COSATU’s response statement on the 2019/20 Medium Term Budget Policy Statement
COSATU is extremely disappointed by the government’s shockingly weak and inadequate 2019/20 Medium Term Budget Policy Statement.Despite our worst economic crisis since 2008, the National Treasury has failed to present any serious plans to kickstart the economy and put it on sustained growth and development.
Again it was a missed opportunity as the government failed to rise to the challenge. It does the government no favours to wish away this crisis and hope that miracles will solve it without a solid plan. Either the government is willfully blind or is being recklessly indifferent because the MTBPS was a huge disappointment.
Millions of South Africans have every reason to feel let down by this lacklustre performance by the policymakers and decision-makers.
Economy
Despite the President hosting very progressive Jobs and Investment Summits in 2018; the Minister of Finance barely made any reference on how far the government and the private sector have gone in implementing the outcomes of these summits.
There is no reference to a national jobs creation target in the MTBPS. Only a few departments make any reference to employment creation and even those that do are woefully behind their modest targets.
The message from this MTBPS to the poor and the unemployed is that there will be no direct interventions by the state to save workers and their families from the devastation of unemployment. This is happening despite reports that SA unemployment has now reached an eleven (11) year high.
We are content , though, that the bulk of the blatantly anti-worker attacks proposed by Treasury in its Economic Strategy Paper have been removed. The federation appreciates the intervention by the President and the ANC to reject these Thatcherite proposals that were targeted at the National Minimum Wage, collective bargaining and agreements, and other progressive constitutional labour rights.
It is disappointing to see that our government still does not have an appetite to hold the private sector accountable for the billions of rands in subsidies and incentives that it has received from the government.
Billions have been given to the private sector through the Employment Tax Incentive(ETI), the Youth Employment Scheme (YES) Programme,including the industrial and manufacturing subsidies. Yet there is no report from the government on how these companies have utilised this generosity or how many jobs have been saved and created. Many of these companies are retrenching workers or simply recycling existing jobs to access these subsidies.
One of the greatest challenges to growing the economy and placing workers in jobs is that our education and skills system is not geared towards the needs of the economy. It is clear that even if there were to be an upswing in economic activity the absolute shortage of skilled and semi-skilled labour would stand in the way of a major leap forward. The MTBPS contains no proposals or plans by government in this regard,instead, there is a cut in SETA funding.
The MTBPS has no plan to assist government grapple with the 4IR despite estimates showing that 56% of workers’ jobs are at risk due to the 4IR and automation. This kind of governance by lethargy by the government and the private sector will only worsen unemployment.
There was nothing said about the current under expenditure of R50 billion in infrastructure funding and there is seemingly no plan to deal with that.
Whilst DTI has done excellent work in driving the reindustrialisation of the economy, it remains woefully underfunded. We expected more support for the parts of government that are functioning.
COSATU is satisfied that the MTBPS commits the National Treasury to release the long-delayed Public Procurement Bill. This must happen as a matter of the highest urgency because local procurement by the state and private sector is key to building our manufacturing capacity and driving economic growth and creating jobs. We cannot become a consumption economy that does not produce anything.
The federation is delighted with the intervention of the Presidency and DTI to ensure the long-promised introduction of the scrap metals export tax. This is critical towards boosting local industries and beneficiation.
The silence of the MTBPS on how the government intends to stem the flow of cheap subsidised illegal imports through our ports and borders is incomprehensible. SARS’ failure to inspect more than 5% of imports entering our ports and borders is inexcusable. Not only does it undermine the billions spent by the government to protect and grow local industry, but it also robs the government of billions of badly needed taxes and plunges thousands of workers into unemployment. It clear that Treasury and SARS are not able to appreciate the severity of this crisis.
The government is still hell-bent on its misguided imposition of 5% to 8% expenditure cuts to a still-fragile economy that has only recently emerged from a recession. COSATU rejects these cuts and that will plunge the economy into a further crisis.
SOES
Much of workers’ expectations for the MTBPS rested upon government having clear plans to save and turn around the bleeding SOEs. Unfortunately , the MTBPS has failed to set strict terms and conditions for the SOE’s to abide by. The SOE’s needs to be put on a tight leash because bailing them out is an unsustainable model.
Whilst COSATU supports the additional financial support provided for these SOEs as they provide critical public and economic services bailouts are not a plan.
COSATU is pleased that the National Treasury now accept that it is time for the National Parliament to urgently pass the Road Accident Benefits Scheme Bill. This bill has been delayed by Treasury and is critical towards dealing with the massive deficit crisis at the RAF that has been created by lawyers feasting on what is due to road accident victims and survivors.
Public Service and Sector Wage Bill
COSATU rejects Treasury’s continuous attacks on the rights of nurses, teachers, police and correctional service officers, cleaners, doctors etc to earn a living wage. Many of the wage bill stats in the MTBPS, in fact, are distortions. On the wage bill, the Minister is either fundamentally dishonest or innocently delusional
The National Treasury complains that the wage bill has increased yet it fails to mention that this was done in part to address apartheid wage gaps. Equally Treasury fails to adequately explain how a large part of the increase in wages is due to an explosion of the executive and management pay.
