Budget 2010: DA welcomes wage subsidy, but crisis in parastatals remains unaddressed
The Democratic Alliance (DA) welcomes the main thrust of Minister of Finance, Pravin Gordhan's budget speech, and particularly the detailing of a wage subsidy that will open up job opportunities for South African school-leavers. This is a measure that has been a central feature of our economic policy proposals for the last decade; the ANC government's acknowledgment of the relevance and benefits of this policy is an encouraging step, and we believe wage subsidies can create real, permanent employment for thousands of young people in South Africa.
Likewise, we welcome the fact that the Minister of Finance remains in control of this country's economy - that authority has not been shifted towards the Department of Economic Development. Though this raises questions about the need for the Economic Development department in the first place, this speech has made it clear that Minister Gordhan, not Minister Patel, has his hand firmly on the tiller of the economy. In this respect, his retaining of a 3-6% inflation band, and the acknowledgment that labour agreements need to be revisited because of the burden they impose on entry-level jobs, are important issues that the Minister of Finance addressed, where the Economic Development department clearly deviate in their opinion.
What we remain concerned about is the failure of the ANC to address the crisis facing our parastatals. Minister Gordhan offered R 2.5 billion to the Land Bank and a R 15.2 billion guarantee to the Development Bank of South Africa. This brings the total amount of all forms of financial support to parastatals to R 260 billion over the last four years. The ANC continues to behave as if R260 billion in parastatal bailouts is business as usual. It is not - but as long as the ANC administration treats it as such, we will continue to divert billions away from service delivery, from education, and from infrastructure.
The minister's comment that the Treasury "will investigate the possibility of rationalising some of our entities and agencies" appears to be very far from the sort of decisive action that is needed to address the shortcomings of our parastatals. At best, it constitutes a weak acknowledgment of the predicament facing state owned entities, but it signifies no real understanding of the nature of the problem, or measures to address it. State owned entities remain playgrounds for ANC cadres, and continue to drain away billions from state coffers. This remains the central failing of ANC economic policy.
That said, there is movement in a really positive direction on the job creation front. Creating employment remains the single greatest challenge for South Africa, economically, and given that the Minister's hands were tied by a R69 billion tax revenue shortfall, his adoption of the very same youth wage subsidy policy that we have been championing is to be welcomed.
What is surprising about this development is it essentially constitutes an acknowledgment that the unions and the far left of his party are wrong on the economy. The unions continue to believe that the government creates jobs, rather than the market. Wage subsidies are a market-orientated measure, and the studies show they work. But whereas the wage subsidy policy is necessarily premised on this insight, the state-orientated approach to parastatals suggests that the blinkers in that case remain tightened fast.
Minister Gordhan's focus on the Extended Public Works Program (EPWP) as the mechanism for job creation is problematic for precisely the same reasons. The President's strategy to survive the recession was premised on creating work through the EPWP. Instead, we lost nearly one million jobs. They also remain deeply flawed insofar as no substantial skills transfer takes place, and that they are temporary, rather than permanent in nature.
In fact, it is quite breathtaking that EPWP "job opportunities" seem to be so well received by a party that apparently believes temporary employment services are slave traders.
We welcome Minister Gordhan's assurances on cutting down on wasteful expenditure across government. We cannot afford to continue to divert much-needed funds away from service delivery and infrastructural projects.
We also commend the Minister's firm support for the existing mandate of the Reserve Bank, and our free-floating currency. These form part of a clear rejection by the Minister of recent appeals to naïve populism, and provide the firm fiscal foundations for growth and job creation. The recent experience of Greece and other European economies shows how rapidly a fiscal crisis can develop. The Treasury has managed the fiscus admirably over the past 15 years, but we are now entering a period of considerably more risk. Parastatals, high government debt and wasteful spending must be the main points of focus if we are to build a robust economy, create jobs, and alleviate poverty.
Statement issued by Dr. Dion George, MP, Democratic Alliance shadow minister of finance, February 17 2010
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