South African Communist Party

Thursday, 29 October 2020

Response to the Medium-Term Expenditure Framework

On 5 October 2020, the South African Communist Party (SACP) released a statement ahead of President Cyril Ramaphosa’s address to the joint sitting of the National Assembly and the National Council of Provinces about the economic reconstruction and recovery plan. The SACP made its stance clear. To overcome its economic and social reproduction crises, South Africa needs radical structural economic and broader social transformation and development in line with the strategic perspective to place our democratic transition on to a second radical phase towards the goals of the Freedom Charter.

We noted the pronouncement by President Ramaphosa, that economic reconstruction and recovery depended on, and required, a supportive macroeconomic framework. The President said the National Treasury will during its presentation of the Medium-Term Expenditure Framework (MTEF) outline that supportive macroeconomic framework including its fiscal path. What we heard from the National Treasury yesterday, Wednesday 28 October 2020, was contradictory.

The SACP was, and still is, deeply concerned that a stance of neoliberal austerity (‘fiscal consolidation’) would constrain some good intentions to achieve economic reconstruction, recovery, and broader social transformation and development. By austerity we mean cuts to social and other development spending, prioritising the achievement of pre-ordained fiscal numbers above all else.

The real, and dangerous, socio-economic crisis that South Africa finds itself in is the national disaster of high levels of unemployment, poverty, and inequality. In the first quarter of 2020, 10.7 million South Africans were unemployed, in terms of the expanded definition of unemployment, said the SACP referencing Statistics South Africa’s Quarterly Labour Force survey for that quarter. Poverty and inequality, the Party said, worsened together with unemployment as a result of the impact of the coronavirus (COVID-19) pandemic: 2.2 million jobs were lost in the second quarter, for instance.

While conceding that COVID-19 worsened the pre-existing crisis of unemployment, poverty and inequality, the National Treasury did not announce any changes to the macroeconomic framework under whose auspices the chronic crisis-high levels of unemployment, poverty and inequality developed and remained persistently high. The MTEF contains no macroeconomic framework supportive to national production development, re-industrialisation and advancing a second radical phase of our democratic transition.

Instead of producing a supportive macroeconomic framework to reduce, towards overcoming, the crisis of high levels of unemployment, poverty and inequality, the National Treasury chose a path of austerity. Austerity often creates a vicious cycle—cuts are made to reach contractionary fiscal targets. With austerity contractionary, revenue collection is constrained, leading to yet more cuts reaching into more important programmes.

This is the path that the National Treasury announced yesterday. Austerity will suffocate inclusive economic growth through such cuts on the expenditure affecting economic and broader social transformation and development programmes.

This will worsen the situation now when the performance of the economy is at a level even below that of the crisis before the outbreak of the COVID-19 pandemic. It must be noted that the growth projections presented in the MTEF, if they occur, will be the massive decline that we have experienced, implying that in aggregate terms we will still not be where we were before what the COVID-19 Great Recession.

In his address the President said economic reconstruction and recovery requires measures and support commensurate with the impact of the decline. On this score, too, the MTEF announced by the National Treasury is devoid of adequate support and commitment.

The SACP maintains its stance, that South Africa needs a programme commensurate with the combined impact of the damage caused by the COVID-19 pandemic and the chronic crisis before the crisis. This must support the radical economic structural transformation and development programme that South Africa needs. That requires a spending big push—focussing initially on a massive infrastructure programme, economic and social, linked to public employment. While the President spoke of the importance of public employment programmes, the National Treasury cut the resources required.

The SACP is deeply concerned about and denounces the anti-workers stance taken by the National Treasury to deprive public service workers of wage adjustments that have been agreed to in due collective bargaining processes. This is an attack on the workers, their families, working class communities, and collective bargaining in South Africa, and a formula for generating other problems with far reaching implications. The SACP will continue engaging with and resolutely supporting the labour movement against such draconian measures and other unfair labour practices.

The SACP will actively form part of the deepening and widening of the workers struggle on this and other fronts. We reiterate our call to the progressive labour movement to unite behind the common interests of the workers and convene a national summit to produce a joint programme of action. We call upon unorganised workers to unite with organised workers by joining the progressive trade union movement. On our part, the SACP will deepen its programme to build wider working class unity and forge a popular Left front to take care of both the immediate aims and the future of the working class in all key sites of the struggle and the significant centres of power existing our society.

The allocation to the South African Airways (SAA) is important. It will intervene in the situation of the workers who have not received their wages for a long time now and severance packages and contribute to building state capacity and participation in the aviation industry through a successful rescue process. However, what was needed was a creative use of both monetary and fiscal policies to support the SAA rescue process, rather than austerity affecting other social and development programmes.

The SACP denounces the reckless call for the boycott of SAA. The call for the boycott state participation in any sector of the economy is reactionary and unprecedented in a democratic state and is against the development of public property. In contradiction, South Africa needs a capable democratic developmental state with its own capacity to serve the people without private profit interests mediating state-society relations. The SACP will continue to support state entities and their turnaround. State entities require the provision of adequate recapitalisation and good governance to thrive and contribute to national revenue for national transformation and development.    

The government must clamp down on undue influence on the state and state officials, entities, and public representatives. Fighting state capture and corruption is essential—but must be seen as an integral part of building state and public sector capacity to lead a radical economic transformation and development programme, not as an excuse to abandon this quest in favour of unrealistic expectations that profit-seeking private capital can fulfil this role.

The SACP reiterates the following and will continue both engagements and mobilisation towards the way forward.

- Building public healthcare capacity and resolutely advancing towards the National Health Insurance (NHI) to ensure access to quality healthcare for all.

- Integrated human settlements planning and development, geared towards eliminating the legacy of apartheid unequal development—this must include running water infrastructure, sanitation infrastructure and other basic amenities for all.

- Prescribed investment requirements to finance infrastructure expansion and drive economic and broader social transformation and development.

- A wealth tax as part of revenue generating instruments.

- Addressing short-term needs through a minimum income guarantee. This must include a universal basic income grant covering the unemployed, and grants to encourage productive activity anchored in a development-oriented poverty and hunger eradication programmes.

- A highly partisan discourse on the need to ‘shorten supply lines’ of medical equipment and critical food supplies to drive more ambitious and higher impact localisation programmes.

- Transformation of the financial sector, in particular de-monopolisation, diversification, including robust support for co-operative banks, and building a developmental state banking sector to take care of national development imperatives. This must include augmenting the mandate of the South African Reserve Bank under the constitution—for the central bank to play a developmental role. The review must include employment targeting and an achievement of long-term moderate interest rates as part of the mandate and accountability of the Reserve Bank.  

- A high valued added, diversified, and expanded industrialisation, and, linked with it, infrastructure development (can support re-industrialisation through drawing inputs from manufacturing), and agriculture and food security.

- Tight regulation of cross-border capital transactions/flows and clamping down on illicit capital flows.

Statement issued by the SACP, 29 October 2020