of renewable energy, a mass public housing programme, transformed public transport based on electric vehicles, land reform and the development of agroecology, Zero Waste philosophy for our rubbish, support for recycling and upcycling cooperatives, appropriate and well-located public housing, and countless other strategies our members are already exploring. We also need to invest more resources into municipal, health and education infrastructure, especially the stormwater drainage and micro-hydro plants for the extreme weather events and droughts that are now more common. 

There’s lots of money to do this, once exchange controls are tightened to halt Illicit Financial Flows. Dealing with South Africa’s growing debt problem will be key, in part by dramatic reductions in interest rates and through more creative monetary policy loosening, as has been implemented across the world since 2020. 

A different macro-economic philosophy would unlock the resources to finance a just transition, addressing both the ecological crisis and the socio-economic crises manifest in mass unemployment and unparalleled levels of inequality. 

Indeed, the South African government can provide even more concessional loans to itself. Here the Government Employees Pension Fund (GEPF) can utilised by redirecting more than R2 trillion in accumulated reserves towards investing in an economy that prioritises the needs of the people and the planet, instead of the hothouse casino of the Johannesburg Stock Exchange, more overvalued in relation to the real economy (measured by the Buffett Indicator) than any other on earth. 

We must tax the rich. Implementing a net wealth tax is critical. Doing so can raise up to R143 billion each year. Putting an end to profit shifting and wage evasion would raise an additional R100 billion in revenue. Another R100 billion could come from raising corporate taxes to levels that were common three decades ago. There are many more options available. The only thing missing is political will to break away from neoliberalism and the financial markets that have applauded Enoch Godongwana’s brutal austerity, even though this MTBPS is in reality a more rapid march to the precipice. 

For more information contact:

  • Zwelinzima Vavi 0791824170
  • Bridgette Nkomana 0744840316
  • Khokhoma Motsi 0764907623
  • Vuyokazi Made 0733257009
  • Dominic Brown 0813094973