Initial response to the Medium-Term Budget Policy Statement

30 October 2024

The Medium-Term Budget Policy Statement delivered in Parliament on Wednesday, 30 October 2024, by the Minister of Finance, Enoch Godongwana, appears as the post-1996 fiscal and monetary policy paradigm maintenance entrenched in failed neo-liberal prescriptions. These have proven incapable of resolving the long-term unemployment, poverty and inequality crises, along with de-industrialisation. These crises persist, for 28 years of neo-liberal policy failure since 1996, further fuelling the high levels of crime and household social reproduction crisis – the severe hardship affecting millions of working-class and poor families unable to support life itself. A decisive break from this paradigm is essential for building a people’s economy and dismantling the entrenched wealth and income inequalities.

Once again, the Medium-Term Budget Policy Statement prioritises the policy reforms championed by imperialist-dominated institutions, among others, the Washington-based International Monetary Fund and World Bank and the Paris-based Organisation for Economic Co-operation and Development. These institutions push neo-liberal economic policies that attack public ownership and participation in the economy in favour of the accumulation of wealth on a capitalist basis.

After the 2008 global capitalist system crisis, the attack on state ownership and participation in the economy increasingly focused on opening up and converting the state into a capitalist wealth accumulation field, among others, with state infrastructure networks the main target of microeconomic liberalisation and privatisation. This agenda is part of the wider neo-liberal attack on state participation in productive sectors and in the long run aims to do away with state participation in vital network infrastructure sectors, like electricity generation, to transfer control to private producers, who put profits over public interest.

The shift from a producer state to a tender state, or a procurement state, undermines the very principles of a capable democratic developmental state that has its own capacity to fulfil its mandate and serve the people diligently. It also opens the door to procurement corruption or “supply chain mismanagement” under the guise of “supply chain management” inherent in a tender state.

At its core, the neo-liberal model is antithetical to the ethical values expected by the working class, who endure heartless exploitation under the regime of capitalist accumulation of society’s wealth and consequent domination with no regard to the human ethics of solidarity and economic and social justice. Such a structure, built on profit over people, cannot deliver the just society that South Africans, especially the working class, need.

Despite the Medium-Term Budget Policy Statement committing to inclusive growth and employment as core government priorities, the projected growth rates of 1.1 per cent in 2024, 1.7 per cent in 2025 and 2026, and 1.9 per cent in 2027, fall drastically short. These stagnantly low growth rates do not drive the large-scale employment creation that South Africa desperately needs and will not overcome the crisis of unemployment, radically reduce poverty and bring down wealth and income inequalities.

The Medium-Term Budget Policy Statement fails to introduce and model radical structural economic transformation measures that would drive higher growth rates than the projected stagnantly low growth rates throughout the entire period. Also, there is virtually nothing in the Medium-Term Budget Policy Statement demonstrating, in practice, how the projected low growth rates, especially from the perspective of production and trade income distribution, will be inclusive and, most importantly, shared.

In the same vein, in this era of intensifying automation and digitalisation of production in an increasing number of sectors, capital has deepened its agenda to produce more output with fewer workers. It is in this context that maximum-profits-seeking retrenchments, contributing to unemployment, contradict employment creation.

Not unrelated, the paltry 0.9 per cent average annual consolidated expenditure on industrialisation and exports from 2024/2025 to 2027/2028 demonstrates a lack of ambition, contradicting the Alliance’s adopted May 2024 manifesto commitments to drive industrialisation and localisation. This minimal investment will not generate the broad-based industrialisation and mass employment needed to turn around the economy and improve the standards of living of the working class and poor.

It is clear that without a radical policy change, the crisis-high rates of unemployment, poverty and wealth and income inequalities – which are racialised, gendered and spatialised, with black people and, within this majority population, women and the youth the most impacted, will persist throughout the seventh administration and far into the future, maintaining hardship for generations to come. The austerity paradigm, also pursued under the euphemism of fiscal consolidation, will perpetuate stagnation, block inclusive and shared growth and continue to fail to address South Africa’s structural economic challenges.

The austerity paradigm has weakened state capacity, leaving vacancies across nearly every department, province and municipality, directly undermining the imperative to build a capable democratic developmental state with internal capacity to fulfil its mandate and serve the people diligently. This erosion of state capacity contradicts any genuine commitment to national state transformation. Without an abandonment of the crippling path, all claims of building such a capable state will ring hollow, serving only to entrench inequality and limit the state’s ability to enact meaningful change.

The Medium-Term Budget Policy Statement reaffirms the neo-liberal commitment to curtail funding for state-owned enterprises. By limiting financial support to state-owned enterprises, the government effectively abandons the opportunity to turn around these enterprises and transform this public economic sector to form part of the engines of industrialisation and large-scale employment creation. Depriving state-owned enterprises of the resources they need will deepen their crises, into which, in the first place, they were forced by the combination of neo-liberal policies and state capture.

Ahead of the February 2025 annual budget, the SACP will strengthen its efforts to build working-class unity and intensify mobilisation for a pro-worker and pro-poor budget that prioritises people’s needs, rejects austerity and promotes a capable, democratic, developmental state. This budget path should drive structural economic transformation, eradicate poverty, drastically reduce inequality, allocate adequate resources to combat crime and corruption, and support the turnaround of state-owned enterprises and the entire public economic sector.

The SACP reaffirms its commitment to continue campaigning for the Social Relief of Distress Grant to be maintained, improved and transformed into a universal basic income grant, a vital step towards building a comprehensive social security system. Equally essential is the comprehensive implementation of National Health Insurance to guarantee quality healthcare for all.

Both the advance towards a comprehensive social security system and implementation of the National Health Insurance, along with campaigning for the state to tackle the ongoing cost-of-living crisis, remain critical priorities for the SACP and the working class at large. We will relentlessly pursue these demands through our mobilisation of the working class to secure a just and dignified life for all South Africans.

Issued by Alex Mashilo, National Spokesperson, SACP, 31 October 2024