Initial response to the Medium-Term Budget Policy Statement
26 October 2022
On Wednesday, 26 October 2022, the Minister of Finance Enoch Godongwana tabled the Medium-Term Budget Policy Statement in Parliament. This initial response of the SACP to the Medium-Term Budget Policy Statement covers a few aspects.
Macroeconomic framework for industrialisation
In identifying long-standing impediments to economic development, the Minister narrowed his focus to some microeconomic supply side issues, ignoring the long-term macroeconomic policy failure to support industrialisation, employment creation, poverty eradication and inequality reduction. This is not an accident. It has been an economic policy orientation of the government since 1996 and has not helped the country as the major policy outcomes such as the persisting crisis-high unemployment, poverty and inequality levels show.
In the 1970s, the apartheid regime started domesticating the neoliberal measures widely known the world over to be principally and notoriously driven by institutions hegemonised by imperialist interests, such as the International Monetary Fund. Instead of rolling back neoliberalism post-apartheid, the government continued the neoliberal paradigm through the economic policy called Growth, Employment and Redistribution (GEAR) that it imposed in 1996 as “non-negotiable” and “cast in stone”.
Under the macroeconomic framework that South Africa followed, as well as its toxic interaction with the persisting legacy of colonial and apartheid oppression and the endemic crisis of the capitalist mode of production, the country’s economy continued to de-industrialise after experiencing premature industrialisation in the 1980s.
No amount of tinkering with some micro aspects underpinned by overall neoliberal framework paradigm maintenance will roll back de-industrialisation, industrialise the economy, create employment at scale to overcome the unemployment crisis, eradicate poverty and radically reduce the racialised and gendered class inequality. South Africa needs to alter the failed thrust of the economic policy framework to build a new economy that will drive structural transformation and take care of the material needs of the people.
The country needs a macroeconomic framework, fiscal as well as monetary policy, that decisively favours and supports industrialisation, which must guide the determination of macro policy. This requires a high impact, comprehensive and coherent industrial policy, a supportive skills revolution, and state led infrastructure investment, including in new electric power generation capacity, bulk water infrastructure, railways, and the digital infrastructure, among others. Trade policy must, likewise, support industrialisation.
Fiscal framework
While the SACP will conduct a detailed analysis of the medium-term expenditure framework and the Money Bills tabled by the Minister, we outright reject neoliberal fiscal austerity as it impacts economic and social development imperatives and the workers negatively.
State-owned enterprises and public entities
The SACP welcomes the allocation of resources to fund state-owned enterprises and calls for adequate recapitalisation of these and other public entities to play their developmental role.
Stringent measures must take precedence to safeguard the resources allocated, with the government ensuring a state-led turnaround of state-owned enterprises and public entities to thrive.
The decision for the government to take over a significant portion of Eskom’s debt is a step in the right direction. How much will that portion be? The government must make the answer clear for further engagements.
In addition, monetary policy cannot stand aloof from the funding needs of state-owned enterprises, including the necessity to recapitalise them as part of supporting and ensuring their turnaround. To this end, the government must explore innovative ways to bring monetary policy to the party.
South Africa needs a significant, towards a predominant, publicly owned economy. This must be part of structural transformation to take care of the material needs of the people and systematically tackle the racialised and gendered class inequalities. The government must lead this imperative instead of converting state power and the role of the executive branch of the state into profit-driven interests’ vehicles.
Gauteng Highway Improvement Project
The SACP welcomes the progress reported towards resolving the e-tolls fiasco in Gauteng Province and will analyse the details when made available.
Going forward, the government must avoid the financialisation of infrastructure development, including through financial instruments such as blended finance that benefit the accumulation interests finance capital but are highly problematic when assessed against the interests of the masses of the people or even the state itself.
Fighting corruption and state capture
The SACP reiterates its call on the state to unleash its capacity to hold those responsible for the corruption of state capture accountable. This must include prosecution, imprisonment, asset forfeiture and the seizure by the state of ill-gotten wealth.
Through its findings and recommendations, the Commission of Inquiry into State Capture has paved the way for law enforcement authorities to accelerate holding those responsible for state capture corruption accountable. To this end, the work already started by the Directorate for Priority Crime Investigation known as the Hawks, the Special Investigating Unit and the National Prosecuting Authority must be strengthened.
Legislative and regulatory changes are necessary to clamp down on state capture and other corrupt activities. However, ending state capture will be far from being realised without rolling back tenderisation and building organic state planning and internal implementation capacity.
Towards a comprehensive social security
The SACP welcomes the extension of the Social Relief of Distress (SRD) Grant but calls on the government to extend the grant beyond the end of March 2024. Going forward, the government must improve the SRD Grant and convert it into a universal basic income grant.
Social relief of distress is provided for in the Social Assistance Act, Act No. 13 of 2004. Section 13 of the Act states that: “The Minister [of Social Development] may provide social relief of distress to a person who qualifies for such relief as may be prescribed”.
Following public engagements and pressure, including from the SACP, the government made social relief of distress available in the form of the SRD Grant and scaled it up to the millions who applied and qualified for the grant during the height of the COVID-19 pandemic. The pandemic was severely impacting economic production and social reproduction, as many sectors closed to observe COVID-19 lockdowns. Capitalist bosses in the economy retrenched millions of workers during that time.
In the second quarter of 2020 alone, the bosses retrenched over 2 million workers. This did not end there. The bosses continued the jobs bloodbath, the already crisis-high unemployment worsened, and the unemployment crisis persisted in and after April 2022 when the government, mainly motivated by the National Treasury-led neoliberal austerity agenda, shifted to bureaucratic measures to curtail the number of people who qualify for the SRD Grant. In the second quarter of 2022, total unemployment affected a population of approximately 12,3 million active and discouraged work-seekers.
Unemployment, which rose to crisis-high levels of above 20 per cent in 1996 after the government imposed GEAR and worsened afterwards, remains a national disaster despite the government ending the COVID-19 national state of disaster and lifting associated lockdowns. This distressful reality necessitates maintaining and improving the SRD Grant and advancing towards a universal basic income grant as part of building a comprehensive social security system.
Issued by SACP, 26 October 2022
