COSATU’s response to the 2017/ 18 National Budget statement

The Congress of South African Trade Unions has taken note of the 2017/18-budget speech presented by the Minister of Finance Comrade Pravin Gordhan in parliament today. The federation feels that there were no surprises and that the minister generally continued to do the usual balancing act; and also stuck to the same mechanisms of incremental or piecemeal reform that have not worked.

The emphasis on growth takes us back to the days of GEAR where it was assumed that growth will result in jobs.  Therefore, it is unlikely that there will be transformation of the economy or restructuring as set out in the RDP because high or lower growth would not result in transformation.

In defining radical transformation the minister rightly said that the transformation must be mass based and not elitist. However, he ignored or neglected to mention that BEE is an elitist programme by its nature and therefore, a stumbling towards a mass based economic transformation.  Therefore, the budget is ambiguous about whether radical transformation is possible and if so how and when will it be accomplished.

The budget reflects government’s lack of a coherent integrated and targeted job protection and creation plan that would ensure that all South Africans are employed.  We need to create at least 100 000 jobs per month and increasingly the jobs being offered to South Africans, especially low skilled workers are temporary, low wage and through labour brokers. 

Whilst some departments have clear job creation programmes and have done excellent work, too many departments, provinces and municipalities are silent on this national crisis.  At best they believe that unemployment can be left to public works programmes.  Until government begins to match resources and programmes to its public commitments to deal with unemployment, we will not see the economy grow and our many socio-economic challenges resolved. 

We appreciate the excellent work done by the Departments of Trade and Industry and Economic Development to protect and support key economic sectors, e.g. textiles, car manufacturing, agriculture etc. We are happy that thousands of jobs have been protected and created there. However, we remain deeply disappointed that government’s job creation programmes seem to be left to these badly under resourced departments.  Allocating R9 billion to DTI is woefully insufficient if government wants to reindustrialise the economy, boost manufacturing and exports to create jobs. 

Government’s job creation plans and policies are fragmented and incoherent as a result of having five different economic departments. The DTI, EDD, Science and Technology, and Small Business Development need to be consolidated as one capacitated department charged with industrialising the economy. 

Government policies need to be coherent. We cannot talk about boosting agriculture and jobs on the one hand, whilst on the other we plan to massively increase a tax on sugar drinks which by government’s own admission will see 5000 jobs lost.  Government needs to learn the importance of engaging and planning and the need to protect and create jobs.

We had hoped to see more resources allocated to support the growth of the job creating tourism sector.

We welcome government’s targets to reduce mining deaths and accidents.  However government’s silence on the mining jobs blood bath is shocking.  Government needs to intervene and assist those mine workers with retraining and job placement programmes. 

Government’s efforts to alleviate drought relief and support emerging farmers are welcome, however more needs to be done in this regard.  Government’s continued failure to address the thousands of outstanding land restitution cases is deeply worrying.  We also demand more explanation on  how government plans to prevent job losses in the sugar industry with its planned tax on sugar sweetened beverages.We had hoped to hear how government would free underutilised state owned land to advance land reform.

The federation appreciates some of the many key progressive government commitments highlighted in the budget.

Health

While we have been deeply worried at the continuous delays in moving forward to build a progressive National Health Insurance, we are pleased with the President and the budget’s commitment to build a badly needed NHI.  We hope that we will see progress this year.

We remain concerned about the impact of freezing critical public service posts and the negative impact it has had on public health care.  Nurse and doctors are working 36 and 48 hour shifts.  Hospitals and clinics lack basic medicines, equipment and security. Government needs to move from progressive commitments towards adequately resourcing public health care. COSATU strongly welcomes government’s continued excellent work to reduce HIV/ AIDS through the roll out of ARVS.

Education

COSATU applauds government for its massive shift of resources to help working and middle class university and college students. While billions have been shifted, however more needs to be done and fast.  We cannot afford to continue to allow tertiary education to be unaffordable for working and middle class students.  The fees commission must move with speed.  We need a clear programme and plan to ensure working and middle class students are no longer denied access to tertiary education. 

We welcome the increased allocations to address our school infrastructure backlogs.  However ,we are disappointed that government has not indicated when will all mud schools be eradicated or when will all schools have decent sanitation, text books, staff, resources and security

Energy

COSATU welcomes government’s commitment to expand renewable energy.  Eskom’s recalcitrant leadership must not be allowed to continue to act as an impediment to the badly needed expansion of renewable energy.

Likewise Eskom must not be allowed by government to continue to fleece badly stretched working and middle class families and the economy with massive above inflation price increases. We hope that government has realised, finally, that we simply cannot afford to expand nuclear energy at a price tag of R 1.5 to R3 trillion.

Workers are bearing the brunt of climate change and global warming.  We had hoped that government would share a clear plan to ensure South Africa meets its climate change targets.

Revenue

The federation welcomes government’s decision to not increase VAT but we condemn Treasury’s continued motivation for a future increase. This will further squeeze workers’ meagre wages and depress demand and economic growth.

COSATU welcomes the increase in income tax for the wealthy.  However we condemn government’s back door effective income tax hike on working and middle class families through minimising inflation adjustments for tax brackets.  The workers are in effect handing over their annual inflation increases in their salaries to cover government’s budget shortfalls.  Unfortunately less money in workers’ pockets means less consumer spending and no money to stimulate economic growth.

