DA Alternative Budget 2015/16: Increasing job opportunities and growth, not tax 

24 February 2015

Note to editors: This statement was distributed to members of the media at a press briefing in Parliament this morning. The full document can be obtained here.

Today the DA presents its Alternative Budget, one focused on creating jobs and opportunities for all South Africans. Without jobs and decent work, millions of South Africans remain trapped in poverty with little prospect of a better life.

South Africa's economy is currently at its lowest ebb since Jacob Zuma assumed office in 2009. Over the last 6 years the country has witnessed the unrelenting deterioration of our economic and fiscal realities, as the Zuma administration floundered in its efforts to achieve stability, never mind economic growth and job creation.

Since President Zuma's term began in 2009, more than 1.6 million South Africans have joined the ranks of the unemployed. Every day President Zuma remains in office, 730 more people become unemployed in South Africa.

Our national unemployment crisis persists - at over 35 percent - and needs to be addressed urgently. Of those unemployed, 67.5% are youth.

The debt to GDP ratio has also ballooned under the Zuma administration, from 27.8% in 2009 to 46.1% in 2014. 

This has led to the announcement by Finance Minister Nhlanhla Nene in his Medium Term Budget Policy Statement (MTBPS) last October that a tax increase would be inevitable in this year's Budget.

Minister Nene indicated an additional R12 billion in revenue will be required for the 2015/16 financial year. 

Rather than cutting wasteful expenditure, annual losses to corruption running into the billions and a bloated government bureaucracy, this administration's instincts are toward passing off South Africa's growing budget deficits to over-burdened taxpayers.

The DA's response to this is simple - a tax increase is both an unnecessary and unjustifiable burden on everyday South Africans.

There is both a short term and a long term solution to avoid a tax increase. In the short term, the DA would cut the immense cost of corruption and maladministration and reduce the public sector wage bill through key interventions such as avoiding above inflation rate salary increases, cutting back on salaries to superfluous departments, and linking salaries to performance. This would free up over R14 billion, which is well in excess of the R12 billion required.

In the long term, the DA would create an environment that stimulates the economy and creates jobs. In doing this, more people become employed, and the tax base widens - resulting in government receiving more revenue without raising any tax percentage.

The ANC government's economic philosophy, which positions the State at the centre of economic activity, is simply unsustainable and does not work.

Under the guise of the "developmental state", what we have in reality is an incapable state centralising the rollout of crucial economic infrastructure for the benefit of crony capitalism and the politically-connected few. This while taxpayers continue to fund bailouts for inefficient state-owned enterprises, incapable of leading economic growth. 

The DA has long held that the State should not be the primary job creator, but should rather preoccupy itself with creating an enabling environment that stimulates the economy and creates jobs.

To achieve economic growth rates that enable job creation, the DA's Alternative Budget focuses on accelerating small business, addressing youth unemployment, boosting trade and infrastructure development.

The DA believes that the South African economy should be growing at a rate comparable to our contemporaries in the developing world.

GDP growth has faltered since 2009. Economic growth in 2014 was estimated at 1.4 percent, slashed from a projected 2.7 percent, and shamefully far off government's target of 5 percent.

While the government is relentless in its attempt to blame the international economic downturn - it is clear from our counterparts in other emerging markets that this argument does not hold water. 

As South Africa struggles to avoid recession, Sub-Saharan Africa is projected to grow at 5% in 2015. 

The fact is economic growth remains a result of good policy decisions and active economic leadership.

We believe this kind of growth can be achieved, and exceeded to reach an 8% growth rate within a decade. 

The choice between a DA Alternative Budget and an ANC government is the choice between one that creates jobs, and one that entrenches the status quo of ashamedly low growth and unacceptably high unemployment.

Accordingly, our Alternative Budget includes several key reforms amongst its proposals:

Injecting R9.3 billion to stimulate and empower small businesses through small business incubators, Red Tape Reduction Units across the country, and a National Venture Capital Fund. While the ANC government has persistently failed entrepreneurs and small business owners, the DA recognises small businesses as the primary source of job creation, and thus our Alternative Budget invests heavily in the support and empowerment of SMME's and entrepreneurs;

Investing 10% of GDP to build and maintain infrastructure including road maintenance, water infrastructure and freight and commuter rail corridors;

Keeping the Budget tax neutral to not further pressure overburdened taxpayers. While an ANC government looks to the taxpayer to fund its incompetence and maladministration, a DA Alternative Budget will not burden the taxpayer by billing them with the fiscal shortfall;

Gradually increase the funding for the National Student Financial Aid Scheme (NSFAS) to R16 billionso that no student is denied further education because they cannot afford it. In this financial year, an additional R2 billion will be allocated to NSFAS.

Cutting the immense cost of corruption and maladministration in order to save R10 billion;

Reducing the public sector wage bill by R4.3 billion through key interventions such as avoiding above inflation rate salary increases, cutting back on salaries to superfluous departments, and linking salaries to performance;

Saving R11.1 billion rand by disbanding the National Youth Development Agency (NYDA) and SETAs;

Slashing the size of President Zuma's R1 billion Cabinet by R355 million. This will be done by doing away with all Deputy Ministers.

Spending an additional R100 million on improving education by implementing performance incentives for school managers and teachers based on learner outcomes.

To return South Africa to a sustainable fiscal footing, the DA's Alternative Budget places further emphasis on addressing the multiple crises at State Owned Enterprises (SOEs), notably Eskom and South African Airways (SAA).

Our fragile economy cannot afford to bailout another SOE. Drastic reforms are needed to address the ailments at Eskom and SAA.

It is unsustainable for 95% of our electricity to come from Eskom, a state-owned entity characterized by mismanagement. Our economy cannot grow without a stable power supply. It is estimated that 10% of potential economic growth totalling R300 billion has been lost since 2008 due to electricity supply constraints. 

A DA-run government would break the Eskom monopoly by subdividing it into separate generation and transmission units. This will take the management of the national electricity grid away from Eskom and allow Independent Power Producers to compete alongside Eskom, which currently has a vested interest in crowding them out. 

Regarding SAA, we further propose that a 49 percent interest in this SOE be listed in a phased manner over a 24-month period to encourage the carrier's turnaround and a rationalisation of its operations. A detailed analysis of the routes currently serviced by SAA should be completed with a view toward rationalisation, especially of international routes such as the Beijing service. It should be an objective decision-making process, not one decided by political relationships with China and the like.

Our Budget would arrest the decline in the management of our public finances and breathe new life into our stagnant economy. 

In sum, we would give South Africans the tools to participate in economic activity, promote job creation and opportunity for more South Africans, and restore confidence in our country as the continent's premier investment destination.

Statement issued by Dr Dion George MP, DA Shadow Minister of Finance, February 24 2015

Click here to sign up to receive our free daily headline email newsletter