The DA’s alternative budget to Rescue South Africa
19 February 2024
Today, the DA presented its Alternative Budget for 2024. Our Alternative proposal presents an adjusted expenditure framework that reconfigures government spending to redirect our fiscal trajectory from the current cliff towards a more sustainable future. The fiscal interventions we propose will enable our economy to grow and generate the jobs South Africans desperately need.
President Ramaphosa’s administration has relegated tens of millions of South Africans to poverty and despair. Vulnerable families face the worst cost of living crisis this country has ever seen. Many struggle to afford basic necessities and millions are suffering from hunger. Unemployment continues to rise as business bears the brunt of constant rolling blackouts while rapidly increasing debt is crowding out more and more basic service delivery.
Major reforms are required for South Africa to recover. Market-oriented reform starts by removing government-imposed barriers to growth. A government that is effective at serving the public, limits regulation and focuses on delivering essential services. This is what will create a dynamic enterprising economy, with market forces and individual freedom at the forefront.
Our 2024 Alternative Budget is therefore anchored in four core policy priorities:
1. Establishing the Foundations for Sustainable Economic Growth that Generates Jobs
2. Revitalising the Electricity Sector to Address Ongoing Power Outages
3. Achieving Fiscal Stability through Controlled Government Expenditure and Debt Reduction
4. Supporting Vulnerable South Africans by Protecting Social Wages
Establishing the Foundations for Sustainable Economic Growth that Generates Jobs
South Africa’s fiscal environment remains characterized by an unsustainable level of debt, persistent deficit spending, slow economic growth, stubbornly high levels of unemployment, decelerating foreign and domestic private capital formation, declining GDP per capita, escalating living costs, food insecurity, and political volatility. These circumstances are compounded by factors that fall under government purview such as uncertain private property rights, onerous labour market legislation, inadequate national and local governance, and a large and inefficient public sector dominated by dysfunctional monopolistic state-owned enterprises.
To establish resilience and stimulate economic growth our Alternative proposes innovative solutions to attract foreign capital, encourage domestic savings, revitalise state-owned entities, fix our crumbling infrastructure, enhance labour market participation, bolster corruption busting institutions, and facilitate the expansion of both the small and large business sectors.
Energising South Africa with Pragmatic Solutions for Ending Rolling Blackouts
Throughout 2023 South Africa has seen unprecedented blackouts which, despite grandiose promises by ANC leaders, including the Minister of Finance, have rolled over into 2024.
By maintaining its monopoly over the energy sector, Government has subjected every South African, with the notable exception of Cabinet members, with their publicly funded generators, to an exploitative energy regime which enforces controlled blackouts at will and crushes economic growth.
Through the implementation of the DA’s energy sector reforms, the delivery of sustainable energy supply will be accelerated. Accordingly, the DA reiterates its call for the unbundling of Eskom and the opening of the energy sector to Independent Power Producers (IPPs), and in the interim, Eskom must prioritise the streamlining of its procurement processes while letting in private capacity to power a growing South Africa. By opening the energy sector, innovation and voluntary action will keep the lights on and the wheels of the economy moving towards the growth rate needed to address declining economic participation.
Achieving Fiscal Stability through Controlled Government Expenditure and Debt Reduction
Government’s consumption expenditure increased significantly, and to secure the funds necessary to finance this expenditure, it resorted to debt.
However, it is imperative to note that the ability to repay a loan, including both the principal and interest, is contingent upon the borrower's capacity to generate wealth. The economic agenda of the ANC has demonstrated an inability to serve as a wealth generator. Instead, the state, under the ANC's leadership, operates as a consumptive entity which continuously extracts resources from the true wealth generators of society and thereby undermines the wealth generating capacity of the economy.
To address the crisis the DA’s Alternative proposal is therefore anchored with a framework of fiscal prudence that prioritises the attainment of a primary budget surplus. Our focus concurrently lays the foundation for economic expansion and job creation.
The DA’s economic policy suite, when implemented, will accelerate the stabilisation of national debt, and achieve fiscal consolidation. This can only be accomplished through catalysing and cultivating robust economic growth that surpasses the expectations under the current administration.
Supporting Vulnerable South Africans by Protecting Social Wages
South Africa’s economic climate exerts a disproportionate burden on low-income and marginalised communities. Their financial hardship is exacerbated by global economic volatility and domestic policies that hinder economic participation while inflating the cost of living and causing households to go hungry.
With the savings realised from the DA’s targeted spending and savings, as well as the implementation of the DA’s policy framework targeted at uplifting poorer households, the DA commits to protecting increases in social grants.
The DA further seeks to evolve the Social Relief of Distress Grant (SRD Grant) into a Job Seekers Grant.
Our Alternative proposal further sets out several affordable proposals for tax relief. Given the current cost of living emergency, fuel taxes and levies must be reduced, and an expanded zero-rated VAT food basket must be considered now, and not deferred.
Conclusion
The South African economy is reeling under an array of government-induced crises.
Economic growth has been stunted by a burdensome regulatory environment, a deficient skills base and low labour market participation rates, a shrinking tax base, overburdened public and private infrastructure, diminishing capital formation, and alarmingly high levels of crime.
Given the dire state of affairs, it is imperative that immediate and decisive action is taken. The failing ANC government is unwilling and unable to act. It is incompetent, incapable, and positioned in the wrong place in our economy. The ANC's inclinations to expand its regulatory reach is fundamentally incompatible with cultivating a market-friendly environment that can attract vital capital, fuel economic growth, ease the debt burden, and create the job opportunities necessary for lifting millions of South Africans out of poverty and despair.
The ANC Government does not respond because it does not care, and it will face the consequences at the election this year.
We can rescue South Africa’s economy by removing this broken government. South Africa deserves a government that can unlock its limitless potential. That government is the Democratic Alliance.
Issued by Dion George, DA Shadow Minister of Finance, 19 February 2024