Government should have increased taxes on imports and luxury goods as well as company tax for well off companies.  Its approach of continuously squeezing working and middle class families is punishing them for government’s failures and further delaying badly needed economic growth. The corporate income tax should have been increased from 28% to 45%.

We are happy with an increase in the dividend withholding tax rate from 15 per cent to 20 per cent ,which amounts to a tax on profits. This is important when only 10% of the population owns 90% of SA’s wealth.

We are equally opposed to government’s rushing into taxing sugar sweetened beverages without adequately preparing and supporting sugar farms and mills to transition to healthier products, e.g. bio-fuels.  Government’s projected 5000 job losses in the sugar industry will cause an economic crisis in rural towns in KwaZulu-Natal and

Mpumalanga.  Many of these towns are still feeling the pain of having lost 1000s of textiles jobs.  Government needs to delay and engage with industry and labour on a plan to meet government’s corrective health objectives of reducing over consumption of sugar, whilst protecting and creating scarce jobs.

Expenditure

COSATU is worried that government’s austerity approach to the public service is having a negative impact upon critical public service vacancies, in particular in health, education, social development, police and correctional services.  We must not overstretch and underpay public servants that are performing badly needed public service functions.

We applaud government’s wasteful reduction e.g. reducing the costs of constructing new schools.  This needs to be expanded to the inflated figures of billions cited for building new departmental head offices, regional offices and embassies as a matter of urgency. We still need to see more commitments by government to reduce real wasteful expenditure and corruption.

COSATU applauds the massive increase in SAPS employment levels over the years.  However the projected decrease in SAPS employment levels over the MTEF is worrying and does not make sense in the face of increasing levels of violent crime.

We are happy with government’s efforts to create work relief for the long term unemployed through the EPWP and CWP.  However these have now come to be abused as sources of cheap labour for cash strapped municipalities and departments and are now performing permanent government functions.

Using tax revenue to fund road infrastructure is good  policy because it avoids the contentious user pay policy, which is being used to fund the –etolls. SANRAL receives R15.4 billion over the period ahead for strengthening and maintenance of the national road network, which now stands at 21 946 kilometres. However, the minister should have announced the scrapping of e-tolls altogether.

Social Security

The budget’s silence on the pending crisis of how social grant recipients will receive their payments from 1 April is deeply worrying.  The Constitutional Court issued a clear judgement in 2014 that the Department of Social Development had issued an illegal tender for CPS to pay social grants.  It was given 2 years to address this matter.  It was warned repeatedly by Parliament, COSATU and Treasury to do so to no avail.  Now CPS has informed DSD that it will cost government R3.5 billion to extend its contract for a further 18 months. 

The leadership of DSD needs to be held accountable for this national crisis.  SASSA has clearly shown why key government functions must not be outsourced.  SASSA needs to be reintegrated into DSD and the payment of social grants should be allocated to the Post Bank.  Treasury must be tasked with ensuring that the Post Bank is sufficiently resourced and capacitated to undertake this function as a matter of urgency.

COSATU is equally disappointed in how government has continuously delayed engaging with labour and industry on Nedlac as it committed to do so repeatedly, on comprehensive social security, including retirement reforms.  We hope that this year will see government engaging on this critical matter at Nedlac.

Human Settlements, Water and Sanitation

Government’s silence on the budget crisis in the Department of Water and Sanitation is surprising.  Government’s lack of a comprehensive desalination programme whilst we are in the midst of a long term water scarcity crisis is reminiscent of how government previously delayed dealing with our electricity challenges till it became a national crisis. 

Government needs to establish a water war room with key stakeholders that will develop a national conservation and desalination programme.  Municipalities cannot be allowed to continue to dump above inflation water tariff hikes on the poor.

COSATU had hoped to hear from government as to when it will ensure that all informal areas and villages have access to decent basic services. We appreciate the good work government has done to provide homes to millions of South Africans.  However we believe that the proposed shift to rental housing stock will be a mistake.  Families need to own and not to rent their homes less they be rendered homeless in the event of a bread winner losing a job.

State Owned Enterprises

Our various SOEs are well known for their many challenges; from corruption, to outsourcing, retrenchments, and governance and delivery failures.  The Minister was largely silent on how good governance will be brought to our SOEs, in particular SAA, Eskom, and the Post Office etc.  The budget speaks of further job losses at the Post Office, whilst postal workers have borne the brunt of thousands of retrenchments and outsourcing.  COSATU does not understand why government says it will not retrench or outsource yet it tolerates it in its SOEs.

Conclusion

Lastly we are encouraged that the minister seems to be prepared to work with all social partners and stakeholders to find solutions to our economic challenges. But we are  disappointed that government has failed to seize the moment and use this budget to drive job creation and radical economic transformation. 

While the budget acknowledged that wealth remains highly concentrated, 95 per cent of wealth is in the hands of 10 per cent of the population ;and 35 per cent of the labour force are unemployed or have given up hope of finding work. The budget is still consumption based than investment led, the promise to support labour intensive sectors is not reflected in the budget

Without a serious comprehensive plan to ensure all South Africans have decent permanent jobs, we will not be able to move forward as a nation. Unfortunately, people are running out of patience and government is running out of time.

Issued by COSATU, 22 February 2017