South African Communist Party
Initial response to the 2022 Budget Speech
Wednesday, 23 February 2022
The South African Communist Party (SACP) will study the full Budget Review and produce a comprehensive response, as the budget speech does not cover all the issues and items covered in the full Budget Review. In the intervening period, the SACP wishes to highlight the following.
As things stand, South Africa is far away from overcoming the entrenched systemic crises of unemployment, poverty, inequality and social reproduction. These capitalist system crises will remain entrenched and unresolved. Taking unemployment as the case in point, the situation could worsen—that is, unemployment could increase to new highs in the period ahead. There is, however, an interrelationship between unemployment, poverty, inequality and the crisis of social reproduction.
This means that millions of the working-class and poor will remain trapped in the capitalist economic crisis and its effects. These observations are based on at least one influential variable or factor that the Minister of Finance Enoch Godongwana conceded to when he said the projected real Gross Domestic Product (GDP) is 2.1 per cent this year while it will average 1.8 per cent over the next three years.
We need a radically different approach to start addressing the crisis in earnest. Rather than neo-liberal structural reforms, we need to advance and deepen structural transformation of the economy.
Retain and incrementally adjust the Social Relief of Distress Grant to lay a foundation for building a universal basic income grant
Firstly, the SACP welcomes the allocation of funds to support the extension of the R350 Social Relief of Distress (SRD) Grant introduced at the height of the global COVID-19 pandemic. However, we reiterate our call to the government to not end the SRD Grant but to instead retain it and incrementally adjust it going forward to lay a firm foundation for building a universal basic income grant for unemployed South Africans.
It is important for the government to demonstrably show that it is worried about South Africa being in the midst of a long-term unemployment crisis. Within our democratic dispensation, the unemployment crisis worsened in 1996 after the government imposed its neo-liberal economic policy called Growth, Employment and Redistribution (GEAR).
It was in 1996 that the unemployment rate rose to crisis-high levels of above 20 per cent in terms of both the officially preferred narrow definition of unemployment that excludes discouraged work-seekers and the expanded unemployment definition that includes them. Throughout the entire period, the expanded unemployment rate was higher than the official unemployment rate that only accounts for active work-seekers.
The government introduced the SRD Grant at the height of the COVID-19 pandemic following a jobs bloodbath affecting 2.2 million workers, who were retrenched overwhelmingly by the profit-driven private enterprise in the second quarter of 2020. The unemployment crisis rose to its highest level in the third quarter of 2021, affecting a combined population of approximately 12.5 million active and discouraged work-seekers.
Discard the neo-liberal policy of austerity, build a budgeting framework that responds to the needs of the people
The SACP remains strongly opposed to the neo-liberal policy of austerity and will strengthen its programme, including building widest possible working-class unity and a popular Left front, to achieve a budgeting framework that is responsive to the needs of the people and our national development imperatives.
In the budget speech, for instance, the Minister of Finance Enoch Godongwana states that the National Treasury will in the coming period “do more work to strengthen fiscal anchors”. On four different occasions in the full Budget Review (on pages 2, 4, 24 and 28), the National Treasury states that it will introduce new fiscal anchors. By fiscal anchors in the neo-liberal policy regime reference is to nothing but driving, and where already in place, deepening and widening austerity. The working-class and poor should consider this to be what the National Treasury refers to by “a more robust fiscal anchor” (page 28), given that it has over the years intransigently followed the neo-liberal policy of austerity.
In terms of social development, the average annual Medium-Term Expenditure Framework (MTEF) for social protection is a negative growth of 3 per cent. The negative refers to a decline in growth, while the MTEF refers to a period of three successive financial years, in this case starting on 1st April 2022.
That said, the average annual MTEF allocation for economic development and industrial incentive programmes is negative 2.9 per cent, while in agriculture and rural development the average annual MTEF allocation for land reform is negative 2.7 per cent (Budget Review, page 65). It is inconceivable that the declines in growth for economic development, industrial incentive programmes and land reform will yield positive results, in this case industrialisation to radically reduce unemployment and an increase in the pace of land redistribution to drive redress and inclusion in agriculture and integration in other land dependent economic activities.
Industrialisation requires adequate support, as opposed to declines in the growth of what was already inadequate support. The government needs to rethink its approach if we are to overcome economic underdevelopment and the unemployment crisis.
Discard the regressive tax regime, embrace a progressive tax framework
There has been a significant corporate income tax reduction within our democratic dispensation, for example, from 35 per cent to 30 per cent in 1999 and then down to 28 per cent later, with a commitment to further reductions. In reminding us that the government has reduced corporate tax, the minister made a timeless assertion that they “have not increased taxes in the major revenue generating categories, such as personal income tax, VAT and the general fuel levy”. This assertion could be misleading because as recently as 2018 the National Treasury pushed an increase in VAT from 14 per cent to 15 per cent.
Based on the generalisation that they “have not increased taxes in the major revenue generating categories, such as personal income tax, VAT and the general fuel levy”, the minister went on to “caution” that the National Treasury “would have no choice but to revisit this (referring to the so-called no increase of the VAT, and the other taxes that he mentioned in the same line) …if there are permanent expenditure increases”. We consider this to be a threat directed at the popular call for the government to establish a universal basic income grant, among others. The SACP denounces the threat and reiterates its stance against increasing taxes that will negatively impact the working-class and poor, such as the VAT, while reducing tax for the rich.
In a society such as South Africa which is characterised by persisting astronomical levels of both income and wealth inequality, unemployment and poverty, the government should be pursuing a more progressive tax framework to support national development imperatives, including redress and redistribution. This should include an annual wealth tax and taxes such as taxes on wealth inheritance and luxury imports, among other taxes on the wealthy.
State-Owned Enterprises
The government has the duty to support State-Owned Enterprises (SOEs) to achieve a turnaround and thrive and to grow the publicly owned economic sector, to take care of the needs of the people, the majority of whom is the working-class and poor, black, women and youth, and to support other national development imperatives.
The SACP is therefore strongly opposed to the macroeconomic framework that deprives the critical SOEs with adequate recapitalisation or defunds them. Together with governance decay under state capture and other forms of corruption, as well as looting, such macroeconomic approaches are a prelude to privatisation. This is highly problematic, to say the least.
The SACP will seek engagements with the Alliance partners regarding the observations we have made in relation to the trend that emerged since the adoption of GEAR in 1996 and under state capture, other forms of corruption and governance decay. Equally important, we will engage with other formations in our effort to build a popular Left front in defence of, and to advance and deepen, developmental state participation in the economy.
In the same vein we want to see support commensurate with the need to build a thriving co-operatives sector that cuts across the length and breadth of our economy.
International Monetary Fund and the World Bank
The SACP reiterates its strong opposition to fiscal policy measures that have the effect of subordinating our democratic policy space to any neo-liberal agenda driven by the Washington-based International Monetary Fund and World Bank, as well as by the Paris-based Organisation for Economic Co-Operation and Development, credit rating agencies, or by any other institution or class, domestic and foreign. This firm opposition includes opposition to the use of borrowing and the National Treasury as vehicles for importing, domesticating and implementing such agendas.
Issued by the SACP, 23 February 2022