Treasury is disingenuous by not mentioning that in 1994 with 34 million South Africans there were 1 million public servants. In 2019 with 57 million citizens there are 1.1 million public servants and 128 000 vacancies. The MTBPS does not disclose the massive strain that the freezing of critical service delivery posts is having on the functions of public hospitals, clinics, schools, prisons, the police and home affairs.
The federation appreciates the overdue recognition by the government that any engagement about the nature of the public service belongs in the respective collective bargaining forums as stipulated by law. If the government wants to engage in a serious and responsible manner then unions are ready to do so. If government wants to reduce the fat then it should:
- Cut the exorbitant salaries and perks of the executive and management from Cabinet to Provincial Cabinets, Mayoral Committees, Public Service Departments and Entities and the SOES;
- Reduce the wage gap;
- Reduce the number of cabinet members, in particular, the 34 Deputy Ministers and public representatives;
- Place all public sector entities and SOEs under the PSCBC so that there is one collective bargaining process;
- Place the public sector entities and SOEs management under the salary caps of the public service;
- Scrap the insulting perks afforded to the executive under the Ministerial Hand Book; and
- Fill critical service delivery posts.
Expenditure Crises
COSATU expected the MTBPS to confront the real crisis facing the state. The Auditor-General year after year reports to Parliament how on average 10% of the budget is lost to corruption and wasteful expenditure. The President recently indicated that R500 billion is thought to have been lost to state capture. The revelations at the State Capture, PIC and SARS Commissions are scandalous, to say the least. Eskom’s debt levels jumped from R45 billion to R450 billion in a decade. Yet the MTBPS offers nothing on what government is doing to deal with this. But the government is prepared to go to great lengths to attack public service workers for wanting to feed their families.
Whilst COSATU appreciates the additional allocation to the NPA and law enforcement bodies, their successes are underwhelming.
The MTBPS ignores the fact that billions of funds will be rolled over because of departments failing to spend the money.
The MTBPS fails to account for the billions in bling expenditure e.g. the R13 billion being spent on 4 new departmental head offices, Tshwane Municipality and our consulate in New York.
We acknowledge the proposed reduction of travel expenses but this is not bold enough. We have some Ministers who believe that their calling in life is to explore the world with their spouses or mistresses. Government delegations overseas must be drastically reduced and limited only to trips that will generate investments for South Africa.
Departments
COSATU will release deeper breakdowns of problems in departmental expenditure during the Parliamentary public hearings. However, the following departments show extremely worrying levels of under expenditure and failure to achieve key service delivery targets. There must be interventions by the President, Parliament and the Auditor General to hold such underwhelming achievers personally liable. The most glaring and underperforming departments include:
- Basic Education (missed sanitation targets, infrastructure under expenditure, safety at schools and increasing teacher-learner ratios);
- Higher Education (failure by universities to spend allocations);
- Water and Sanitation (failure to meet sanitation and upgrading of informal areas targets);
- Human Settlements (failure to meet housing roll-out targets);
- Energy (cutting of household electrification targets whilst underspending by R250 million);
- Treasury (under-expenditure whilst failing to adequately resource Customs to crack down on illegal imports);
- SAPS (under-expenditure of R700 million in face of high crime levels);
- Correctional Services (under-expenditure whilst prisons suffer from high levels of crime);
- State Security Agency (no report on mass corruption allegations);
- Transport (no plans to deal with the collapse of Metro Rail and no proposals to end long rejected E Tolls);
- Environmental Affairs, Fisheries and Forestry (failure to achieve jobs targets);
- Small Business Development (under-expenditure failures whilst SMMEs are crying for help);
- Health (under-expenditure whilst public health care lacks basic resources and staffing); and
- Cooperative Governance and Traditional Affairs (under-expenditure whilst municipalities are collapsing and no clear plans to intervene in municipalities failing to pay workers taxes and salaries).
Taxation
COSATU welcomes the initial interventions by government to fix SARS. We are hopeful that this may help to turn the tide. However, the federation believes the government is too timid and more needs to be done to re-capacitate SARS but also to boost tax revenues. These must include:
- Massive investment in SARS Customs capacity. This must include additional personnel and technology. Currently, only 5% of imports entering our ports and borders are inspected. This must be increased to 100%. Additional staffing would generate revenue through ensuring all imports pay the customs duties due.
- Holding companies accountable for the tax breaks and incentives that they receive in exchange for job protection and creation;
- Cracking down on tax evasion by both the wealthy and companies;
- Closing of existing tax loopholes;
- Shifting the tax regime to become more progressive through:
o Increases in personal income tax for those earning more than R1.5 million;
o Increases in company taxes for wealthy companies;
o Increases in inheritance, estate, land and dividends taxes for the wealthy; and
o Increases in VAT for luxury goods and customs duties for imports.
Sizwe Pamla (Cosatu National Spokesperson)
Matthew Parks- COSATU Parliamentary Coordinator
Issued by COSATU, 30 October 2019
