Cut politicians' perks and stop SOE bailouts in mid-term budget, says BOSA

30 October 2024

As Build One South Africa (BOSA), we set out our expectations for the upcoming Medium-Term Budget Policy Statement (MTBPS).

South Africa faces a challenging macroeconomic environment, with average economic growth stagnating at just 1% over the past decade and a growing national debt that threatens long-term fiscal stability.

The unemployment crisis has deepened, with 11.57 million South Africans able and willing to work but unable to find employment, an increase of 476,000 year-on-year. The expanded definition of unemployment has now reached an alarming 42.6%, among the highest rates in the world. Particularly concerning is the impact on young people aged 15-34, with nearly half of this demographic currently jobless.

It is our duty to warn the people of South Africa of the tight fiscal role we are walking on as a country, balancing the triple demands of social wages, increasing taxes and debt servicing costs.

For every R100 rand of money spent by government, R60 of it goes to the social wage, and R16 goes to paying off national debt. There is little wiggle room. While young people remain unemployed and miseducated, the funding available to unlock growth and potential shrinks each year.

What we cannot do is to social wage spend ourselves to prosperity and growth. 60% of the national budget is directed to spending on health, education, and social protection. This is unsustainable.

What we cannot do is to tax our way to prosperity and growth. With economic growth averaging just 1% for the past decade, wealth and value are depreciating while the cost of living and doing business is on the rise. Taxpayers cannot be squeezed any further. This is unsustainable.

And what we cannot do is borrow our way to prosperity and growth. Debt servicing costs will reach R440.2 billion in 2026/27. This too, is unsustainable.

If we are to turn the ship around, the Minister of Finance needs to begin working towards next year’s budget to “fund for growth” We call on the government to take a decisive stance on several critical issues impacting the fiscal health of South Africa and the economic potential of all its people.

First, no further bailouts should be granted to state-owned enterprises (SOEs). It is clear that perpetual financial support to underperforming SOEs poses a growing debt risk, and without structural reform, this cycle will continue to undermine South Africa’s fiscal stability. We urge the Minister of Finance to announce a clear, actionable plan for SOE reform, or to consider viable alternatives for these entities. This is a necessary step to prevent SOEs from remaining a continuous drain on our nation’s resources.

Additionally, cutting administrative expenses within the government must be prioritized. Given the current economic strain, South Africa cannot afford unnecessary bureaucratic spending. These funds would be better directed to essential public services and infrastructure development, both of which are vital for sustainable growth and job creation.

BOSA calls on the government to address inefficiencies by consolidating departments and cutting excessive political perks in the Medium-Term Budget Policy Statement (MTBPS). Specifically, dissolving the Department of Small Business Development and moving its functions to the Department of Trade, Industry, and Competition would save R2.4 billion, while eliminating the Department of Planning, Monitoring, and Evaluation could save an additional R1 billion.

Furthermore, abolishing costly Deputy Ministerial roles, along with their associated staffing and perks, could save R500 million annually. Finally, cutting VIP protection for politicians—an unnecessary expense for public servants during a fiscal crisis—would free up approximately R2 billion.

On infrastructure, BOSA strongly supports the establishment of a dedicated fund for infrastructure development. South Africa urgently needs to invest in growth-oriented projects that can stimulate the economy, create jobs, and modernize our national infrastructure. We hope to see a comprehensive plan that allocates sufficient resources to this essential sector.

In terms of monetary policy, we welcome the positive outlook on a strengthening currency and the relaxation of interest rates. However, BOSA believes more can be done. We call for additional interest rate cuts to provide much-needed relief for households and businesses and to boost domestic economic activity.

We also recognize recent improvements in legislation targeting greylisting. With South Africa’s debt at alarmingly high levels, getting off grey lists is essential to restoring investor confidence and attracting foreign capital. We urge the government to continue reinforcing these efforts so that South Africa can reclaim its place as a reliable investment destination.

Addressing the struggling Transnet to boost trade. Fixing Transnet is critical to improving our trade balance and to realizing South Africa’s potential as a net exporter. By investing in Transnet’s operational efficiency, we can increase our export capacity and reduce dependency on imports, which will benefit our currency and economic stability.

Finally, BOSA advocates for the development of township manufacturing hubs as part of a broader industrial policy. Our townships have untapped potential to become centres of manufacturing excellence, providing employment and economic empowerment to local communities. This shift is critical for ensuring inclusive growth and should be a core priority in the MTBPS, by prioritising the establishment of Special Economic Zones (SEZs) in every township.

BOSA remains committed to holding the government accountable to fiscally responsible, growth-oriented policies that create real change for South Africans. We will continue to advocate for policy reforms that prioritize efficiency, economic stability, and the empowerment of all citizens.

Issued by Roger Solomons, BOSA Acting Spokesperson, 30 October 2024